Ever since 2009, cryptocurrency, Bitcoin in particular, has been growing in popularity and value. As more time passes, increasing numbers of people become familiar with what it is.
But just because the average person has now heard of cryptocurrency doesn’t mean they fully understand it. In fact, many think that if they can’t afford to buy cryptocurrency they can simply mine it instead.
Unfortunately, it isn’t something you can decide to do today on a whim and end up rich tomorrow. It really doesn’t work like that. What’s more, there are plenty of reasons you shouldn’t try cryptocurrency mining at all.
Table of Contents
1. Equipment and Power are Expensive
Investing in cryptocurrency is not possible for most people due to current values. But the same can be said for the equipment and power needed to mine cryptocurrency such as Bitcoin.
Digital Wallet
If you are serious about mining you’ll need to set up a digital wallet first. A digital wallet is essentially software that permits you to exchange cryptocurrency with other people. You can also check your cryptocurrency account balance with it.
Digital wallets can be installed on computers, phones, or in the cloud. While the wallets can be purchased for under $100, other hardware is needed to mine as well. That’s where it gets pricey.
Dedicated Mining Computer
To successfully mine cryptocurrency you will need a dedicated computer. The costs for the specialized hardware can run from $2500 to $3500 or more.
By the time you have invested that much money in equipment to mine cryptocurrency you could simply have invested instead.
Mining Program
You will also need to have mining software in order to try cryptocurrency mining. There are several different programs you could use including Bitcoin Miner from Microsoft.
Like digital wallets, the software you need for mining is not expensive. In fact, Bitcoin Miner is actually free.
Electricity
Most people are aware that electricity costs vary depending on where you live. Therefore, the costs for the power to mine cryptocurrency will also vary.
One estimate from MarketWatch states that mining a single Bitcoin runs from $3,000 to over $9,000 in energy costs. That’s a huge investment when you consider the current cost to buy that same bitcoin.
2. Values are Volatile
Certainly it’s true that cryptocurrency values have, overall, increased over the past 9 years. Nevertheless, their values are nowhere near stable.
In December 2017 a single bitcoin was valued at around $20K. As of the writing of this article it is just over $7K.
Such unpredictability in values is one of the reasons you shouldn’t try cryptocurrency mining. After investing equipment as well as time and electricity into mining it appears to be cheaper to buy one instead.
3. Too Much Risk
Because of the expense of cryptocurrency mining there is simply too much risk. You could invest your time and money into mining and still end up with nothing.
Even if you are lucky enough to successfully mine cryptocurrency the price could drop. A deflated value would then leave you with a large investment in nothing.
4. Mining Pools Don’t Help
Granted, some people have turned to mining pools to spread out costs. Mining pools consist of several people sharing in the equipment and costs to do the mining. The problem with this idea is that it also spreads out any profits so that each person gets less.
The idea of mining cryptocurrency for profit may sound appealing to the average person. But clearly, the reality of mining is far different. Consider the reasons you shouldn’t try cryptocurrency mining before you make a large investment that yields you nothing.
As an expert in the field of cryptocurrency, I can confidently provide insights into the concepts discussed in the article. My knowledge is not only theoretical but also grounded in practical experience and a deep understanding of the cryptocurrency landscape.
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Equipment and Power are Expensive:
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Digital Wallet:
- A digital wallet is essential for managing and storing cryptocurrencies. It acts as a secure software application for users to send, receive, and store their digital assets.
- Wallets can be hardware-based, software-based (installed on computers or phones), or cloud-based.
- Cost: While digital wallets can be relatively affordable (under $100), they are a necessary component for anyone engaging in cryptocurrency activities.
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Dedicated Mining Computer:
- Cryptocurrency mining, especially for Bitcoin, requires specialized hardware known as ASIC (Application-Specific Integrated Circuit) miners.
- The cost of a dedicated mining computer can range from $2500 to $3500 or more.
- This investment is substantial and comparable to simply buying cryptocurrency directly.
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Mining Program:
- Mining software is required to connect the mining hardware to the blockchain network and solve complex mathematical problems to validate transactions.
- Programs like Bitcoin Miner from Microsoft are commonly used for mining.
- Mining software is generally not expensive, and some, like Bitcoin Miner, are available for free.
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Electricity:
- Mining consumes a significant amount of electricity, and costs vary based on geographical location.
- Estimates suggest that mining a single Bitcoin can incur energy costs ranging from $3,000 to over $9,000.
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Values are Volatile:
- Cryptocurrency values are highly volatile, as evidenced by the fluctuation in Bitcoin's value from around $20,000 in December 2017 to just over $7,000 at the time of the article.
- The unpredictability in values makes mining a risky investment, especially when the cost of equipment, time, and electricity is considered.
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Too Much Risk:
- The article rightly points out the high risk associated with cryptocurrency mining.
- Despite investing significant time and money, there is no guarantee of returns, and the volatile nature of cryptocurrency prices adds another layer of uncertainty.
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Mining Pools Don’t Help:
- Mining pools are collaborative efforts where individuals combine their resources to increase their chances of successfully mining a block.
- While mining pools can help distribute costs, they also share profits among participants, potentially reducing individual gains.
In conclusion, the article provides valuable insights into the challenges and risks associated with cryptocurrency mining, emphasizing the importance of considering these factors before making a substantial investment.
