Cryptocurrency mining, don't dig too deep

Mining cryptocoins is an arms race that rewards early adopters. You might have heard of Bitcoin, the first decentralized cryptocurrency that was released in early 2009. Similar digital currencies have crept into the worldwide market since then.

The importance of money as a form of judging the ownership of a person’s assets is known since late stoneage. It started with stone nuggets, then iron tablets followed by gold and silver coins and now paper money and electronic money. One notable fact is that throughout the timeline, the number of money people possessed increased and the value of each unit decreased. This happened till a stage when the banking system had to finally digitalize their currency, and it is all stored in reserve banks in a digitalized form. One step ahead of the agenda is the concept of Cryptocurrencies. This is different from money stored in banks which can be accessed indirectly through debit/credit cards and online banking.

Today, there is very much a digital gold rush where people can make a small profit by investing a few hundred dollars in equipment, and then spend months mining for digital coins before any return on their investment sets in. Litecoins, Dogecoins, and Feathercoins are three Scrypt-based cryptocurrencies that are the best cost-benefit for beginners. At the current value of Litecoins, a person might earn anywhere from 50 cents to 10 dollars per day using consumer level mining hardware. Dogecoins and Feathercoins will yield slightly less profit with the same mining hardware but are becoming more popular daily.

What is Cryptocurrency Mining

To mine cryptocurrencies you need a powerful hardware as well as software combination. Since the value of a currency depends on the number of units of the currency available in the market, it should be a carefully monitored and a very reliable process. Cryptocurrency mining is simply the process of generating new units of the Cryptocurrency.

Is It Worth It to Mine Cryptocoins?

As a hobby venture, yes, cryptocoin mining can generate a small income of perhaps a dollar or two per day. In particular, Litecoins, Dogecoins, and Feathercoins are very accessible for regular people to mine, and a person can recoup $1000 in hardware costs in about 18-24 months.

As a second income, no, cryptocoin mining is not a reliable way to make substantial money for most people. The profit from mining cryptocoins only becomes significant when someone is willing to invest $3000-$5000 in up-front hardware costs, at which time you could potentially earn $50 per day or more.

Now, there is a small chance that Litecoins, Dogecoins, or Feathercoins will jump in value alongside Bitcoin at some point. Then, possibly, you could find yourself sitting on thousands of dollars in cryptocoins. Note: the emphasis here is on 'small chance', with small meaning 'slightly better than winning the lottery'.

If you do decide to try cryptocoin mining, definitely do so as a hobby with a very small income return. Think of it as 'gathering gold dust' instead of collecting actual gold nuggets.

If your objective is to earn substantial money as a second income, then you are better off purchasing cryptocoins with cash instead of mining them, and then tucking them away in the hopes that they will jump in value like gold or silver bullion. If your objective is to make a few digital bucks and spend them somehow, then you just might have a slow way to do that with mining. 

Why Not Mine Bitcoins?

If you had started mining Bitcoins back in 2009, you could have earned thousands of dollars by now. At the same time, there are plenty of ways you could have lost money, too.

Now, Bitcoin mining is reserved for large-scale operations only. Over the past five years, the mathematical difficulty of discovering Bitcoins has grown far beyond what a regular individual can achieve at home. The current up-front investment and maintenance cost to mine Bitcoins is no longer worth it for small-scale consumers.

Unless you are willing to spend tens of thousands of dollars on industrial hardware and rent an air-conditioned office to house your hardware, there is no profit in mining Bitcoins. You are better off purchasing cryptocurrency with your regular money, and tucking it away in the hopes it will further climb in value.

Litecoins and Dogecoins are the popular digital currencies that are still within the grasp of consumer-level users with hobby budgets, with Feathercoins being a good third option that is gaining traction.

sample of a small mining farm:

And a more serious one:

List of Cryptocurrencies

While the actual list of Cryptocurrencies is huge – there are over 800 cryptocurrencies as of date, and so we can only discuss the most prominent few here.

1] Bitcoin: Are the most popular and the highest rated Cryptocurrency. Rather most think of it as the only Cryptocurrency available in the market. Valued somewhere near $650 per Bitcoin by mid-2017, it became the reason for interest in the Cryptocurrency market when its rate surged suddenly.

2] Ethereum: While still at its nascent stage, this currency launched in 2015 might be the Cryptocurrency of the future. It is a decentralized, secure and could be used to trade almost anything.

3] Litecoin: They say that if Bitcoin is gold, Litecoin is silver. Litecoin is based upon the fundamentals of how the peer-to-peer system works on Bitcoin, but with improvements on the technical front. It has substantially reduced the time of transfer from a rather long one for BTC.

4] Ripple: Ripple’s distributed financial technology allows for banks around the world to directly transact with each other.

5] Dash: Dash, or DarkCoin, as the call it, is a highly secretive Cryptocurrency. It is almost impossible for anyone to trace where it has been routed. It is more in use on the darknet.

Risks with Cryptocurrencies

With most transactions shifting online, Cryptocurrencies have become a cause of concern for Banks as they fear money transaction business moving online. Attempts would be made to stop it at this level. Recently, the U.S. Congress submitted a bill to make Cryptocurrency illegal. The pretext was that it could fund terrorism and corruption.

But in my opinion, Cryptocurrency is here to stay – and if one invests conservatively and carefully in them, one could end up making money!