Mining is the process by which transactions are verified and added to the public ledger called the blockchain. The incentive for miners to participate in the process is the transaction fees and newly minted coins produced during the process. Mining is open to any individual who is interested and willing to invest in the mining equipment, however due to the high demand – mining equipment is hard to source and usually comes at a premium. Before investing in mining, consider the tips below:
Mining difficulty – Most cryptocurrencies are designed with a difficulty variable aimed at controlling the rate at which new coins will be minted. Block times are fixed per currency, mining difficulty is adjusted to keep the block time constant – for example Bitcoin mining algorithm is designed to maintain the block time at 10 minutes. When new miners enter the network and the network hashrate increases, new blocks would form faster releasing new bitcoins faster and increasing Bitcoin inflation – to prevent this from happening when new miners enter the system, mining difficulty is increased and the mining computation takes longer to complete with the same hashrate, maintaining the block time at 10 minutes.
Block reward is halved every 210 000 blocks, the current reward is 12.5 bitcoins per block and this number will decrease to 6.25 in approximately June 2020 according to http://www.bitcoinblockhalf.com.
Keeping these facts in mind – The amount of bitcoin mined daily will always decrease with time, however mining can remain profitable as the value of bitcoin increases daily. All these points must be considered when choosing to invest in mining hardware – most mining profitability calculators show you a snapshot in profitability. This profitability is based on variables that change daily, consider the changes before investing. It is sometimes more profitable to just buy and hold the coins.
Buying directly from the suppliers will be the cheapest alternative, however there is usually a long waiting period. Make sure you understand where the profitability will be by the time you actually get your miner delivered.
Once you have acquired your miner, you will need to join a mining pool and start mining.
Cloud mining enables you to mine cryptocurrency using a remote datacenter with equipment managed by the mining company. Cloud mining will cost you more than buying your own equipment, the benefits are no waiting periods and convenience. It is important that you weigh the benefits before entering a cloud mining contract and measure the returns – considering the mining difficulty increases and block reward decreases. Cloud mining will be less profitable than owning your own equipment – only use reputable cloud mining companies with proved track records.
Popular cloud mining contracts providers are:
Ethereum, Litecoin, Dash
Warning: Beware mining contract scams where companies sell you mining contracts and disappear with your money, if you are going to invest in any form of mining – start by investing some time in research.
Disclaimer: All comments, articles and blogs on GetBitcoins.co.za are not financial advice or financial guidance. Cryptocurrency markets are very volatile, partake at own risk.