Benefits of Cryptocurrency Mining: The Pros and Cons
December 14, 2019 - How-To Articles
Cryptocurrency mining is like any other business. Before diving in from the deep end, related costs and benefits must be determined. That’s the inescapable part called due diligence. It would be an act of vanity if capex or operational costs are too high, outweighing expected benefits. What an investor ought to spend in any endeavor must be less than earnings. It’s elementary math. Otherwise, no deal.
That is why, it is paramount for would be crypto miner or investor to understand the benefits of crypto mining, what it means for the blockchain community and the expected hurdles. After all, if mining was risk free and boosted by ideal climatic factors or government subsidies as free electricity, everyone would be mining Bitcoin.
Exactly, What Is Crypto Mining?
I will breakdown what crypto mining is in a very simple, easy-to-understand manner using a practical example:
In the fiat world, banks charge a transaction fee when moving funds from one bank account to another. Charges vary but usually decrease as the amount increases. The ballpark for this could be somewhere between 3-10 percent depending on jurisdiction. Usually, fees cover transaction processing and system maintenance.
When this analogy is extended to cryptocurrencies, Bitcoin mining is easier to understand. Since blockchain systems are free from intermediaries because of sufficient decentralization, the work of miners (like banks in our example) is to verify transactions and secure the network against attackers.
A miner has the copy of the entire blockchain. When confirming transactions-which includes checking whether the sender has sufficient balance, miners must commit their computing power, or hash power, and consume electricity, a utility which is expensive.
Best Bitcoin mining hardware costs money and are run 24 hours a day, 365 days a year in low temperatures and constant speed which vary depending on the cryptocurrency being mined. It’s arduous. How long does it take to mine Bitcoin (BTC) and break even when the cost of gear and fluctuating asset prices are factored in? It could be months or years largely depending on the performance of Bitcoin prices.
Bitcoin Mining Is All about Incentives
Therefore, to incentivize them, it is usually hard coded that successful miners are rewarded with transaction fees and new cryptocurrencies for their “work”. Within the Bitcoin network, successful miners earn 12.5 BTCs roughly every 10 minutes. That is when a block containing transaction is “chained” to the ledger, increasing the size of the transparent ledger called blockchain. This is how Proof of Work systems operate.
In a nutshell, cryptocurrency mining is time and resource consuming that must be compensated. In “sealing” transactions in a block by solving complex math, miners play a crucial role in Proof of Work networks. The more the miners, the more the demand the coin has.
While a cryptocurrency enthusiast can decide to buy the asset from an exchange, getting involved from the ground up though Bitcoin mining for example is the best way to contribute and keep the ball rolling. And it is very easy to get started. Through trusted and best Bitcoin mining providers, one can allow his money to do the work as the facility mines several cryptocurrencies including BTC, Bitcoin Cash, and more without his/her direct involvement.
Pros and Cons of Crypto Mining
A cryptocurrency like Bitcoin (BTC) is a tamper-proof, weightless, utilitarian modern money operating on the auspice of decentralization and has the following advantages:
- After determining the most profitable coin to mine and armed with the right knowledge, one can earn decent money. Huge sums with tremendous ROI are possible. As a matter of fact, the last cryptocurrency rally of 2017 churned many crypto millionaires. Also, compared to other careers, there is an unmatched level of freedom in this space found nowhere else.
- You can’t be bankrupt. Reason? Well, prices may free fall, dropping by 95%, but still, the cryptocurrencies in your vault are worth something. That’s not forgetting the gear bought whether mining from your backyard or mining from a provider as VBit. Besides, there is no concept of debt or fractional reserving in cryptocurrencies.
- There is flexibility. The cool thing about cryptocurrencies is their volatility. If prices rally, a miner can have extra-ordinary, once in a life-time ROI granting him financial security. However, it doesn’t end there. Cryptocurrencies are by nature censorship resistant and global meaning it can act as a store of value in times of uncertainty or financial crises.
- If you own a coin’s private keys, then it can’t be stolen. Private keys are secret codes that are needed for the owner to spend funds. Essentially, they are digital signatures that prove ownership. Uniquely, there is no way to practically deduce one private key from another.
- It doesn’t matter your technical knowhow or level of expertise to get started. There are various channels of earning cryptocurrencies. While one can buy from exchanges, an investor can directly inject hash power and bolster the network’s security through trusted, reliable best Bitcoin mining providers.
- Cryptocurrencies are digital and sealed transactions are immutable. That means every coin in circulation is tamper proof and cannot be copied eliminating fraud. Since private keys guarantee ownership, cryptocurrencies could usher in the beginning of the end of fractional reserve triggered boom and bust cycles.
Its disadvantages are as follows:
- Chipsets powering Proof of Work blockchains are energy intensive. That is why, unless there are special government subsidies or the prices of digital assets have soared to new highs, or there is free electricity to power the power-hungry rigs, mining is not practical everywhere.
- Mining gear are scarce. And it doesn’t matter the time of the year or the state of the cryptocurrency market. The chipset industry is, for lack of a better term, monopolized meaning whatever is availed, usually an upgrade, is hot property often sold in BTC or any other liquid crypto assets mineable by the offered gear.
- Risk of fraud in mining pools or cloud miners. There have been cases of even the best mining pools being dishonest in the operations, defrauding investors and those who mine Bitcoin at home. It is advisable that miners only engage with reputable mining pools and mining providers, reviewed and rated by the thorough blockchain community.
- Crypto asset prices fluctuate. Bitcoin prices to rise and fall depending on the level of demand and supply influenced by external factors like government regulations. The more the demand, the higher the asset prices. That demands gauging the prevailing sentiment and determining whether it is time to liquidate mined assets to meet operational expenses, or ramp up and mine more coins as market conditions change.
What to Look For From the Best Bitcoin Mining Provider
Good news about cryptocurrency is that the technology is here and proven. What remains is global adoption and therein lies the gem. Investors are also more aware. Every year, sophisticated derivative products are being approved by regulators and ordinary investors are now better protected.
Those are the triggers that make Bitcoin mining so attractive. After all, the advantages are numerous and participating in Bitcoin mining via verifiable, trusted provider means you are part of a digital revolution and in that case allowing fiat money to work for you, earning digital money-even if in fractions, every 10 minutes, monies acceptable all over the world, and being you.
The downsides on the other hand include getting scammed especially if you fail to research about the mining provider, the running contract being nullified when prices collapse and the scarcity of hash rate contracts can be discouraging. As a matter of fact, Bitcoin (BTC)hash rate contracts in most mining providers are so in demand, they are currently out of stock.
VBit Technologies is a preferable alternative that presents the above advantages and IS available for your investment. Not only are their contact and owner’s information accessible, but clients have access to the latest mining equipment and can therefore mine longer.
That is why are creating avenues where your money is put to work ridding you of all the boring stuff of keeping tabs, connecting wires, selecting the best Bitcoin mining software or keeping temperatures lows. Our miners are housed out of data centers in Colorado and Alberta, Canada. Through these modern facilities, you can join million others in supporting your preferred blockchain network ensuring that they remain secure, transparent but hassle free from your end.
Sign up for a free account and start Bitcoin mining today in an arrangement that ensures you always miner longer using the latest mining gear from as low as $150! There is a trick, you can join for free.