What is cryptocurrency mining?

Mining cryptocurrency is the process of creating digital currencies using the best videocard for mining. But you shouldn’t compare it with the emission of money, because mining has certain functions and tasks for the performer. The fact is that most cryptocurrencies work on the principle of decentralization. This means that all transactions on the network are not processed by any one central authority, for example, in the form of our usual National or Central Bank, but by any user connected to the network. And in order for users to be motivated to spend their time and computer power to process transactions, the system creates and calculates the Miner a reward in the form of a cryptocurrency or part of it for a certain number of processed transactions.

But not everything is as simple as it looks at first glance. Most cryptocurrencies operate on blockchain technology, that is, each transaction contains information about all previous transactions on the network since the creation of the digital currency. Therefore, the complexity of processing transactions from cryptocurrency is constantly growing, and only one miner who first processed the operation receives a reward. Thus, mining is not speculation and a game, but serious work that requires certain knowledge. It is an investment that can bring both profit and loss.

Is it possible to make money on cryptocurrency mining?

When Satoshi Nakamoto launched bitcoins in 2009, a home computer with a medium-sized processor was enough to process transactions. But, after 1.5-2 years, with the growing popularity of cryptocurrency and, accordingly, the number of operations performed, the increase in the complexity of calculations required more powerful equipment. As a result, calculations began to be performed on video cards. In 2012, one computer for processing operations on the network was no longer enough – the era of mining farms came – installations connecting many video cards, and then ASIC pools, equipment from many components, sharpened to process a specific algorithm.

Thus, the cost of the equipment required for effective cryptocurrency mining is becoming more and more, and today it can amount to tens of thousands of dollars. In addition, such a technique consumes a lot of electricity for operation and requires additional cooling of the system. On the other hand, the rate of many digital currencies has already peaked, which makes such currencies less attractive for investment.

Therefore, if in the years of the inception of the cryptocurrency, your investments could be recouped in a few weeks, now it will take several years. And mining has become like a serious investment, and its owner has to analyze many factors to make a decision: the dynamics and growth prospects of the cryptocurrency rate, the complexity of its mining, the cost of mining equipment and its technical characteristics, local electricity tariffs, etc.

And, of course, investing in mining is a bit of a roulette wheel, because there have been cases when the price of a cryptocurrency dropped several times in a few days, and newcomers, on the contrary, soared in value in a week. This adds uncertainty to this direction of investment.

However, he who does not take risks does not make good profits.