Wtf is Happening to All Those People and the Whole Industry?
These days, mining doesn’t seem to be the hottest discussion topic in the blockchain community, and now it’s even looking like the industry as a whole is no longer hyped as much as it used to be. Because of this, realistically, it does not seem to be very appealing to an average Joe currently. But then the BCH hardfork drama reminded everyone that the one who holds the most hashing power wins. It doesn’t necessarily mean that your coin will stand a chance of surviving, but in the mining world, hash rate equals power.
For those of you who still have no clear picture of what this all means, we decided to make a small introduction to mining and its different types, mining pools, and possible profits. Eventually, we will try to find out if you should try to pursue a ‘mining career’ at this tough time for cryptocurrency market.
How Mining Works
Simply speaking, we can say that mining resembles a competition in which you need to guess a random number. Whoever guesses the number first gets a chance to combine the next block of transactions that are waiting to be confirmed. After this block is validated by others, the winner gets their reward in coins.
The whole mining process is done by machines. Obviously, the more powerful machine you’ve got, the bigger the chance is of getting those reward coins.
However, it’s not exactly that simple. The thing that slows down the mining process is its difficulty. Mining difficulty means that the more resources you have, the more difficult it gets to guess the number. This rule was originally implemented for Bitcoins by Satoshi Nakamoto to provide a stable flow of funds.
This way even if you’ve got the best equipment, it doesn’t guarantee you’ll become a millionaire overnight. And even though you can easily buy that super powerful ASIC equipment online, it won’t do you any good if you decide to mine Ethereum because Ethereum mining is still (and, probably, always will be) powered by GPUs.
If words like ASIC or GPU sound foreign to you, here’s a little breakdown on mining evolution.
CPU mining is the great-grandparent of all mining. Back in the day, as the demand was still low people could mine Bitcoins on their own computer just using their PC’s central processing unit.
Then when more people got involved in mining, the need for more powerful machines rose, and that’s how GPU mining came along. It is powered by a graphics power unit, which is basically the device gamers use for smooth gameplay. The power of a standard GPU is on the average 30 times higher than the power of a regular CPU.
And when that was not enough, FPGA mining emerged. FGPA is a hardware that can be connected to your PC to run the calculations and it is up to 100 times faster than your average GPU. FPGAs are quite difficult to put together; that’s why they were not as popular as GPUs.
And, finally, ASIC mining took its turn. ASIC miners were the first and only devices that were made only for the sake of bitcoin mining. Currently, they’ve reached their developmental roof, and it’s not that unusual to see ASIC miners on sale as it’s getting more and more challenging to be a part of the mining guessing game considering the state of the crypto market. These days, hardly any miner is there for the idea, like many other industries, it became a tough business so mining coins on your own at the time when the market continually crashes is definitely a risky affair.
If you’re not much of a risk taker, your best option is to join a mining pool. Mining pools are based on the idea of uniting miners together and using their joint power to solve a block. The good thing about such pools is that even if you haven’t solved that block yourself (but your pool did), you still get your fair share. The reward will be divided between the participants according to the amount of work they’ve contributed. You have to pay certain fees to be a part of such a pool.
China is still considered to be the world’s mining pool leader but other countries are starting to catch up.
The idea of cloud mining sounds really appealing to many people because you do not have to go through all the troubles with choosing, purchasing, and maintaining physical mining rigs, and instead, you can just rent the required computing power from a company. However, it is still questionable if these cloud mining companies can really bring you profit, while some of them are clearly just another way of scamming people. One should really do their own research and calculate the costs before jumping into it.
Where the Profit Comes From
To answer the question about the present and the future of the mining industry, it might be helpful to review the main factors that affect the ultimate outcome. Currently, there is no lack of services that allow you to calculate your possible income (or loss), and all you have to do is just fill in your initial conditions.
What should you take into consideration?
- Hashrate or how many guesses per second can you make
- Block reward or the number of coins you will get as a reward
- Mining difficulty depends on the amount of mining power in the system
- Electricity cost can vary on your location (you might have to consider moving elsewhere)
- Power consumption which depends on the miner that you use or are about to use
- Pool fees and how the reward is being divided between the miners of the pool
- BTC price is one of the crucial factors if you’re not planning to be a hodler and want to get your profits straight away
- Increasing difficulty could become a major obstacle when it comes to mining as each year the business only gets tougher, and what’s more, it’s very unpredictable
There is no doubt that each year bitcoin mining becomes tougher and more competitive. Doing it on your own in 2018 is probably not the best idea. Joining a pool, however, might get you somewhere, although you still have to calculate the costs of the equipment and electricity. At the same time, focusing on mining altcoins can still be quite beneficial if you do the calculations wisely and take into consideration the current state of that crypto’s market.
Made Up Your Mind Yet?
We won’t give you any advice on whether or not you should start mining crypto in late 2018, but if you’re really inspired and challenges don’t scare you away, Lumi Wallet is a safe place to store or exchange your hard-earned coins.
Although we are not mining experts, we still know a lot of stuff and are always happy to share our knowledge with you on our Telegram public chat. And for those of you who don’t like to talk much, we’ve got some fascinating content on our Twitter, Facebook, or Reddit pages.