Cryptocurrency Miner – Key Features of Equipment for Mining CryptocurrenciesDecember 25, 2023
How to Mine Cryptocurrencies – A Practical GuideJanuary 8, 2024
It’s hard to dispute that earning money from cryptocurrencies is possible. However, it can take various forms, as we have often written on this blog, and is associated with risk. Alongside trading and long-term investments, many people wonder whether cryptocurrency mining is still profitable.
And that’s what we would like to focus on in today’s post, showing the benefits of mining cryptocurrencies and the limitations of such activity.
What is cryptocurrency mining?
Mining Bitcoin or some other cryptocurrencies is a computational process that involves verifying and confirming transactions within the blockchain network, which ultimately leads to the acquisition of new cryptocurrency units.
Everything takes place in computers with high computational power (so-called cryptocurrency miners), which collect information from the last 10 minutes about transactions made within the blockchain, to place them in a new block. The next step involves a series of complicated mathematical operations. If an answer is found, the miner (miner) shares the answer, confirmed by other participants. Correct information forms the next block within the chain, and its author receives a reward in the form of cryptocurrencies.
How to start mining cryptocurrencies – high computational power equipment is essential
If we already know how cryptocurrency mining works, let’s take a moment to consider the equipment needed for this. For mining cryptocurrencies, to perform the mentioned mathematical tasks, cryptocurrency miners with high computational power, equipped with very powerful graphics cards, are most often necessary.
Devices enabling the mining process must be very energy-efficient and effective in performing all necessary tasks. They also significantly differ from traditional computers, which means a considerable investment at the start. More about how a cryptocurrency miner should be built we wrote in the text: “Cryptocurrency Miner – Key Features of Equipment for Mining Cryptocurrencies“.
The process of mining cryptocurrencies – how to mine crypto?
There are several ways to create cryptocurrency mining and extract crypto, each generating different electricity costs and having different hardware requirements.
The most popular include:
- GPU mining (one or more graphics processors) – high electricity consumption, significant mining power (hashrate),
- ASIC mining (use of an integrated circuit) – electricity consumed to a lesser extent, the greatest mining power,
- CPU mining (central processing unit of a computer) – small mining value due to the low power of processors,
- cloud mining – purchase of Bitcoin mining power on cloud equipment.
It is also worth mentioning that due to the increasing difficulty in mining bitcoins or other cryptocurrencies, the profitability of independent mining is increasingly falling. While a few years ago, for their work, it was possible to receive even 50 BTC, currently the value of the reward oscillates around 6.25 BTC and will continue to fall due to the bitcoin halving, i.e., the applied economic model in which, after reaching the maximum value of specific assets circulating in the network, their extraction falls by half. This happens approximately every four years.
For this reason, mining pools that bring together groups of miners are increasingly common, where several people jointly deal with mining and then share the profits. This can generate a greater chance of profit but also brings various forms of danger, often simply resulting from human dishonesty.
Profitability of mining cryptocurrencies at the threshold of 2024
So, if you want to earn money on cryptocurrencies and are looking for an answer whether it is possible to earn money by mining Bitcoin, you need to choose the right mining strategy and also consider all costs associated with:
- purchasing and maintaining professional computer equipment,
- electricity costs (for the operation of the miner and cooling devices),
- the possible need to share rewards and dangers resulting from the dishonesty of other miners,
- issues of external contracts and economic mechanisms, like halving.
While a few years ago, even despite high initial costs and expenses for electricity, mining brought solid profits, nowadays earning on it is becoming increasingly difficult. Additionally, constantly rising energy costs discourage many people and make crypto mining less profitable and require a detailed analysis of profits and potential losses before deciding to mine Bitcoin.
Is a cryptocurrency mine a good investment?
To mine crypto, you need to have a solid background. The basis is, of course, the right computer equipment, whose computational power allows solving complex mathematical tasks and, as a result, mining crypto. Depending on the chosen strategy, the cost of electricity in mining may vary. However, maintaining the computer and electricity still constitute the largest expense.
So, while mining as such is a relatively safe form of earning money on cryptocurrencies, where the risk of exchange rate changes and market instability do not affect potential profits so strongly, such activity is associated with considerable expenses. Therefore, before becoming a cryptocurrency miner, it is necessary to carefully calculate the available possibilities and check whether in a given case it has a chance to pay off.