While cryptocurrency mining is a concept known to almost all investors, understanding how exactly it works is another matter. But don’t worry, in this article we will detail how to mine digital assets.
For this, we will first start by defining what a miner is, which cryptocurrencies can be mined, what computer equipment you need and see if mining is really profitable or not. . Do you like the program? So let’s get right to the heart of the matter, if you don’t mind.
What is a minor?
As you might expect, the term miner used in the cryptocurrency industry has a connection with that of traditional mining.
For many cryptocurrency investors, Bitcoin represents digital gold. As a result, people involved in online transaction processing have also received this denomination because they receive rewards every time they can solve the equations to register a block on the blockchain.
The choice of the cryptocurrency to mine
As you surely know, there are thousands of different cryptocurrencies. Among these, many can be considered of no real use. But of those who might achieve their goals, not all are sleazy.
Indeed, for a digital asset to be sleazy, its blockchain must use a French Proof-of-Work (PoW) or proof of work consensus. If crypto works with another consensus, such as Proof-of-Stake (PoS), it cannot be mined.
Likewise, the cryptocurrency must be what is called a coin and not a token. For example, until September 2022, Ethereum operated with the Proof-of-Work consensus.
However, the Ethereum blockchain allows other projects to issue ERC-20 tokens on it so they don’t have to create their own blockchain internally. In this specific case, we cannot in any way connect it to the concept of mining.
The hardware needed to mine cryptocurrencies
Now that you know which cryptocurrencies can be mined, how should you proceed? Can everyone improvise as a minor? Do you have to invest in very expensive equipment?
In fact, as we will see, it depends. Each time, however, it is necessary to dedicate time to analyzing the digital asset that you want to extract. You have to make sure that it is reliable and that you will not waste time and electricity.
We will provide you with a small list of the different options available to you for mining. As you’ll see, and despite all the promises of easy wins you might hear from mischievous actors, it’s ultimately not a trivial thing to set up.
You will inevitably find people offering you to mine cryptocurrencies easily with your mobile.
So we will cut very quickly, whenever it is a scam. A mobile phone does not have the power to mine cryptocurrencies. If you find a digital asset that claims to be removable from mobile devices, run away immediately.
web browsing program
There are some plug-ins that can be installed as an extension on your web browser. With these, you can mine cryptocurrency while surfing the net. How this process works is pretty simple to understand.
When you browse the Internet, you are not fully using your computer’s resources. As a result, there is computing power available that can be used to mine cryptocurrencies. However, this type of plug-in does not allow mining in an optimized way.
In fact, your computer’s remaining computing power will not be used 100%. Also, it should be noted that the earnings you can make with this method are quite low and that this practice will have a negative impact on your computer’s life expectancy. It is therefore a method that we really do not recommend.
Another more interesting mining option is to install a dedicated program on your computer. When you launch it, you will be able to use 100% of your computer’s power and thus make the most of your mining operations.
However, this is also not optimal if you use your daily PC to mine cryptocurrencies.
What matters most in mining is the power of your graphics card rather than that of your processor. Unless you have a gaming PC with a state-of-the-art setup, you shouldn’t be able to generate sufficiently attractive profits there either.
Dedicated RIG hardware
Now we are starting to get down to business. Here we are talking about hardware dedicated to cryptocurrency mining. In jargon, this is called RIG. Sometimes we use prefabricated structures, but in other cases it is custom made in the house.
You must therefore have solid computer skills if you want to mine cryptocurrencies with a RIG.
Such a device usually has a motherboard, a not too expensive processor, and most importantly, several state-of-the-art graphics cards. In fact, it is precisely the latter that will allow your structure to be able to give maximum power to cryptocurrency mining.
However, the big problem with the RIG is that it requires the investment of a significant amount of money to design a structure that is powerful enough and does not become “obsolete” after a few months.
If you’re on a tight budget and don’t know much about hardware, this isn’t an attractive option for you.
