Today, the financial needs of many individuals have grown due to advancement in technology. For a growing number of investors, cryptocurrency is not only perceived as the future of money but also seen as an attractive and profitable investment asset. The onset of digital currencies and blockchain technology has provided investors with multiple investment routes and opportunities, and many organizations have emerged to provide investors with the very best when it comes to utilizing blockchain technology to meet their financial needs.
Transactions within a cryptocurrency network are confirmed only by miners by solving a cryptographic puzzle and are rewarded for performing such task. Many people may want to know if an optimistic feature can be carved out from mining cryptocurrencies. Mining of cryptocurrencies can be an intelligent move besides being a lucrative one. Digital currencies have earned ample exposure, and a mining career can provide income.
Mining is a computationally intensive work that requires a lot of processing power and time. It is an act of participating in a given peer distributed network in consensus. Mining is an essential part of any cryptocurrency network and can be seen as an investment just as trading. Miners contribute their computational computing power to solving complicated math problems/cryptographic puzzle which is required for a transaction to be confirmed and displayed on the blockchain. The process of mining involves using a computer’s hardware with the mining application.
Ethereum is an open source software platform that operates via the blockchain technology and allows developers to build and deploy decentralized applications. Just like every other cryptocurrency, ethereum can be mined. Mining ethereum is crucial, besides increasing the volume in circulation, it also secures the ethereum network as it creates, verifies, publishes and propagates blocks in the blockchain. Mining ethereum is similar to mining bitcoins. For each block of transaction, miners use computers to guess answers to math puzzle until a winner emerges. A miner devotes computer space, time, and energy to sorting through blocks. The miners run the block’s unique header metadata through a hash function, only changing the nonce value, which impacts the resulting hash value. Miners will be awarded ether once they find a hash that matches the current target, and broadcast the block across the network for each node to validate and add their own copy of the ledger. When a miner finds the hash before other miners, they will stop work on the current block and initiate the process afresh for the next block.
Mining ethereum is easy and can be done from the comfort of your home. It requires some knowledge of command prompt and script writing. Lots of electricity is needed to mine ether, and any PC can be used provided the computer has a good graphics card (either AMD or NVIDIA) with at least 2GB of RAM. Before mining ethereum, you should consider joining a mining pool instead of mining alone. Combining resources or hash power with other miners is useful as it increases your chance of acquiring ether. Miners in pools share rewards from mining ether.
The risk involved in mining
Just like any other investment, cryptocurrency mining involves substantial risk. They may include:
- A miner can lose his/her investment if your network/wallet provider goes out of business, broken hard drive or by locking yourself out if you lose/forget your password. Since the system is decentralized, there is no way you can recover your funds or wallet.
- Since cryptocurrencies are volatile, the value of a cryptocurrency may fall over time instead of grow.
- Miners are also prone to the actions of hackers that may break into the pool and empty the user’s wallet.
- Since mining requires high computing power, the cost of electricity is high; this may reduce earnings and adversely affect your terminal.
- Lose investment to fraudulent or dishonest mining pool administrators.
- Increased mining difficulty can pose a threat of low earning to those that invested lots of money and time into mining.