The only reason most cryptocurrencies are conceived and can work in the market is due to mining.
Without miners, the blockchain cannot be validated every time someone wants to make a transaction. If the blockchain is not validated, there is simply no way to know which transaction is legitimate and which is not.
Becoming a miner is not possible without a reward. However, there are two things that your reward is based on:
- The block reward
- Transaction fees
For example, every time you decide to send Bitcoin, Ethereum, or whatever other cryptocurrency you are using, you have probably noticed the additional fee that can appear as a “transaction” or as a “mining commission” depending on your wallet.
This commission is added to any miner who “cracks” the code and completes the block.
Although this reward is quite minuscule, this activity’s real pleasure is the “reward per block,” which in the case of Bitcoin is 12.5 BTC. You can buy bitcoin in dubai, if you are having an internet connection with a quality investment amount.
This article delves into how to calculate the profitability of mining with cryptocurrencies and thus have a precise notion of how profitable this activity is for a certain virtual currency.
PROS AND CONS OF MINING VS. INVESTING
One of the benefits of investing a couple of hundred or thousands in mining equipment rather than the cryptocurrency that you will eventually mine is the reason that in the unlikely event that “The United Nations prohibits all forms of digital currencies,” you can still sell your mining equipment. However, you will have lost, but it is still better than nothing.
However, if that amount was invested in a cryptocurrency, that digital currency is probably worth noting, although there is still a chance that it will go up 100% during the day.
Another benefit is that if the cryptocurrency you are mining loses value, you can easily switch to another cryptocurrency and recover your profits in this way. That’s why people buy bitcoin in London online without getting into much trouble.
Let’s take Ethereum, for example. About a year ago, and with a small mining team, it was very easy to mine 1 or 2 ethers per day, while at the time, it was only worth a couple of dollars. If you have kept it until today, you could sell each ether for a much higher value, making your investment worth it.
Even though cryptocurrency mining appears to be an easy get-rich-quick scheme, it does not carry risk. Rather the main risk may be a fire case.
Suppose you have relatively large mining equipment with little cooling and are using faulty power supplies with multi-extension cords plugged into an outlet. In that case, something could easily catch fire, causing not only your equipment to lose value but your home as well.
As long as you use components from trusted companies and keep your equipment cool and dust-free, this shouldn’t be a problem. Another risk to keep in mind is if you have small children or animals. In this case they could easily damage your platform by accident, either by throwing something inside or by a static shock.
The next risk, although not as serious, is potency. On this occasion, you must learn to calculate mining power since mining equipment consumes a lot of Energy and depending on the size of the platform, more than 1000w can easily be consumed.
Another risk, albeit a minor one, is that if you decide to mine the ETHash algorithm, you should make sure you have enough VRAM (Video Random Access Memory) on your graphics card, since DAG (Directed Graph Acyclic) networks will be stored in VRAM.
So if you don’t have a big enough VRAM size on your GPU, you won’t be able to mine that coin. Currently, the Ethereum DAG file size is over 2GB, which means you’ll have to mine with a graphics card with more than 2GB of VRAM. Below you can check the size of the DAG for some of the most popular cryptocurrencies. Because now, you can buy bitcoin in UK online.
In conclusion, while there are many risks, they can all be easily avoided by implementing standard security procedures or by ensuring that your team lasts a long time by acquiring the best hardware components you can.
In general, while you will receive a large amount of profit from mining, you can also lose a large amount of money if your mining rigs break down due to bad luck or a bad awareness of not knowing how to do it properly.
ECONOMICS OF MINING
The next cost is Energy, although this should not be a problem unless you are using inefficient graphics cards (graphics cards with a low hash rate and high power consumption) and you live in a country with high costs of Energy.
To find out how much you will spend on energy each month, you can check RapidTables. Here you can enter how many watts your computer will use, and the website will give you results of how many KW / h they are per month.
After calculating the amount of KW / h, you will use each month, multiply the KW / h per month by the amount you pay for electricity in your country and then you will find the cost. Take your monthly energy cost out of the cryptocurrency value you mine to find your monthly earnings.
Although most mining calculators include calculating profitability in mining, they can also be very useful in finding the exact amount that you will spend on Energy.
Here is a formula to calculate the monthly profitability: M – W = P
cryptocurrency in M and daily power consumption in W, the same can be done for weekly calculations.
However, to find your real profit, you first have to pay off your mining rig’s first investment.
POW VS POS
Although this guide mainly focuses on Proof of Work (PoW) of mining, you should be careful with Proof of Stake (PoS) as Ethereum will soon switch to this method.
PoS trusts that it will “bet” your coins to the network. The more coins you bet, the more likely you are to receive transaction fees from other Ethereum investors.
Both types of mining have a difficulty factor in which the more miners there are on the network, the lower the chances of mining a block. In other words, the lower your reward will be.
Bitinfocharts is a website that has a lot of information about the major cryptocurrencies, including their difficulties, blocks, and rewards block. If you want to check when the last block was mined and who mined it, you can check this website for Bitcoin and this website for Ethereum.