Cryptocurrency mining is the act of validating transactions using a computer processor and electricity. Each blockchain network has its own methods and rewards for mining. Bitcoin has what is called a block reward program that is programmed into its code and was set up by Satoshi Nakamoto himself. On the Bitcoin network, the initial reward for mining was 50 BTC, but because it follows a reward program, as more blocks are completed the network decreases the amount of BTC earned per block which is called “halving”. Currently, the reward for mining one block of BTC is 6.25 BTC.
Cryptocurrency mining is carried out by processors that validate transactions on a given blockchain network. To perform this validation, the processor solves complex mathematical problems called “hashes”. The rate at which this is executed is called a “hash rate”. To incentivize the use of their processing power on the network, it provides miners with a potentially lucrative opportunity to turn computing power into money. Under ideal circumstances, mining is carried out somewhere where the price of energy is cheap, to reduce expenses and thus increase the profits of currencies extracted from mining.
Now that we know what mining is, what are people doing wrong?
Wrong idea #1: “it will consume all the energy”
Contrary to some of the apocalyptic theories about the nature of cryptocurrency energy use, cryptocurrency mining will not consume all the energy on the planet. While there has been concern about the energy use of cryptocurrencies, especially currencies that use the proof-of-work (PoW) model, they will not absorb all of the planet’s energy. In reality, miners typically use the cheapest energy sources they can find, which puts waste energy to work, as with Exxon Mobil’s new flare-off methods.
While Bitcoin remains dedicated to the PoW model, there are other consensus methods that don’t consume as much energy. Ethereum will switch to a proof-of-stake model, which puts an end to mining on its network. While this reduces energy consumption, it does so by radically altering the mining side of the grid.
Whether or not ETH
miners survive the transition to ETH 2.0 or remain on a fork of ETH 1.0 is a current topic of debate. We will know for sure only after the switch.
Misconception #2: Mining is only done by large organizations
Currently, some of the largest mining organizations come in the form of warehouses full of computer processors that mine huge amounts of crypto. While this can be a powerful extraction method, it’s not the only way. In the early days of cryptocurrency, and even still true today, the small miner was quite common. These miners were known for mining with graphics cards designed to play video games, but they were also useful in bitcoin mining. The rise of small BTC miners has effectively altered the computer parts market.
In addition to these two methods of mining, there are consumer-level cryptocurrency miners that are very easy to buy. They are dedicated solely to the act of cryptocurrency mining, in the video linked above, LinusTechTips reports that it was earning $32.46 per day after the cost of energy in 2018 using a handful of these type of miners.
It is very possible to mine cryptocurrency at any level, whether you are a DIY GPU miner, a corporate warehouse, or an individual investment in technology.
Wrong Idea #3: You Have to Mine Yourself
This is no longer true. With the rise of mining as a service AKA cloud mining platforms like ElevateGroup, you don’t even need to make a physical investment in miners and buy computing power. This has advantages and disadvantages over running their own miners.
The advantage of cloud mining is that it avoids the start-up cost of buying a miner and setting it up. Instead, what is common is that users will pay for the computing power required. This comes with the disadvantage of volatility in the cryptocurrency markets, as some days computing power is more valuable than others. Another advantage is that downtime is not your responsibility to manage, but the company you’re buying cloud mining services from. Finally, also choose how long you want to tarnish mine. This typically involves signing a contract for a set period of time, but after that period you can choose not to continue mining. This prevents the service buyer from covering the costs of disposing of e-waste or falling into the fallacy of sunk costs if they go too deep.
The disadvantages start with volatility as mentioned above. As this is an emerging service, credibility is still unclear on who the mining companies are. It means where they get their miners from, the reliability of energy acquisition, and other critical information that potential investors may want to know before investing money in it. Also, you don’t have as much control over what is mined or the mining method itself, as the mining service maintains control over that and its own facilities. So even if you don’t have to mine yourself, it might not be worth diving into cloud mining unless you’ve done the research beforehand.
Conclusion: There are still opportunities in cryptocurrency mining
In conclusion, mining is a
complex operation that can be performed by users of multiple scales, whether you are a GPU miner or are considering building a wide range of miners in a warehouse, cryptocurrency mining is still viable.
Contrary to sensationalist headlines, it will not consume all the energy on the planet. There are several ongoing efforts to ensure that cryptocurrencies are part of sustainability plans around the world ranging from investments in renewable energy, to alternative consensus methods that are not PoW systems, and to using waste energy productively. Finally, you don’t even have to mine yourself, thanks to the development of cloud mining services.