Cryptocurrencies like Bitcoin, Ethereum and Litecoin have become increasingly popular in recent years. Many people have invested in cryptocurrencies and made money from it. But what exactly is a cryptocurrency and how does mining work? In this article you will learn everything about cryptocurrencies and mining. You will learn what cryptocurrencies are and what purpose they serve. You will also learn how cryptocurrency mining works and the risks involved.
Cryptocurrencies and mining
Cryptocurrencies are digital or virtual currencies based on cryptographic tools. Unlike traditional currencies, they are not regulated and controlled by governments and central banks.
The first cryptocurrency, Bitcoin, was created in 2009 by a person or group of people using the alias Satoshi Nakamoto. Bitcoin is the world’s first decentralized cryptocurrency and is also the largest by market cap. Cryptocurrencies can be exchanged and traded like any conventional paper currency. There are countless cryptocurrencies with unique characteristics and uses. So far, however, only a few of them have a correspondingly high market capitalization, including Bitcoin (BTC) or Ethereum (ETH).
Crypto mining is a process that allows individuals to generate cryptocurrencies such as bitcoin. Crypto mining is what is known as a proof-of-work solution, in which a miner creates a new block in a cryptocurrency by solving a complex task. Once a block is solved, it is added to the blockchain and the miner is rewarded with a certain amount of cryptocurrency.
To start crypto mining, you first need a mining program and mining hardware. Most people use an ASIC Miner specifically designed for cryptocurrency mining. Once they have a miner and the mining program, they can start mining.
Benefits of Crypto-Mining
As we have seen, crypto mining is a method to create new cryptocurrencies like Bitcoin, Ethereum or Kadena. A computer with special software is used to solve complex arithmetic problems. Once a block has been solved, the new currency is credited to the miner.
The benefits of crypto mining are many. For one thing, it’s a great way to create new currencies because you only need a computer and the appropriate software. On the other hand, it is a good way to earn money as you get a reward for every solved block. Let’s take a closer look at some advantages:
YIELD ALMOST ALWAYS GUARANTEED
Every entrepreneur who takes money into his hands wants to know that his investment is well spent. He expects a return on investment (ROI) that is worthwhile and makes up for the money originally invested. While risky speculation can go awry in the stock market, making a profit in mining is almost imperatively logical. You don’t buy into something, you produce something – which is a big difference! The reward is in the form of tokens of the respective cryptocurrency. Of course, the value of the tokens depends on the respective price. Nevertheless, one receives more and more of this reward the longer one participates in the calculation processes. And again the comparison to the stock market: you may receive annual dividends when buying shares, but no further shares.
EASY TO MAINTAIN WITH MINER HOSTING
Setting up your own mining farm takes a lot of knowledge, money and effort. The electricity costs at the place of residence are often too high to operate profitable mining. So-called miner hosting providers can help here. You can deliver your mining hardware to a miner hosting provider. The service provider will put your ASIC miner into operation in a professional mining farm. The mining farms are often located in places with cheap electricity prices, such as Georgia. Your hardware is maintained and monitored for you by the hosting provider. So you have no effort and receive your mining income every day.
Entrepreneurs know what “normal” self-employment costs in the first few years. And unlike our own employees, Mining Hardware never needs vacation!
FIXED COSTS CAN BE CALCULATED
If you start your own business, you should always keep an eye on the costs. There is an initial investment and running costs during operation. For example: rent, salaries, taxes, etc. The same applies to mining, but with one decisive advantage: the fixed costs are much easier to calculate and plan. The energy requirements of computers, the fees for hosting, as well as the amount of their purchase, are known in advance. Don’t expect any nasty surprises during ongoing operations.
After founding a company, it usually takes some time before the first stable income can be generated. On average, a company is only out of the red zone after three years of successful business activity. With mining, this is very different. Anyone who operates crypto mining can count on an output and thus a fast cash flow from day 1. It is extremely fun to watch how the computing power is carried out reliably and without delay.
Cons of Crypto-Mining
Crypto mining does not only have advantages. With the mining of Bitcoin and Co. you can make high profits, but there is also a hack. Crypto mining requires insane amounts of electricity, resulting in a huge CO2-footprint. Also, it involves financial and regulatory issues. We list the three most important disadvantages for you:
- As already mentioned, crypto mining is an extremely energy-intensive process. It is estimated that the power demand of crypto mining is higher than that of all of Finland. Not only does this lead to massive costs, it also generates a huge CO2-footprint. For this reason, the mining farms are often located in countries with low electricity prices. Unfortunately, this can lead to a disproportionate load on the mostly outdated infrastructure there.
- Not only the electricity costs can put a noticeable strain on the wallet. Also the initial investment cost of buying mining hardware. The miners can cost a few thousand dollars each. Especially when the Bitcoin price is high, the miners also cost more. If the crypto prices fall, as they are at the moment, the mining hardware is also cheaper. At the beginning of the year, an Antminer S19j Pro with 110 TH/s cost over 10,000 dollars, but today you can buy it for just under 6,800 dollars. So you should always buy mining hardware when crypto prices are low.
- Even if you have an ASIC or GPU miner and you could start mining, that doesn’t mean you can. Some countries ban crypto mining. For example, China completely banned mining in 2021. Other countries like Sweden would like the EU to follow suit. This would drastically reduce the number of regions in which mining can be carried out legally.
Would you like to invest in cryptocurrencies and earn some money at the same time? Then crypto mining is for you. However, you should be aware that mining also has some disadvantages. So before you embark on a mining adventure, you should do some research and consider whether it’s worth it for you.
Should you decide to invest in crypto mining, AVATRON Mining can help you with that. We are a leading provider of crypto mining solutions and miner hosting, offering the best experience to our customers. Get in touch with us today and start your crypto mining career.