Cryptocurrency mining is the action of obtaining virtual coins in one way or another. It is not only mining with the available capacity, but also stacking, plotting, renting equipment, passive earning, cranes and even buying. All of these ways allow you to get certain cryptocurrencies and become an investor. Below we will consider what are the features of each method, highlighting their advantages and disadvantages.
Mining
The classic way of mining cryptocurrencies is mining, which is built on the principle of “proof-of-work”. The essence is to perform calculations to create a block – an element of the blockchain, which is necessary for further confirmation of transactions. This method is relevant for Bitcoin and a number of other virtual coins. Read more at the Kirill Yurovskiy.
The efficiency of mining directly depends on the power or hash rate of the equipment used. The latter allows to solve a certain puzzle and find the proof. The participants in the process considered are miners who work on solving a single problem individually or in a pool. The goal is to get a reward.
In popular cryptocurrencies, such as Bitcoin, mining participants join together in multiple pools. Their goal is to solve one common task with a reward and then divide the profits among all participants.
Popular methods of mining include:
- CPU. It implies the use of processors for solving computational tasks. Suitable for new coins, which do not require complex calculations to obtain a block. For Bitcoin and other popular cryptocurrencies, this method is not effective.
- GPU. The use of video cards allows you to count on a higher hash rate. This method is more versatile due to the support of most algorithms and the possibility of application in the form of farms for virtual coin mining. The essence of the latter is to combine two or more video cards into one system for mining.
- ASIC. Special devices with high hash rates. Created for mining and most often designed for a specific algorithm. In most cases we are talking about Lightcoin, Dogicoin, Bitcoin Cash, Etherium, Bitcoin and other coins.
Pros of mining:
- automation of the process;
- the ability to mine all types of cryptocurrencies;
- no “ceiling” on the amount of earnings;
- the prospects of earning on the further growth of the price;
- the direct dependence of income from the power of equipment;
- fast self-repayment;
- ease of operation.
Cons:
- complexity of the first setup;
- need to connect to the pool;
- low efficiency with “weak” equipment and solo mining.
Steaking
The concept of “steaking” differs from mining in the way of obtaining cryptocurrency, namely the passivity of earnings. The principle of action is based on the PoS or proof-of-work algorithm. This method was first used for the cryptocurrency Pircoin. It requires less energy and is suitable for a larger number of users. The correctness of transactions using the PoS algorithm is confirmed by other people.
Stacking is a more environmentally friendly way of mining cryptocurrency that does not require expensive equipment. The main requirement concerns the capacity of the disk on which the virtual money is stored. The possibility of such earning is relevant for cryptocurrencies operating on PoS. This group includes Tezos, Tron, NEO, Solana, Cosmos, Cardano and others.
Eventually, a switch to stacking is planned for Etherium. The goal of such a change is to reduce the environmental damage due to the use of high power and the load on the electric grid. But there is still a debate going on here. According to many experts, conventional financial structures have just as much of a negative impact on the environment.
Benefits:
- Cryptocurrency mining without having high capacity.
- Potentially high returns.
- Low threshold to start investing.
- Wide choice of coins to mine.
- No taxation.
- Convenience and security of the process.
- Ability to use an asset that is on “deposit”.
- No big commissions.
Disadvantages:
- When storing coins on an exchange, there is always the risk of hacking such a platform.
- For some assets, the profit margin does not exceed 5%.
- There is no money insurance if compared to conventional bank deposits.
- The risk of a drop in the price of the coin in which money has been invested.
- Impossibility of receiving payouts in fiat coins.
Plotting
One type of cryptocurrency mining is plotting, which focuses on obtaining a virtual Chia coin using a hard drive. The possibility of earning is due to the peculiarities of the virtual coin. The first mentions of the money appeared a few years ago, but the active mining of Chia began only in 2021.
The essence of Plotting is the use of free space of the computer / laptop to store Chia, followed by the receipt of remuneration. In this case, the user decides how much space to allocate for mining. The larger the amount of memory provided, the higher the probability of getting the reward.
The hard drives of the users participating in the process are used to build rafts. Once they are built, the farming process is started, and the software takes control of the operation and tracking the rewards. This “mining” requires minimal parameters and low resource requirements, with only the size of the hard drive being the main requirement.
