Jun 11, 2021 09:11 AM EDT
Main Pros and Cons of Cryptocurrency Mining
Should you buy Bitcoin or simply mine BTC? Mining cryptocurrencies is nothing similar to gold mining. It is not about finding, discovering, or making new coins. Instead, it involves a set of procedures that are necessary to validate and process a cryptocurrency's transactions.
Hence, this work requires a lot of computing effort and expensive costs. The complexity of the process guarantees the manner new transactions are written as new transaction blocks in the blockchain, which prevents malicious behavior and block modifications.
At the beginning of the Bitcoin era, mining cryptocurrencies was very easy. However, over the years the activity has become a billion-dollar industry, involving an astonishing number of investments in hardware, infrastructure, and electricity.
Considering the current scenario, is it still profitable to mine cryptocurrencies? In this article, you will discover the main pros and cons of cryptocurrency mining.
Understanding Cryptocurrency Mining - The Importance of Miners
Not all cryptocurrencies work the same way, as the way to mine each of them depends on the system that is used by each blockchain and the algorithm for each specific cryptocurrency.
However, all digital assets have one thing in common, which is that all major networks (e.g., Bitcoin, Ethereum, etc.) need miners. These figures are necessary to maintain the stability and security of the network, and that is why they have the right to charge fees for their mining work.
In the case of Bitcoin, for example, every time a miner finds a valid block, he is rewarded with 12.5 bitcoins.
The reward is given using the coins that are in the reserve, which, at that moment, enter into circulation. This part of the process sometimes makes some people mistakenly believe that mining involves creating new coins - which is not true.
Given the fact that all existing coins in a blockchain were already created, the mining process only disposes more of the available coins into circulation.
Is It Still Worth Mining Cryptocurrency in 2021? - Pros and Cons
Undoubtedly, Bitcoin is still the world's most popular cryptocurrency, also being the first digital asset to ever exist. However, while many are still insisting on putting their scarce resources into Bitcoin mining, currently there are more than 100 cryptocurrency alternatives. Also, the higher the crypto prices are the more profitable mining becomes.
Each of these alternatives has its own mining algorithms and mining costs. In many cases, it is possible to start mining for profit by using only a good GPU and some other basic pieces of mining hardware that are easily accessible for the average crypto enthusiast.
For example, Ethereum is considered the world's second most used cryptocurrency, and it is possible to mine it profitably without a mining rig worth hundreds of thousands of dollars.
Another good example is Monero, which has become very popular because it is mined simply through a script that runs on a browser. Unfortunately, many cybercriminals took advantage of this particularity by crypto-jacking people's funds.
Joining a Mining Pool - Is It a Good Idea?
So far, mining pools are still a more profitable option than solo mining.
In essence, mining pools are groups of miners who come together to reunite the computational power of all participants to have a better chance of finding valid blocks and winning the rewards, which they share among the participants in the pool.
There are different types of mining pools. While some are more stable, others are not, but these usually compensate by being more profitable (depending on the volume of work handled by each pool).
Mining pools can be a good option for those users who are starting to mine cryptocurrencies, as it gives them a chance to increase their mining power without necessarily investing a lot of money in computing power.
However, this option is mostly valid for altcoins, since mining Bitcoin in 2021 without an advanced infrastructure is difficult even for most mining pools. Some altcoins that are still profitable to mine in 2021 are:
Ethereum Classic (ETC)
The Legality of Cryptocurrency Mining Around the World
The best advantage of cryptocurrencies is that they function in a decentralized manner, being completely outside the traditional banking system.
However, it does not mean that digital assets are untouchable, as the regulation of digital assets varies according to each country's local laws- including mining activities as well. Hence, miners must evaluate their situation based on their countries' local legislation.
Indeed, mining cryptocurrencies is still worth it in 2021. There are still profitable mining opportunities for those willing to bet on altcoins, especially Ethereum (ETH), ZCash (ZEC), Ethereum Classic (ETC), Dogecoin (DOGE), and Litecoin (LTC).
Although it is still possible to mine Bitcoin, it requires too much in terms of computing power and hardware.
Plus, multiple factors are consolidating Bitcoin as the market's favorite cryptocurrency, especially in terms of institutional adoption, it is unlikely that mining BTC is a profitable activity for the average user.
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