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There are many ways to potentially earn cryptocurrency as a side hustle, and crypto mining companies or mining pools tend to be the first option that comes to mind. But before you decide to try crypto mining, you need to know some basics about it. This guide gives an overview of cryptocurrency mining, bitcoin mining, and altcoin mining.
What is Cryptocurrency Mining
Cryptocurrency mining is the process of creating new units of digital currency. The currency is mined using powerful computers that solve complex mathematical problems. The mining process rewards miners with new units of the currency, which they can then exchange for other currencies or use for purchases.
As the value of many digital currencies has skyrocketed in recent years, cryptocurrency mining has become increasingly popular. Climate change has been attributed to its energy-intensive nature. White House published a press release about Bitcoin and cryptocurrency’s electricity usage.
It is likely that mining will become more widespread as the price of cryptocurrencies continues to rise.
Why is crypto mining necessary?
Crypto mining requirements will vary depending on the system used by digital assets. Proof-of-work (PoW) requires mining; proof-of-stake does not.
For example, Bitcoin, Dogecoin, or Litecoin use a Proof-of-Work consensus, requiring miners to solve complex mathematical problems to add new blocks to the blockchain.
A full list of Proof-of-Work tokens can be found here.
In the PoW world, without miners, transactions would not be able to be verified and added to the blockchain, and the entire system would grind to a halt.
Mining cryptocurrencies has some advantages, such as the rewards mentioned above, but it also has some disadvantages.
The cost of electricity can be high when mining, for instance. The difficulty of mathematical problems increases as more people mine cryptocurrencies, so earning rewards takes more time and effort. Despite these drawbacks, mining remains a crucial part of many cryptocurrencies.
What is Bitcoin Mining?
Bitcoin mining involves verifying and adding transaction records to the public ledger known as the blockchain. Blockchains contain a record of every bitcoin transaction ever made.
In exchange for solving math problems, bitcoin miners receive a certain number of bitcoins. It provides an incentive for people to mine bitcoins. Whenever someone sends a bitcoin, miners verify the transaction.
Read: Bitcoin mining platforms
They confirm that the sender has the necessary amount of bitcoins to make the transaction and then they add the transaction to the blockchain. In an off-the-record comment, this process closely resembles accounting, and miners are much like accountants.
What are Mining pools?
As more and more people use Bitcoin, more computers are needed to verify transactions. This requires miners to work together in what is called ‘mining pools.’ Mining pools are a way for individual miners to work together and share resources in order to increase their chances of getting rewards:
Bitcoin block rewards consist of 6.25 newly generated coins per block. Every four years, a halvening event regulates the number of newly generated coins. During this halving event, the supply of newly generated bitcoins will be cut in half, and the supply will be tightened until all 21 million bitcoins have been mined. This is what we call: bitcoin halving. The next Bitcoin halving is scheduled to take place in 2024 at block 840,000. On Jul 08, 2024.
By working together in pools and sharing resources, miners can increase their chances of getting rewards.
There will only ever be 21 million Bitcoins mined, so it’s safe to say that Bitcoin mining is here to stay for a while!
Ethereum shifted from the Proof-of-Work concept to the Proof-of-Stake concept. We published an article about this process which can be found here.
Keeping the blockchain network secure and validating transactions is better with Ethereum staking after switching to Proof-of-Stake. You can mine Ethereum using staking instead of hardware.
As mentioned, altcoin mining is a possibility for nearly any altcoin with a Proof of Work consensus mechanism. Altcoins are subject to the same rules.
Is Crypto Mining Worth It?
Depending on who you ask, you may get a different answer as to whether crypto mining is worth it. When considering the potential profits, you also have to think about the costs of cryptocurrency mining. From the crypto mining rig to the excessive energy use, mining can come with high costs.
The answer will also depend on the value of the coin you mine. That point alone makes it hard to predict whether mining is worth it, as cryptocurrency prices are volatile.
It’s really hard to outperform mining companies now, and you don’t have to invest in hardware to start cryptocurrency mining. It would be better to use cryptocurrency interest accounts, such as Haru Invest, that give interest at the end of the lock-up period. Learn more about Haru Invest Earn Plus account.
How Much Can You Earn with Crypto Mining?
You do not earn cash at the end of the mining period, and the cost of the mining process will vary based on the complexity of the mathematical problems, the price of the token you are mining, the hardware required to solve mathematical problems, and the cost of electricity.
Therefore, earnings don’t have a fixed rate. You need to calculate it before making a wise investment, as it varies daily, even hourly.
Risks of Cryptocurrency Mining
Mining is a resource-intensive process that can have negative environmental and financial consequences.
Electricity is required for cryptocurrency mining, for example. Miners may have to operate at a loss to pay their energy bills. Climate change can also be caused by cryptocurrency mining. As a result of the energy used to power miners’ computers, greenhouse gases are produced, which contribute to global warming.
There are also financial risks associated with cryptocurrency mining. Tokens are earned by crypto miners, but bills are paid in cash. As a result, unexpected token price changes can lead to unexpected coincidences. As a result, miners may find themselves owing more money than they can repay if a cryptocurrency’s value decreases.