Pros:
- minimal hardware requirements: motherboard, power supply, etc;
- the possibility of mining with a minimum investment;
- safety of the process;
- high potential for further growth;
- minimal harm to the environment;
- easy installation of the hard disk;
- low noise level.
Disadvantages:
- if the project fails, all financial costs will be useless;
- there is no exact information about the optimal time of mining;
- limited issue of Chia (not more than 21 million);
- opportunity to mine only one cryptocurrency.
Cloud mining
In contrast to conventional cloud mining does not involve the purchase of equipment, and its essence is to rent the capacity of special companies. With the growing demand for cryptocurrencies, there are many organizations that buy the necessary equipment and perform its configuration, and then rent it out to users.
People who do not want to spend money to buy ASIC miners / video cards and the time to set them up pay a certain amount of money to get the power. The latter are used for cryptocurrency mining. There is no need to worry about possible equipment failure, reduced liquidity, electricity charges and other things. Examples include Eobot, Genesis Mining, Binance Pool and others.
Benefits:
- Saving money on buying mining farms or ASICs.
- Accessibility to all comers.
- Wide range of cloud mining services.
- Ability to mine almost any cryptocurrency.
- No upper limits on the size of earnings.
- Official work of large cloud mining services.
- Affiliate program to increase the size of earnings.
- No need to pay for light.
Disadvantages:
- High cost of services.
- Low efficiency with low power.
- Many scammers among services that provide such services.
- High volatility in the market, which can minimize the amount of income.
Buying
The next method of mining cryptocurrency is buying it. In contrast to the methods discussed above, in order to obtain virtual coins, it is sufficient to have the necessary amount of money to make a transaction.
The main methods of purchase include:
- Online exchangers. Oriented at beginners, they have a simple algorithm of actions and small commissions. They do not always have a favorable rate. To select the best option, the monitoring sites of exchange offices are used. As an example, the exchangers 365cash, Baksman and others.
- Cryptocurrency exchanges. The recommended option, which allows you to get the most profitable rate and even earn on the price difference. Here you can trade cryptocurrency without the involvement of intermediaries. Popular options are EXMO, Binance, etc.
- P2P services. Their peculiarity is to buy cryptocurrency directly from the seller, while the online platform acts as an intermediary and guarantor. This method allows you to get virtual coins quickly and at a favorable rate, but you will have to pay a fee. Examples of such platforms are LocalBitcoins, OKEx, etc.
- Telegram Bots. A convenient way to get cryptocurrency for fiat money. The essence consists in installing a special application in Telegram and making payments via it. Examples – BTC Banker, Btc_Change_Bot. The algorithm of actions in all cases is almost identical – run the bot, select the currency, select the payment option and find the application to perform the operation.
- Cryptomats. A universal option that allows you to buy cryptocurrency offline. Today such machines are found less and less often because of questions to the regulation of virtual coins. Of the disadvantages – less favorable rate and the presence of commission.
- Payment systems. A large selection of electronic services can be found on the Internet, allowing transactions in different directions. Popular platforms include Payeer, Capitalist and others.
Buying cryptocurrency is the best solution for investors who do not want to spend money on purchasing the necessary equipment and time to set it up.
Pros:
- accessibility for everyone;
- the ability to conduct the operation on the simplest PC / laptop or without it at all;
- simplicity of operation;
- a wide range of available services.
Cons:
- the need to spend money to purchase;
- loss of part of the money on commission.
Passive income
As the demand for cryptocurrency grows, services offering passive income from cryptocurrency appear. DeFi programs for decentralized finance are the most in demand. One example is the Binance platform available. Here you can invest in safe deposits, earn on fixed staking, get tokens from new projects, use bicurrency investments, etc.
The pros of such platforms are:
- availability of earnings;
- a wide choice of ways of passive income;
- the universality of the method;
- ease of start-up even for beginners, etc.
Cons:
- a limited number of such platforms;
- lack of understanding of the principles of work.
Summary of
Today, more and more people are interested in the process of cryptocurrency mining and investing money in this tool. A wide range of options allows you to find a suitable solution for obtaining Bitcoin, Ethereum or other coins. Some people will like classical or cloud mining, others will prefer cranes with the possibility to mine without investment, others will successfully use plotting or stacking. Each method has its pros/cons to consider.
