Crypto mining can make for a very profitable venture. Putting new coins into circulation on a blockchain and validating transactions keeps the entire network going, so it’s no surprise that miners get rewarded for their work. But the process of mining isn’t free, and it just isn’t a suitable option for some. So, let’s discuss what you should consider before you get started with cryptocurrency mining.
1. The Crypto You Want to Mine
You can mine a wide range of different cryptocurrencies, but some are more lucrative to mine than others. Certain cryptocurrencies are cheaper or simpler to mine, so it’s important to know the ins and outs of your desired coin before you jump into the mining process.
Many look for the Goldilocks zone when it comes to mining. In other words, they want to mine a coin that generates a healthy profit but doesn’t have expensive setup or maintenance costs. This kind of crypto can be hard to find among the swathes of recommendations and opinions you’ll find online (plus all the other people looking for the same thing!).
Take Ethereum, for example. This crypto is less time-consuming to mine than Bitcoin, and still offers a very generous reward for mining a block. However, the Ethereum mining process can be pretty energy-intensive and because it is “easier” to mine than Bitcoin, more people try to do so. So, it’s crucial to understand the pros and cons of mining any coin before selecting it as a mining option.
On top of this, you should also check the market performance of the token you want to mine. The cryptocurrency market is incredibly volatile, and the price of a coin could change drastically at any moment. Remember that if the value of a coin is either low or prone to dropping, you won’t receive the same kind of rewards as you would mining a more stable, valuable token.
2. The Up-Front Costs
To mine cryptocurrency, you need specific hardware. This can range from the pre-existing CPU in your device to a pricey ASIC miner that could set you back thousands of dollars.
Though the idea of simply using your CPU seems pretty convenient, CPU mining is quickly becoming outdated. Mining using your device’s CPU can lead to overheating, and the mining process itself can be time-consuming and energy-inefficient when using this kind of hardware.
This is why many opt for using either GPUs or ASICs. You can buy a GPU for a few hundred dollars, but the high-end options can range in the thousands. Some older, inefficient ASICs can also cost as little as a few hundred dollars, but newer, efficient ASIC miners can cost as much as a car.
Because of the expense of such hardware, it’s worth doing research into just how much it’ll cost you to get started. Try not to get distracted by any specific hardware hype, and focus more on crypto suitability, up-front price, and running costs.
3. Whether Your Hardware Can Mine Certain Coins
A major point to note before you start crypto mining is that not all tokens can be mined by all hardware. For example, if you already have a GPU and want to mine Litecoin, this won’t be possible, as Litecoin can only be mined using an ASIC. There are also many cryptocurrencies that can’t be mined using a CPU.
On top of this, many ASIC miners have been programmed so that they can only mine one kind of cryptocurrency. So it’s very important that you check the specifications of your desired ASIC if this is the kind of hardware you want to use. This can end up saving you thousands of dollars.
So, if you already have hardware suitable for mining, you should check which coins your hardware is designed for mining before setting your sights on any specific token.
4. The Energy Consumption of Mining
If you’re living on a budget, or if you’re big on helping the planet, crypto mining may not be for you. Along with the upfront hardware costs, running a node using your hardware and computer on a long-term basis is incredibly energy-intensive and will cause your monthly energy bill to skyrocket.
This often comes down to block time and hashrate. The hashrate refers to how much computing power is being used, and the block time refers to the amount of time it takes for a miner to verify the transactions of one whole block. The longer the block time, the more energy you may be using, and a higher hashrate will lead to a more costly electricity bill.
The kind of hardware you’re using will also affect the amount of electricity you use to mine. For example, GPUs are far more efficient at mining than CPUs, and so you’ll most likely be using less power when using the former (though again, your mileage will vary drastically depending on the hardware, crypto, and your local electric rates). So, if you want to keep a cap on your electricity bill, make sure you buy a piece of hardware that’s known for its energy efficiency.
5. Whether to Solo Mine or Join A Pool
Solo and pool mining are the two main ways that an individual can mine crypto. As the names suggest, solo mining involves running a node and mining crypto on your own, while pool mining involves joining a mining pool along with multiple other miners.
In short, pool mining allows for a more reliable stream of income. In this scenario, miners commit a certain amount of computing power to the pool, and the rewards gained from mining a block using all the members’ power are handed out in proportion to how much power was given by each user. But mining pools also charge fees, which will be taken out of your rewards.
Though this form of mining is more reliable, the rewards will not be as high as you would receive by mining alone. This is because solo miners get to keep the entirety of their mining reward. But, the likelihood of mining a block alone is much lower than that of mining in a pool, as the amount of computing power is almost always considerably less. So, solo mining is seen as more of a gamble.
So, whether you want to mine in a pool or alone depends on how much of a risk you want to take and what kind of income you’re looking for.
Do Your Research Before You Start Crypto Mining
While crypto mining may sound like a great way to make money, there are a number of factors surrounding it which affect how much it will cost, how much you will make, and how much time it will take to see any rewards. So, make sure you consider the points above and thoroughly research your desired crypto or mining hardware before committing to anything.