While cryptocurrency mining is a familiar concept to almost every investor, understanding exactly how it works is another matter. But don’t worry, in this article, we will explain in detail how to mine digital assets.
For this, we will first start by defining what a miner is, which cryptocurrencies are possible to mine, what hardware you need and see if mining is really profitable or not. Do you like the program? So let’s get straight to the point if you don’t mind.
What is a minor?
As you might expect, the term miner used in the cryptocurrency industry has a connection to that of traditional mining.
For many crypto investors, Bitcoin it stands for digital gold. As a result, people who deal with the processing of transactions on the network have also received this designation because they receive rewards every time they manage to solve the equations to record a block on the blockchain.
Choosing a cryptocurrency to mine
As you probably know, there are thousands of different cryptocurrencies. Among them, many can be considered to have no real use. But among those likely to achieve their goals, not all are weak.
Indeed, for a digital asset to be weak, its blockchain must use a Proof-of-Work (PoW)-type consensus, or proof-of-work in French. If the crypto works with another consensus, such as Proof of Stake (PoS), it is not possible to mine.
Likewise, cryptocurrency should be what is called a currency and not a token. For example, until September 2022, Ethereum operated with the proof-of-work consensus.
Gold, the Ethereum blockchain it allows other projects to issue ERC-20 tokens to it so they don’t need to create their own blocks internally. In this particular case, we cannot relate this in any way to the concept of mining.
The hardware needed to mine cryptos
Now that you know which cryptocurrencies can be mined, how should you go about it? Can everyone improvise as a minor? Should you invest in very expensive equipment?
Actually, as we’ll see, it depends. However, every time it is necessary to spend time analyzing the digital asset you want to mine. You need to make sure that it is reliable and that you will not waste time and electricity.
We will give you a small list of the different options available for mining. As you’ll see, and despite all the promises of easy wins you might hear from malicious actors, it’s not such a trivial thing to decide after all.
Inevitably you will find people offering you to effortlessly mine cryptocurrencies with your mobile phone.
Therefore, we will cut very quickly, whenever it is a scam. A mobile does not have the power to mine cryptocurrencies. If you find a digital asset that claims to be usable by mobile, run away immediately.
There are several plug-ins that can be installed as add-ons to your web browser. With these, you can mine cryptocurrency while surfing the net. The operation of this process is quite simple to understand.
When you surf the Internet, you don’t fully use your computer’s resources. As a result, there is computing power that is available and this can be used to mine cryptocurrencies. However, this type of plug-in does not allow mining in an optimized way.
Indeed, the remaining computing power of your computer will not be used 100%. In addition, it should be noted that the benefits you can get through this method are quite low and that this practice will negatively affect the life of your computer. Therefore it is a method that we do not really recommend.
Another more interesting mining option is to install a dedicated program on your computer. When you start it, you will be able to use 100% of your computer’s power and thus make the most of your mining operation.
However, this is also not optimal if you use your everyday computer to mine cryptocurrencies.
What matters most in mining is the power of your graphics card, not your processor. Unless you have a gaming PC that has a more recent configuration, you shouldn’t be able to generate pretty cool profits there either.
Dedicated RIG type equipment
Now we are getting down to business. Here we are talking about hardware dedicated to cryptocurrency mining. In slang, this is called RIG. Sometimes, we use prefabricated structures, but in other cases, it is custom made in house.
Therefore, you must have strong computer knowledge if you want to mine cryptos with a RIG.
Such a device usually has a motherboard, a not too expensive processor and, most importantly, some modern graphics cards. Indeed, it is the latter that will allow your structure to be able to give maximum power to crypto mining.
However, the big problem with RIG is that it requires the investment of a significant amount of money to design a structure that is robust enough and does not become “obsolete” after a few months.
If you’re on a budget and don’t know much about hardware, this isn’t an attractive option for you.
The mining farm is the most powerful structure for mining digital assets. In reality, there are many devices that can be described as RIGs that are placed side by side. And by many, we sometimes mean thousands of RIGs sitting next to each other.
Mining farms are managed by professionals. It is impossible for a simple individual to create such a structure as the financial resources needed to invest in it are endless. Mining farms can be compared to large data centers.
Profitability of mining
Now that we have been able to present you the various options that allow you to mine cryptocurrencies, it is time to analyze an essential point: the profitability of this activity. In fact, who would want to start mining if this activity is loss-making or much less profitable than many others?
There are various factors to consider when analyzing the profitability of a crypto mining operation. However, for the purposes of this article, we will be limited to the cost of electricity, equipment depreciation and the time you will have to spend to perform this activity.
The cost of electricity
When you run your computer or RIG at full power, it is necessary to consume electricity to do so. And the more powerful your device, the more you’ll need. The problem with this story is that some countries where the cost of electricity is high enough are not competitive with others.
If other miners have the opportunity to pay for their energy 3 times less than you, will it be possible for you to be as profitable as them? Unfortunately not. Moreover, it is even a safe bet that you will be in deficit in the operation, turning it from then on into a real economic abyss.
Depreciation of equipment
Next, you need to consider the cost of purchasing the mining equipment and its amortization over time. Before you can make a profit mining crypto, you need to be able to pay the price of your computer peripherals with your mining profits.
But that’s not all. Computer hardware changes very quickly and if you want to be able to stay competitive, you will need to update 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, you finally need to add all the maintenance costs of your peripherals and be ready to replace defective parts as soon as necessary.
Time spent checking everything
Finally, there is one last component to consider: your time. Every second, minute, and hour you spend checking to see if your mining operations are going well is time you can’t use to do anything else.
You should therefore clearly assess whether your mining activity, taking into account the purchase of equipment and the price of electricity, is more profitable than having another economic activity on the side. This is information that only you have and therefore it is necessary that you make a comparison between the different options available to you and cryptocurrency mining.
Alternative to mining: lending
As we have just seen, mining cryptocurrencies is not that easy after all. Do you still have the motivation to go on an adventure? So don’t hesitate to try the experience. But if you are now hesitating to mine digital assets, we have an alternative to offer you that you will definitely find more interesting (and affordable).
What if instead of investing time and money in buying modern mining equipment, you use these resources to do what is called lending? In bulk, you buy cryptocurrencies and you can lend these to other users in exchange for interest on the amounts distributed to the borrowers.
There are many types of lending and some are, in our opinion, much more profitable and easier to set up than trying to become a crypto miner. If you are using a reputable platform, then lending digital assets to other users is a piece of cake and just a few clicks away.
If you want to use a relatively easy-to-understand lending exchange, we can recommend the excellent ZenGo.
It is a platform that has a very neat interface, clear menus and offers a very interesting loan offer with good profitability. For example, it is possible to lend your Bitcoins and earn up to 3% interest per year (rate may vary). Other assets are supported, including stablecoins (USDC, USDT and TUSD) and Ether (ETH).
If you want to know more about ZenGo and investor-to-investor lending, we invite you to visit the platform’s website by clicking on the button below:
We hope you now have a better understanding of how cryptocurrency mining works. We have 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, this is not something that can be achieved by everyone. First, it requires computer skills that not everyone can acquire. Then, you need to have a lot of time to devote to this activity. Finally, you also need to have plenty of funds to invest in quality equipment and succeed in being profitable.
If you want to try to generate some profits in the cryptocurrency universe, then we recommend that you turn to lending at a platform like that of ZenGo. All this is much easier to understand and requires less investment than becoming a crypto miner.