Mining Cryptocurrency: Is it Still Worth Doing?
One of the most interesting concepts in crypto is the idea of mining cryptocurrency. To the average person, this may seem like easy money, but mining is a complicated, costly, and involved process in reality. Long gone are the early days when anyone with a run-of-the-mill computer can participate in mining and get themselves some “free” crypto.
These days, you would either have to invest millions of dollars into specialized equipment and facilities or join forces with many other people to be profitable. Even if that doesn’t interest you, it’s still beneficial to learn and understand the fundamentals of mining as it is how many notable cryptos, like Bitcoin, function.
What is Crypto Mining?
First, we should explore what purpose does crypto mining serve? In simple terms, crypto mining exists to update and maintain the integrity of the cryptocurrency’s network. This network is commonly referred to as a blockchain, which you’re familiar with.
Whenever the network is being used, miners “lend” their computing power to process the users’ transactions. The miners are rewarded with new cryptos, created when transactions get finalized and grouped into what’s called a “block,” as well as fees paid by users.
However, only one miner is granted the privilege of processing a block at a time, and they get to keep the reward for that block. How miners are chosen to process a particular block can be understood as a “mathematical lottery” but typically, those with the most computing power are much more likely to win.
Once a block has been finalized, it is connected to the block before it, forming a blockchain. Once that’s complete, another miner is picked, and the process repeats for as long as the network is active.
How Crypto Mining Works
As the first known cryptocurrency, bitcoin introduced and popularized mining. Its inception spawned a variety of crypto networks that also has mining like dogecoin (yes, the doggy coin that Elon Musk loves so much), ethereum, and litecoin to name a few.
But unlike ethereum, which can be mined with just regular computer graphics cards, bitcoin mining is typically done with Application-Specific Integrated Circuits (ASIC)—specialized computers designed to mine, in this case, Bitcoin. Aside from being niche expensive hardware, ASICs, especially the newer and more efficient ones, are also quite difficult to find due to them being in very high demand by big mining operations.
The Challenges of Crypto Mining
But let’s just assume that you’ve got the initial capital and somehow luck out on top-of-the-line ASICs, what then? Well, that’s just the beginning. Now you have to set up your miners. Luckily, tutorials can be easily found online and with some technical knowledge, you should have it up and running in no time.
The first major challenge is managing costs. Your electricity bill is the number one factor that eats into your profit. If all you have access to is regular, residential electricity then you might want to reconsider mining bitcoin. Cheaper, alternative power sources like wind, water, and thermal are ideal here, if you can get access to them.
The second challenge is managing the temperature. Not only are these miners power-hungry, but they also generate a lot of heat. If you live in a cold and arctic environment, that may not sound too bad, but for those living in hotter regions, this is a nonstarter. There’s a reason why big mining operations spend a lot of money on facilities with generous spacing and cooling. And even if the heat doesn’t bother you, keeping your expensive hardware properly cooled is always a good idea if you want to preserve its longevity.
What are Mining Pools
Since the barrier to entry is so high, mining pools exist to facilitate the collaboration of smaller, individual miners in solving a block, while taking a small cut for their service. These miners contribute their computing power into a common pool to be competitive with the big mining operations. When a block reward has been awarded to that pool, it is split proportionally among the miners, according to their contribution to processing that block.
Earn MCT – Without Mining
If mining sounds like too much of a hassle for you, there are other ways to participate early in crypto. At MyConstant, we’ve recently launched our own crypto, and it’s perfect for those who want to access various aspects of the blockchain world all from one place. MCT token allows you to perform all kinds of financial transactions with one convenient token, from trading to borrowing to switching between cryptocurrencies.
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