How to Start Crypto Mining
Before getting started with cryptocurrency mining, remember a few things. To begin with, make sure you do your research and understand the risks involved. Secondly, make sure you have access to cheap electricity. Last but not least, consider joining a mining pool, which will allow you to pool resources with other miners and increase your chances of success.
What are your options?
There are several ways to mine cryptocurrencies, each with its own advantages and disadvantages.
- CPU mining, or the use of a computer’s processing power, is the most traditional method.
- GPU mining is another popular method in which a computer’s graphics card is used to solve complex equations.
- ASIC mining, which stands for Application-Specific Integrated Circuit, is a type of hardware designed solely for mining.
- Another option for those who don’t want to invest in expensive equipment is cloud mining, which involves renting hash power.
Cost, energy consumption, and mining difficulty will all play a role in the choice of method.
What is CPU Mining?
CPU crypto mining involves the use of your computer’s central processing unit (CPU) to verify transactions on a cryptocurrency network. In exchange for their efforts, miners receive a small amount of cryptocurrency. With the increasing demand and competition in the market, mining with a CPU is simply not powerful enough to make a significant profit any more. Cryptocurrency mining with CPUs is often done as a hobby or to learn more about the process. CPU mining may not be the most efficient way to mine cryptocurrency, but it remains an important aspect of blockchain technology.
What is GPU Mining?
In GPU crypto mining, graphics processing units (GPUs) are used to mine cryptocurrencies. As opposed to traditional mining, GPU mining uses the processing power of graphics cards to perform complex mathematical calculations necessary to verify transactions within a blockchain network. GPUs are highly efficient at parallel processing, making them ideal for mining cryptocurrencies. However, the process comes with its own set of challenges, such as energy consumption, overheating, and hardware costs. In spite of this, GPU crypto mining remains a popular way for crypto enthusiasts to generate income.
What is ASIC mining?
This type of mining is designed specifically for cryptocurrency. An ASIC is an application-specific integrated circuit that is designed to perform a single task efficiently. Mining cryptocurrency is the task in this case. For those who want to mine cryptocurrency, ASIC miners are faster and more efficient than traditional miners. They are, however, expensive to purchase and require a lot of electricity to run. Despite this, ASIC crypto mining remains a popular way to earn cryptocurrency.
What is Cloud mining?
In cloud crypto mining, cryptocurrencies such as Bitcoin are mined remotely using cloud computing resources. Traditional mining requires specialized hardware that consumes a lot of power and occupies a lot of space. However, cloud mining allows an individual to rent the processing power of a remote data center and conduct the mining process remotely. For those starting out in cryptocurrency mining, it is a more accessible way to mine because it saves on space and costs. The popularity of cryptocurrency is growing, and cloud crypto mining is becoming an increasingly attractive option for individuals and businesses.
Which option should you choose?
The answer depends entirely on your budget and strategy. Cloud mining is an excellent option if you just want to benefit from mining in a simple way. You can use GPU mining or ASIC mining if you are serious about mining, willing to take on more risk, and have the budget for it.
How to start cloud mining?
The only thing you need to do is join a mining pool and start cloud mining. Below are some popular pools. You can research them and find the one that best fits your strategy.
Once you’ve chosen a pool, you must create an account, make a payment, and start mining.
|Mining Pool||Market Share (Hash Rate)|
|Foundry USA||29.33 %|
|Binance Pool||10.62 %|
|Braiins Pool||2.08 %|
The data was fetched on 10.04.2023 from btc.com/stats/pool.
Read: Public Bitcoin mining companies
What Are the Requirements to Join Crypto Mining Pools?
To work with crypto mining pools, you will need to decide whether to invest in hardware or do cloud mining. Crypto mining can even be done using a mobile phone in some pools.
You will need to install some software to be part of the pool if you invest in hardware and build your own mining computer. If you want to use cloud mining, you will just need to sign up. Cloud mining has a very straightforward onboarding process.
Pools have different requirements. Choose the best option for you by searching and finding the appropriate pool to start with.
How Much Should You Invest to Start Your own Crypto Mining Business?
There’s no one answer to this question since it can vary greatly depending on a number of factors, including the type of cryptocurrency being mined, the equipment being used, and the electricity costs in the area where the mining is taking place.
As the software does not cost anything, mining Bitcoin is technically free. Hardware and electricity expenses, however, are extremely expensive.
Based on the Visual Capitalist dataset, bitcoin mining costs on average $35,404.03 across 198 countries.
Mining pools allow multiple miners to pool their computing power, but each miner only receives a share of the Bitcoins mined.
What Are the Alternative Ways to Earn Crypto?
When it comes down to it, you could choose to mine cryptocurrency, but it comes with a high risk, and you are unlikely to be able to get ahead of the crypto mining companies. There are also many scenarios where you could lose money, especially if you live somewhere with expensive electricity or the value of your chosen coin drops.
A good way to minimize risk is to look for an alternative method of earning crypto, such as Haru Invest.
Using innovative crypto experiences, Haru Invest helps you make better financial decisions. The practice of programming a computer to automate customized trading strategies guides our investment strategies.
At Haru Invest, we offer:
- Most competitive earn rates in the crypto industry.
- Earnings are offered daily — in daily compound!
- Lock up as long as you wish, from a minimum of 15 days to a maximum of 365 days.
Automated investments — let us do the work for you.