The mining farm is the most powerful facility for digital asset mining. In fact, there are many devices that can be described as RIGs that come side by side. And by many, we sometimes mean thousands of RIGs sitting next to each other.
The mining farms are run by professionals. It is impossible for a mere individual to create such a structure as the financial resources needed to invest in it are immense. Mining farms can be compared to large data centers.
The profitability of mining
Now that we have been able to introduce you to the different options that allow you to mine cryptocurrencies, it is time to analyze an essential point: the profitability of this business. In fact, who would want to start mining if this business is at a loss or much less profitable than many others?
There are several factors to consider when analyzing the profitability of a cryptocurrency mining operation. However, for the purposes of this article, we will limit ourselves to the cost of electricity, depreciation of equipment, and the time you will need to devote to carrying out this activity.
Cost of electricity
When you run your computer or RIG at full power, it needs to consume electricity for it. And the more powerful your device, the more you’ll need it. The problem with this story is that some countries where the cost of electricity is quite high are not competitive with others.
If other miners have the ability to pay for their electricity 3 times less than you, will it be possible for you to be as profitable as they are? Unfortunately no. Furthermore, it is also a safe bet that you will be in deficit on the operation, transforming it from then on into a veritable economic abyss.
Depreciation of equipment
So, you have to take into account the cost of buying mining equipment and its depreciation over time. Before you can make a profit mining cryptocurrency, you need to be able to pay back the price of your computer peripherals with your mining profits.
But that is not all. Computer hardware changes very quickly and if you want to be able to stay competitive you will need to upgrade your hardware. Otherwise, it will be very difficult for you to successfully register a block on the blockchain and thus receive the associated mining rewards.
To this, finally, you must add all the maintenance costs of your peripherals and be ready to replace the defective parts as soon as necessary.
Time spent checking everything
Finally, there is one final component to take into account: your time. Every second, minute and hour you spend checking if your mining operations are doing well is time you can’t use to do anything else.
You must therefore clearly assess whether your mining business, considering the purchase of equipment and the price of electricity, is more profitable than having another economic activity apart. This is information that only you have and it is therefore necessary that you make a comparison between the different options available to you and cryptocurrency mining.
The alternative to mining: the loan
As we have just seen, cryptocurrency mining is ultimately not that easy. Still have the motivation to embark on the adventure? So don’t hesitate to try the experience. But if you are reluctant to mine digital assets now, we have an alternative to offer that will undoubtedly seem more interesting (and accessible) to you.
What if instead of investing time and money in purchasing state-of-the-art mining equipment, you used these resources to do what is called a loan? Basically, you buy cryptocurrencies and lend them to other users in exchange for interest on the sums distributed to borrowers.
There are many varieties of loans and some are, in our opinion, much more profitable and easier to set up than trying to become a cryptocurrency miner. If you are using a reputable platform, lending digital assets to other users is child’s play and takes just a few clicks.
If you want to use a relatively easy to understand loan exchange, we can recommend the excellent ZenGo.
It is a platform that has a very clean interface, clear menus and offers a very attractive loan offer with good profitability. For example, you can lend your Bitcoins and earn up to 3% interest per year (the rate can vary). Other assets are supported, including stablecoins (USDC, USDT and TUSD) and Ether (ETH).
If you want to learn more about ZenGo and investor-to-investor loan, please visit the platform’s website by clicking the button below:
We hope you now have a better understanding of how cryptocurrency mining works. We made sure to explain things as clearly as possible so that everyone can fully understand the concept.
As you may have noticed, in our opinion, it is not something for everyone. First, it requires computer skills that not everyone can acquire. Hence, it takes a lot of time to devote to this business. Finally, you also need to have a lot of funds to invest in quality equipment and be profitable.
If you want to try to generate profits in the cryptocurrency universe, then we recommend that you turn to lending on a platform like that of ZenGo. The whole thing is much easier to understand and requires less investment than becoming a crypto miner.