The Comprehensive Guide to Mining Cryptocurrency [2020-2021]
Cryptocurrencies like Bitcoin can be bought and traded via various online exchanges. However, you can also acquire these digital coins without using fiat money like cash – you can mine them. While they function like cash, virtual coins can be mined like gold. If you’re willing to take the investment risk and you know how to do it properly, you may wind up with some valuable Bitcoins of your own. Who would blame you for wanting to join the digital coin rush? After all, the price of Bitcoin reached 1,349.19 U.S. dollars per unit in April 2017.
How Cryptocurrency Works, and How You Can Mine It
You can acquire cryptocurrencies via three methods:
- Purchasing them on an exchange
- Accepting them for services and goods
- Mining new coins
‘Mining’ is the term used for finding new coins—just like digging through the earth to discover gold. In fact, the whole process involves a complex method of verifying coin transactions. Let’s say John uses Bitcoin to buy a computer from Pam. To ensure that John’s digital coin is genuine, miners have to verify the authenticity of the transaction. Now, this may seem like a straightforward process, but that may not be the case since miners have to verify multiple transactions. These transactions are stored in virtual boxes with secure padlocks known as ‘blockchains.’
What a miner does is run software that will locate a key that will unlock a blockchain. Once their high-powered computer discovers the key, the blockchain will open, verifying all the transactions. In a way, finding the key is like looking for a needle in a haystack. Only this time, there are complex algorithms used to locate that key. Once the miner verifies the transactions, they will be rewarded with 25 new bitcoins.
According to Blockchain.com, a trusted source of Bitcoin information, it will take around 1,789,546,951.05 attempts to find the correct key for a blockchain. Previously, only 25 bitcoins could be generated every ten minutes. However, in 2016, that halved (to 12.5), and it happened once more this year, bringing down the bitcoin generation to 6.25 every ten minutes.
Just by looking at the process, you may think that it’s quite complicated to enter the Bitcoin market and, even more so, learn how to mine cryptocurrency. Luckily, some companies offer mining services to individuals. So, you wouldn’t need to have high-powered computers and complex technical knowledge to mine for cryptocurrencies. To get started, follow the steps below:
Step 1: Look for a Reliable Crypto Mining Company
If you don’t have the sophisticated knowledge and tools necessary to mine for virtual coins, you can opt for cloud mining. With this option, you’re either hiring someone to mine for you or renting hardware or a portion of hashing power. Since you’re essentially making an investment, you should also perform your due diligence. A lot of cloud mining companies claim to be the best but rarely follow through their promises.
Some of the trusted cloud mining firms include Bitcoin Pool, which delivers the highest Pay Per Share (PPS) pool, and Hashnest, which is backed by Bitmain, a big name producing ASIC mining hardware. You’ll have to fork out a great deal of money to get started, but you won’t regret choosing the best options out there. Always be careful when looking at reviews because comments sections are usually riddled with referral codes.
Step 2: Select a Mining Package
After choosing your cloud mining provider, the next thing you have to do is select a mining package. Usually, you’ll have to get hashing power that will suit your budget. On face value, you’ll see that going for a bigger package will render better and quicker results. However, that is not always the case.
Most cloud mining firms will help you make an informed decision. They will provide you with calculations based on the current cryptocurrency market situation. Moreover, they’ll help you factor in the difficulty level of crypto mining. You can compare the data with the hashing power you’re renting. Now, you must remember that the numbers will change. So, it’s important to study the market trends and analyze where cryptocurrencies will go next. What may seem profitable today may not be as lucrative when the value of cryptocurrency crashes—which has happened several times before.
You may find packages that are available on a pre-sale basis. These contracts will require you to pay upfront for an agreement that will only begin once new hardware becomes available. We do not recommend signing contracts like this because there is no guarantee that they will be profitable or work at all.
Step 3: Choose a Mining Pool
Once you’ve signed a contract, your cloud mining firm will let you select a mining pool. Basically, you’ll join a global mining team that will help you increase your chances of discovering virtual coins. Whether you’re mining on your own or using the services of a cloud mining company, you’ll have to go through this standard practice. Of course, there are pros and cons to joining a mining pool. Even so, when you’re starting, your best bet is to choose a proven and credible pool.
Step 4: Choose a Secure Digital Wallet
After choosing a mining pool, you can start your mining activities. Over the following weeks, you will see virtual coins starting to accumulate in your cloud mining account. It’s always a good idea to withdraw your digital coins and put them in a secure wallet. On the other hand, you still have the option to use your earnings to gain more hashing power.
Whatever your decision may be, you should always look at the bigger picture. You can use cryptocurrencies to purchase products or services. However, since prices tend to fluctuate, you still need to perform due diligence to determine if you’re securing a good deal. Other crypto experts recommend HODLing as a good financial strategy. You can keep your coins with you and wait for their value to increase over time. However, don’t take our word for it because we’re time tracking experts—not financial advisors. Even so, if you plan to hold on to your coins, you’ll still need a reliable digital wallet to store them in.
Should You Mine or Buy Crypto Currency?
Run-of-the-mill computers are not powerful enough to support cryptocurrency mining. Considering the complexity of mining for virtual coins, many naturally resort to learning how to buy cryptocurrency. Whether you decide to mine or buy, you must understand the uncertainties and risks in this field. The cryptocurrency market is highly volatile, and many factors contribute to it, including the level of Bitcoin mining difficulty and hardware price fluctuations. What’s more, there’s no payout guarantee at the end of it all, making mining a riskier investment.
Since the cryptocurrency market is highly volatile, it can be difficult to forecast how much you’ll earn from mining. For instance, in 2018, cryptocurrency mining profits plummeted, then started to shoot up unexpectedly. This will likely happen over and over again unless there is a significant change in cryptocurrency tech. Ultimately, if you want to gain something tangible from your investment, buying virtual coins directly is worth considering. Plenty of credible platforms, including Coinbase, will help you buy and sell Bitcoin with ease.