What is coin mining? Should you mine crypto in 2021

Today’s article will dive into what coin mining is? Mining steps like? Evaluate the pros and cons of coin mining. Especially in 2021 should we invest in equipment for coin mining?

what is coin mining

If you are just starting to learn about the crypto market, are wondering and still have many questions about coin mining that you are often heard about, please refer to this article.

1 – What is coin mining?

Today, cryptocurrencies have gained worldwide popularity and recognition. The increasing popularity and increasing trend of Bitcoin and other cryptocurrencies in terms of payments has made the e-commerce market wobble.

In addition to trading cryptocurrencies, there is another form that many people talk about is coin mining. Therefore, has attracted a large number of investors to participate in coin mining, willing to spend a lot of money to equip coin mining machines.

So what is coin mining? Why attract so many people?

Coin mining, also known as virtual currency mining, is a term used to refer to the mining of digital currencies by finding and processing confirmations of payments on the chain network system.

Simply put, it is easy to understand that the process of solving complex problems, when you are done solving, you will receive a reward of coins.

And to perform this process, it is necessary to have 2 factors: a highly configurable supercomputer and mining software.

And the people who operate this computer system are called miners.

2 – Coin mining method

2.1 – Option 1: Hardware Mining (Traditional Mining):

At the time when cryptocurrency was just launched, mainly Bitcoin, the mining was done mainly on the personal computer CPU.

Mining platform: Traditional method based on computer hardware (CPU)

+ Method: Need to buy equipment to exploit and operate the system by yourself

+ Characteristics: Need to monitor maintenance, change, upgrade computer hardware. If the scale is large, it is necessary to rent space to place the mining rig.

what is coin mining

2.2 – Option 2: Cloud Mining:

With this method, miners do not need to use their computers, but can use the hardware at remote data centers in the cloud to mine coins.

+ Mining platform: Mining on the cloud computing platform

+ Method: Just pay the fee, the intermediaries will provide you with 1 account to mine coins.

+ Features: Can be exploited right after having an account without having to set up the machine or install anything. However, you can lose money if you encounter fraudulent units.

By now, you may have an overview of what coin mining is. Here, Cryptocurrencyin4.com has the following advice for you:

=> At the beginning of the time when cryptocurrency was first born, decoding algorithms was quite simple, normal computers could do it. But nowadays, the difficulty has increased a lot, there are millions of difficult algorithms, so the computer configuration must be high, fast and much more powerful to handle. This means that if you want to mine, you have to spend a huge amount of money to invest in the system, not to mention that it also consumes a lot of electricity and time.

=> So if you are tinkering to learn how to mine coin with a laptop or a regular computer, give it up.

2.3 – Coin Mining steps

2.3.1 – Step 1: Create a crypto wallet

Coins need 1 storage space on an electronic system and that is a cryptocurrency wallet. There are 2 types of cryptocurrency wallets:

Cold wallet: stored directly in the hardware of the mining equipment

Hot wallets also known as e-wallets: store in a digital environment

With miners they will store coins in cold wallets because of the high security

2.3.2 – Step 2: Select the mining method

At this step, you will analyze and determine whether your ability is suitable for mining on hardware (Hardware Mining) or on the cloud system (Cloud Mining).

2.3.3 – Step 3: Coin mining software

If you mine coin with your own hardware system, you must have a supporting mining software. This software will help manage the output and input of the mining rig along with the necessary statistics such as mining speed, hash rate, fan speed and temperature. However, if you are coin mining on a cloud platform, there is no need for software to support it.

2.3.4 – Step 4: Find an exchange

After the mining process, you will have a certain amount of coin, to be able to sell them to the market, you need to go through an exchange. Therefore, a reputable exchange is necessary to protect coin purchases.

See also: >> The best crypto exchanges – Review of Binance and Remitano exchanges

3 – Should mine or trade coin?

To answer this question, first need to determine how you want to invest in your long term or short term, your capital potential. You can see the comparison below to make your decision.

To answer this question, first need to determine how you want to invest in your long term or short term, your capital potential. You can see the comparison below to make your decision.

Compare Coin Mining Trade Coin
Level High Low
Efficiency Low, profitable year on year (long term) High profit for the day, week (short term)
Advantages
  • There is a good profit if the coin price goes high at the time of the sale
  • Owning coin after successful mining
  • It is easy to join as there are currently a lot of software available
  • Very low capital through margin trading
  • Profits are high because of the use of financial leverage
  • Two-way profit because of the ability to short sell assets
  • Very low transaction costs
  • Easy to get started
Disadvantages
  • Capital is high due to a competitive market, requiring good mining equipment
  • There is a high risk of coin devaluation
  • Many costs incurred such as electricity, maintenance, etc.
  • Equipment needs to be continuously monitored
  • Requires experience in computer hardware
  • Do not own coins
  • Requires the ability to read charts
  • Requiring to capture good market news
  • High risk if you abuse leverage

 

4 – Advantages and disadvantages of coin mining

Coin mining is a way of exploiting electronic coins like Bitcoin, Ethereum, … But with the cryptocurrency market now, it is necessary to review the pros and cons of coin mining before making a decision.

4.1 – Advantages

As long as you have a computer system with a suitable strong configuration and the internet is connected, you can participate in coin mining.

One strong advantage of coin mining is that it has no strings attached and is not duplicated. Every transaction is tracked by you.

4.2 – Disadvantages

4.2.1 – The cost is high

Currently there are hundreds of thousands of people involved in coin mining around the world. This has caused the cost of some mining tools to skyrocket. There are also other costs, as follows:

The cost of buying a dedicated machine exclusively for coin mining

Factory cost for mining machine

Maintenance and operating costs

The cost of electricity (the mining of coins consumes the power in a huge amount, and in places with high electricity costs, should not participate in mining)

Internet costs

4.2.2 – It takes time but the profit is low

In the beginning, the mining of coins was quite easy, quickly exploiting a large number of coins. But at present, with millions of difficult algorithms, it takes a lot of time to be processed to solve.

It is estimated that with a mining machine it can take anywhere from 1 to 2 years to start profitable coin mining.

4.2.3 – Risk due to fluctuations of the coin price market

Visible, the price volatility of the cryptocurrency market is difficult to accurately grasp. Partly because the coin is still not stable, there are still many mixed opinions. So in the extraction process, the value of the copper can decrease, keep the price unchanged or even increase dramatically. So coin mining is a non-profit project.

4.2.4 – Risk of scam

If you participate in mining with a group of miners or join on a 3rd platform, the theft of your mining coin can happen if they are dishonest.

what is coin mining

5 – Conclusion

In short, there are 3 ways to invest cryptocurrencies: coin mining, hold coin, trade coin. You should only participate in mining when you have large enough resources to compete with large corporations in investing in infrastructure for mining.

If you are a beginner to the crypto investment market and want to make a quick profit with a small amount of capital, trade coin is the best way for you.

Maybe through this article you have understood what coin mining is. And hope you will get the best investment for yourself. Good luck.

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