Mining of bitcoin and altcoins tends to be a confusing topic for many. How does it work? How can I set up a miner? And most importantly, is it profitable? These are just a few of the questions that led the Bitcoin Market Journal team to put together this frequently asked questions guide to bitcoin and altcoins.
What is bitcoin and altcoin mining?
Mining bitcoin or other altcoins has two purposes. The first is to confirm transactions and validate blocks, and the second is the creation of new coins. In practice the miners use powerful computers to solve complex mathematical equations that “unlock” transactions in a block, allowing them to be added to the blockchain. This is called a Proof of Work consensus method, and only Proof of Work blockchains use mining.
Is cryptocurrency mining legal?
In most countries of the world, bitcoin mining is perfectly legal. Those living in North America and Europe will find bitcoin mining to be legal and accepted. Even in China, where trading bitcoin was outlawed, mining it is still legal. As of February 2019, bitcoin mining is illegal (or implicitly illegal) in the following countries: Algeria, Bangladesh, Bolivia, Cambodia, Columbia, Ecuador, Egypt, Iran, Macedonia, Morocco, Nepal, Pakistan, and Venezuela. Note that this is a rapidly changing landscape and the legality of cryptocurrency mining could change in any country at any time.
Is cryptocurrency mining profitable?
Bitcoin mining is not profitable at present (February 2019) in most developed nations due to the cost of electricity and the depressed price after an extended bear market. However, there are some altcoins that remain profitable. Keep in mind you’ll need a pretty powerful computer for mining most of these, so when you factor in the cost of hardware, profitability could be months away.
On the other hand, if the market were to reverse course and go into bull mode, the coins you mine today could have a value 10x more in just a few months. You can look into the profitability of individual altcoins at WhattoMine.com. For those willing to make a bigger investment in hardware, see the most profitable ASIC rigs here.
What is cloud mining?
Cloud mining gives users a way to mine bitcoin and other altcoins without actually purchasing hardware or going through the trouble of running and maintaining their own hardware. Instead, users purchase processing power from large data center-like operations, which they can then use to mine cryptocurrencies remotely. It’s an easy way to get involved with mining without all the upfront costs of hardware. It’s also a good way for those with high electricity costs to mine less expensively. Most cloud mining companies offer contracts that lock in the price of the processing power for 12-18 months.
What equipment do you need to mine cryptocurrencies?
Those who want to mine cryptocurrencies on their own will need a certain level of hardware to do so. In the case of bitcoin, this would be an ultra-powerful and expensive ASIC rig. These are not only expensive, but they are also loud and generate a lot of heat, so a suitable environment is needed to operate them. Some of the altcoins have been made ASIC-resistant, and these can still be mined using a personal computer. However, in general, a powerful GPU (video card) is still required. The best video cards for mining are made by Nvidia, and top-of-the-line video cards can cost well over $1,000. One of the most popular ASIC-resistant altcoins is Vertcoin (VTC).
Finally, to learn more about mining, how to do it, and which coins are most profitable, subscribe to the Bitcoin Market Journal newsletter today.