As of today, there exists a large community of cryptocurrency miners and mining pools who use a vast amount of resources to mine coins. These are people who already have a large capital to spend in order to make mining profitable for them even after the incurred electricity and hardware costs.
The whole idea of cryptocurrency relies on its distributed technology and encourages more people to mine them in order to improve certain consensus mechanisms [like Proof of Work and Proof of Stake etc]. However, the average person is put off by the initial and concurring cost of running a mining hardware because it doesn’t seem profitable to them. Here are a few examples on how you could set up a mining rig and mine a particular cryptocurrency without incurring significant losses:
Knowing which coins you can mine profitably
Mainstream coins like Bitcoin and Ethereum require a lot of hash rate in order to receive mining rewards equivalent to the amount of hardware resources dedicated to them. So mining them with a budget rig is either going to give you a very marginal profit or just no return in investment at all or even just straight up a loss.
To work around this we should look at mining altcoins that are backed by a good team and underlying technology so that you get in on their groundworks before the price rises. Unlike Bitcoin, the complexity of mathematical problems won’t be as high either and this will allow miners to mine blocks easily and gain more mining rewards for their limited resources.
An example of a coin like this would be Ravencoin [RVN]. What sets Ravencoin apart from the rest of the cryptocurrencies like Bitcoin is its X16R algorithm. This algorithm uses 16 different consensus mechanisms [hashing algorithm] on its blockchain, which means that it selects one of the 16 algorithms at the creation of every new block randomly. This makes developing Application Specific Integrated Circuits [ASIC] hardware difficult to develop for it because the miner isn’t able to narrow it down to a particular one. Which means that it gives a fair opportunity to every miner in the pool and not only the ones who can afford expensive mining equipment like an ASIC.
The block rewards is much higher compared to Bitcoin at 5000 RVN instead of 12.5 BTC. Block time is faster at 1 minute compared to BTC’s 10 minutes and its total coin supply is 21 billion as opposed to BTC’s 21 million. The above figures makes it one of the most profitable coins for mining and is quite a popular one among new cryptocurrency miners.
Making use of GPU’s rather than investing in an ASIC
Yes the above statement seems quite counterintuitive, hear me out. As we know ASIC’s are power chips that are meant to make mining more efficient and an alternative to the raw output a GPU can put out for mining. However, these are “application specific”, which means that every ASIC is designed to mine a specific algorithm like Bitcoin’s SHA256. If you want to mine another cryptocurrencies blockchain with an ASIC designed for BTC blockchain,the efficiency of it would drastically reduce and would be even less than a standard GPU.
So it makes sense for large mining farms to buy ASIC’s because they are determined to mine a particular cryptocurrency and will have enough profit if they want to shift their resources [to mine on a different blockchain] or even sell them in order to buy new ones. The same doesn’t apply for individual miners who can’t afford more than one or two [max] ASIC’s and won’t have a choice apart from mining the same blockchain even if it becomes unprofitable, as switching to another blockchain will have the same result. Hence using multiple GPU’s for the same price will offer the individual a lot more flexibility and efficiency.
Coins that can be mined through CPU alone
This is one of the main methods of personal or solo mining due to the lack of resources required to actually mine coins through this method. Any blockchain that operates on the Cryptonight algorithm is efficient to mine only using CPU’s, like Monero, Bytecoin, Electroneum, DigitalNote etc. CPU’s like Intel, AMD and Xeon can be used for this process and although we can’t narrow down what makes a good mining CPU, we can use the number of cores and its clock frequency as a good metric.
This type of mining can be used if people want to invest in cryptocurrency mining without the hassle of actually managing their own hardware. This method uses cloud computing and shared processing power from data centres in order to amass hashing power. They consist of 3 types, ‘hosted mining’- where you lease a mining machine hosted by the provider, ‘virtual hosted mining’- where you create a (general purpose) virtual private server and install your own mining software and finally ‘leased hashing power’- where you can lease an amount of hashing power, without having a dedicated physical or virtual computer.
Although it will result in lesser profit as compared to traditional mining, at a point in time when mining becomes less profitable, you will not need to go through the hassle of selling the mining hardware. However, care must be taken while investing in cloud mining companies or sites due to the risk of a lot of fraudulent activities that goes down there and the opaque mining operations.
As the cryptocurrency market is ever growing, nobody wants to miss out on techs largest genesis since the internet. The above mentioned methods are a few examples on how you could get into mining solutions without expending a large amount of your assets and how you can save yourself from the FOMO.