The advent of Bitcoin in 2008 was the result of the need for an alternative financial system. Backed by blockchain technology, Bitcoin gave rise to an entirely new industry of cryptocurrencies. Today, the market comprises of more than 2000 cryptocurrencies, with the capitalization amounting to billions of dollars.
With the growing popularity of cryptocurrencies, everyone wants a piece of them. In this comprehensive guide, we are going to dig deep into one of the ways through which you can acquire cryptos. That is, we are going to be exploring cryptocurrency mining in more details.
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What is Cryptocurrency Mining?
Naturally, the first question that comes to a beginner’s mind is what is cryptocurrency mining?
Well, in one sentence, it is a method through which new digital coins are generated inside the network. Having said that, it is a deeper process and an integral part of the successful functioning of a crypto network. The network, backed by blockchain technology, is wonderfully intricate. Essentially, there is no central body to process and manage the transactions happening inside the network.
The transactions, inside a blockchain network, are processed and validated through this process known as ‘cryptocurrency mining’ and the ones performing the task are known as ‘miners.’ Each transaction is vetted by the miners and then added to the blockchain ledger.
In return, the miners receive a reward in the form of cryptocurrency coins for honestly validating transactions and updating the ledger. The rewards differ according to the cryptocurrency you choose to mine. For example, in the case of Bitcoin, currently, a miner receives a block of reward comprising of 12.5 Bitcoins, every 10 minutes.
Among other ways, that include trading or buying digital coins, mining cryptocurrencies is one of the unique ways through which you can acquire cryptos. The method of mining is a relatively safe and secure way to invest in digital currencies.
Mining cryptocurrencies has a number of benefits as compared to other methods. Some of these benefits include:
- Lower Risk – Cryptocurrencies are highly volatile. As a result of this, buying or trading these digital assets can be a huge investment risk. Cryptocurrency mining has comparatively lower risks in contrast to other alternatives.
- Better ROI – The investments needed for mining include buying mining hardware equipment, investing in software, and electricity consumption, among others. However, after making a one-time investment, you can receive a substantial inflow of crypto rewards.
- Secure and Easy – Cryptocurrency mining is one of the easiest ways of earning cryptos as a passive income. There is no need of continually monitoring the market or staying up to date with the latest trends, as is required when investing in cryptocurrencies in the financial markets.
How to Mine Cryptos?
Now that we have already established the fact that cryptocurrency mining is one of the easiest and safest ways to invest in cryptocurrencies, from where do you start? How to mine cryptos?
Over the years, with the rising popularity of cryptocurrencies, new ways of mining have emerged in the market. Individual mining is one of the first methods for mining cryptocurrencies. You can set up a small rig, even in your home, with the required mining hardware equipment. Further, you can install the software and start mining for a cryptocurrency that you want to invest in. However, increasing competition has made individual mining difficult. The rewards are less and the growing electricity consumption and costs could give you a lower ROI.
Distinctive systems, like group mining or pool mining, have made their way in the crypto industry. A pool of investors set up a mining rig together with higher pieces of equipment and within a larger area. The processing power of a bigger mining rig can subsequently result in better rewards.
Alternatively, cloud mining is one other service provided by mining firms. Larger corporations, specializing in cloud mining, buy excessive amounts of hardware mining equipment. You can then invest in the company providing cloud mining services, instead of buying any equipment yourself, and earn your profits in cryptocurrencies.
The mainstream adoption of the crypto sphere is growing. While other methods for investing in cryptocurrencies can be a bit overwhelming for beginners, cryptocurrency mining provides an easy and secure way for you to get in on the profits offered in this space. Furthermore, it has become a favorable option for investors looking for passive investments in cryptos.