There have been many debatable topics regarding cryptocurrencies since their evolution in the last decade. Some debates revolve around the credibility of cryptos as “Money” or another Madoff Ponzi scheme. But after the development of hundreds of cryptocurrencies to date, it’s enough proof that they are not going anywhere.
If you are a crypto enthusiast, you probably have wondered if cryptocurrency mining can be a profitable deal and your main hustle. As per now, my answer to you is the capital “NO.” In the early days, cryptocurrencies would be mined successfully by small players. Still, it’s currently the business of big players since it is a capital-intensive project demanding a lot of electricity to run the machines. This article helps you understand why the mining of cryptocurrencies is not easily profitable and does not fit your main work.
The History of Mining of Cryptocurrencies
The concept of mining cryptocurrencies is not new, especially to the diehard followers of Bitcoin. It began approximately ten years ago. The process involved using computers to solve complex mathematical algorithms whose rewards were in cryptocurrencies, specifically, Bitcoin. At that time, very few miners were in the market since the digital currency was still new. Mining only required one or two computers to mine enough bitcoin. By the way, Satoshi Nakamoto, the founder of Bitcoin, was among the pioneers of mining.
Since that time, many were attracted to mining as Bitcoin grew in popularity. Its growth resulted in a mathematical crisis demanding more computing power to solve the problems whose solutions rewarded Bitcoin. The sophistication of the process ushered in different technologies to solve the mining problems such as the Graphics Processing Unit (GPU), a device with a higher speed than regular computers. Others were Field Programmable gate arrays (FPGA); they consumed less power than GPUs. Lastly came the application-specific integrated circuit (ASIC) units, specifically designed to mine cryptocurrencies.
Today, the equipment named above halts your passion for cryptocurrency mining since they are costly. And any attempt to buy them requires a thorough consideration of both the long and short-term goals of the investment.
Is Cryptocurrency Mining Really Profitable?
The dynamics of cryptocurrencies have been on the rise since their evolution. Many people have not yet caught up with their growth. Therefore, mining has not been easy to make a profit. Generally, cryptocurrency mining will not work for an individual or small business as the main job due to the following factors:
Mining cryptocurrencies on your own is very difficult. Initially, most of the miners worked alone, but as the technology grew, many miners teamed up to work together. This resulted in systems known as mining pools. They were a competitive approach for better Bitcoin rewards. Therefore, any miner’s success depends on his/her ability to work with pools, which are characterized by a fee and splitting of rewards. The system implies that one may receive the lowest rewards.
The reduction of rewards of a cryptocurrency block reduces at an interval of four years. The cryptographic algorithm is designed to half rewards every four years to reduce the amount that is mined each year. This program secures cryptocurrencies to last longer.
Therefore, miners’ rewards reduce each year despite the effort one put. This means that cryptocurrency mining cannot serve as the main hustle.
Increase in the difficulties of the mining process. The most interesting part with cryptocurrencies is that their equations get more complicated as more users join the network. This sophistication means the miner should increase their computing power. To cope with the increases in demand for power, one needs expensive machinery that eats away the profits.
In conclusion, cryptocurrency mining is hardening as days go due to the halving of rewards. Therefore, anyone interested should consider either mining pools or cloud mining, which are not very sustainable as the main source of income. Failure to do so, mining alone will not only frustrate you but also reap a lot of money out of you.