It’s becoming more and more common for people to seek out supplemental sources of income. While side hustles like freelance writing, web design, or even just getting an extra part time job are popular, there are a lot of people seeking out more passive ways to make money. Phone farming, where people make small amounts of money running ‘beer money’ apps such as Yoolotto, SBTV, S’mores TV, or Cashmagnet on their phones and computers.
As popular as these are, crypto mining has become even more popular. It’s widely touted as being the ultimate way to earn a bit of side income, or even as a means to earn a profitable living. Does it really work? Is it safe? Is it sustainable? Let’s dig into crypto coin mining to see what this is all about.
What is Bitcoin Mining?
Bitcoin and other cryptocurrencies are part of decentralized systems. While dollars and other currencies are exchanged through banks, cryptocurrency exchanges are handled without any central authority. In a sense, anyone who wants to can play the role of banker.
The challenge is that nobody wants any one person or entity to be control of these transactions. If that happened, there might as well be a central banking system. Instead, the bitcoin system generates random math problems. These cannot be seen. Then, bitcoin miners use software to generate numbers.
When a number they generate happens to be the right answer, your computer or device is then selected to be the one that updates the ledger with a transaction or set of transactions. You are in essence, the ‘bank’ for a brief moment. It’s a bit like a raffle with a lot of security and verification.
Each time this happens, you are rewarded with bitcoin. At the moment it’s 12.5 coins. This is subject to change. There’s also a verification system that ensures that your system truly has generated the correct ‘answer’ to the random problem.
Of course, all of this happens very quickly, thousands of times per day. It’s not something that anyone could do manually. So, people rely on apps to run passively. The apps generate the numbers, get matched (or not), and then mine the rewards for users.
As you can imagine, the better and faster your equipment, the more numbers you can generate, the more guesses you can make, and the more mining you can do. Except, there are some built in limitations. Satoshi Nakamoto, the inventor of bitcoin, implemented some checks on this. The more powerful a network is, the more difficult it becomes to guess. This limits the power of large groups of miners to dominate the ledger system, or for a large corporation (for example) to simply use their resources to buy and run hundreds of thousands of instances of mining software.
This also stifles inflation, and ensures a steady flow of bitcoins. It’s also created fierce competition among bitcoin miners. The fastest and most powerful miners are the most successful, so people endeavor to improve their mining systems.
How Long Does it Take to Mine a Bitcoin?
There are two kinds of bitcoin mining, solo or pool.
In pooled mining, multiple users take part as a group. Everyone in a pool contributes to creating blocks of bitcoin transaction. Then, the reward is divided among the members. Each member is rewarded according to the number of shares they contribute. In layman’s terms, it’s a bit like an office lottery pool where everyone splits lottery winnings according to what they threw into the kitty. With pooled mining, you increase your chance of winning, but you lower your reward if you do win.
With solo mining, miners do all the work, use hashing power of their own or rented equipment, and keep all rewards for themselves.
A mining rig is a computer system that is specifically designed for mining cryptocurrency. In some cases, people build mining rigs for the sole purpose of bitcoin mining. In others, the systems are used for other purposes, and are dedicated to mining part time.
Dedicated miners invest a significant amount of time and money into their mining rigs. A powerful mining rig can mine bitcoin much faster and efficiently than a computer system that just happens to be running mining software. A mining rig might contain multiple processors and motherboards, cooling fans, cables, and other elements.
A good mining rig can increase profitability. This does come with a trade off. The equipment must be maintained, there may be an increase in your electric bill, and all of the constantly running equipment can generate quite a bit of heat. It’s enough to raise the temperature of a room, noticeably.
Cloud mining is an alternative to buying or building a mining rig. In this case, just like other cloud based applications, you lease space on external servers that you connect to through the internet. The benefits of this are that you don’t have to deal with maintenance costs, hot rooms, and higher power bills. The downside is that you have to share some of the profit with the operators, there’s less transparency, there’s an increased risk of fraud, and mining operations could be shuttered if the price of the cryptocurrency goes below a certain threshold. In addition to this, for some people building and improving mining rigs becomes a bit of a hobby.
Choosing Between Cloud Mining And a Mining Rig
So, which is better, a rig or cloud mining? That depends. If you are a computer hobbyist, feel comfortable buying and maintaining various hardware components, and you want more control over the mining process, definitely consider building a mining rig. As you learn more, you can build bigger and better rigs.
If possible, rigs work best if they can be run in their own space in a well-ventilated area. A powerful rig can make a living area uncomfortably hot. If you have a spare room or basement, especially one that has windows you can use for ventilation, you will be much happier with your setup. So will everyone that lives with you.
If none of the above applies to you, or you aren’t sure of your willingness to invest in bitcoin mining in the long term, don’t invest in a mining rig. Instead, consider leasing space on a cloud mining server.
How Long Does it Take to Mine a Bitcoin?
To be clear, you wouldn’t mine a bitcoin. You mine a block. Each block contains 12.5 coins. Right now, that’s worth about 96K and change. You can calculate the value of bitcoin here. What you get is your small bit of a share of that. It could take years and years to mine one bitcoin. When you think of the number of bitcoins you can mine, think in fractions, very small fractions. The average bitcoin miner makes a little over 1300 dollars per year.
Is it Worth It?
That depends. A lot of people lose money. They might choose the wrong mining solution and set up for them. They might be victims of fraud. They might even jump into mining at the wrong time. Keep in mind that many successful miners only take part when their analysis tells them it is profitable to do so. Many amateur miners don’t have the knowledge and understanding of cryptocurrency to make these predictions.
Truth be told, many professional miners are very hesitant to recommend this as a profitable venture. There’s a risk like any other investment. There are a lot of scammers out there waiting to rip people off. There’s also a limit to bitcoin mining to remain viable. Eventually, this form of investing will no longer be profitable for anyone.
Can you still get in, and make money mining currency? Yes you can. Your best bet is getting the equipment together, and having money to invest to start out with. Then, know when it’s time to pull out and shut things down. Most importantly, educate yourself. Don’t waste your money if you don’t have a better than average understanding of blockchain, bitcoin, and other cryptocurrencies.
Know Your Financial Goals Before You Begin
Expectation management is huge here. Please don’t jump in thinking you’ll get rich, or even that you’ll make a significant amount of money. The odds are against you. Currency mining may have a bit of sex appeal, but in truth there may be better ways to meet your goals.
To earn small amounts of money to fund hobbies or extras, consider running some of the passive apps mentioned above. There are others as well. You can also earn money through mechanical turk, task rabbit, and other platforms by completing surveys, doing data entry tasks, or even running errands.
Finally, if you want a significant boost in income, you may be better off freelancing on the side using your existing skills. Another option is to invest the time and money you would spend earning side money into education and training to boost your skill set.