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While anyone can buy cryptocurrencies like Bitcoin and Ethereum, there is a certain thrill in cryptomining. The process can be tedious and does not always guarantee a reward, yet investors and entrepreneurs are intrigued by the process. Much like the 19th century gold rush, it's an incredibly exciting time to step into the crypto mining world. It's also more popular than ever, with up to $ 50 million worth of cryptocurrencies being mined in a single day in 2021.
This is how Bitcoin cryptomining works
Unlike traditional money, it is possible to issue cryptocurrency more than once. For example, if you buy something for $ 5 in cash, you must give that $ 5 to the seller. There is no chance of using it twice. With crypto, it is possible to make a copy of the digital token and pay with it while keeping the original. To avoid this we have crypto miners.
Specifically for Bitcoin, these miners verify a block (1MB) of Bitcoin transactions to ensure that the same Bitcoin has not been used twice. In order to get paid, the miners also have to complete a second step. Miners must be the first to correctly (or almost correctly) answer a math problem. Using advanced computers, miners try to find a 64-digit hexadecimal number (also known as a hash) that is less than or equal to the target hash. The second step is known as proof of work. If a miner does not reach this number first, he will not be granted a payout.
Related: Is Bitcoin Really As Bad For The Environment As Some Think?
Is crypto mining worth it in 2021?
Cryptomining can be expensive and resource intensive. To even consider cryptomining, you need strong computing power and electricity. The cost of the equipment needed can be a huge barrier to getting into crypto mining.
For some people, especially gamers, you may already have this gear lying around. Antonio Villas-Boas, for example, who reports for The Informer, happens to have two ultra-powerful graphics cards lying around that he originally bought for gaming: the GTX 1080 and the GTX 1080Ti. Even with those graphics cards in hand, he spent another $ 1,600 on other equipment he needed: three GTX-1060 graphics cards, a power supply, and a cheap processor and motherboard. As Villas-Boas reported, after eight months of the trip, although he was making money, he still had not amortized his expenses.
Apart from these costs, there is also the issue of ROI. For Bitcoin, it halves every four years. The halving is an event that occurs every 210,000 blocks mined and means that the number of Bitcoin people rewarded for mining will be reduced by half. In 2009, people received 50 BTC per block; In 2020 it was only 6.25.
Related: Entrepreneurs are accelerating the adoption of cryptocurrencies, one solution at a time
How do I get to crypto mining
Decide on the coin. There are big differences between mining Bitcoin, Ethereum and all the other cryptocurrencies. Instead of trying to mine multiple coins, choose one that you want to focus on. You will need to research the mining process for each type of coin, but you should also consider the limitations. For example, with Bitcoin halving and miners increasing, the return on investment is much lower than it used to be. These restrictions should be taken into account in your decision. Get supplies. Next, set up your mining rig. A GTX 1060 graphics card (six gig) is recommended. While electricity is not an offer you collect, it is a good idea to compare the cost of electricity to the potential profit. In general, $ 0.12 per kilowatt per hour or less is most likely profitable, but $ 0.06 is ideal for a profitable business venture. You'll also need a computer (or a cheap processor and motherboard like Villas-Boas) and a power supply. Finally, you need a wallet (similar to an encrypted online bank account) in which to store your coins. Choose a mining software. Most programs are free to download and use. You need to choose the right one for your operating system and the type of crypto you have chosen to mine. For example, NiceHash is considered a "simple button" for crypto mining, but it does require a percentage of your earnings. Join a mining pool. For some, joining a mining pool can make cryptomining more accessible by lowering the cost of getting started. Mining pools are groups of miners who work together to pool their computing power and profits. Mining pools can lower the initial setup costs, but you earn less because you share with a group of people.
Related: 3 Big Challenges In Crypto Mining And How To Master Them
Whether you are starting out with crypto mining or buying cryptocurrency, the time to invest is now. The SEC can approve a US exchange-traded Bitcoin fund (ETF) as early as June or July. With this type of mainstream adoption, Bitcoin will be open to a much wider range of investors – a major milestone for crypto.