Cryptocurrency mining.
I get asked by a lot of people about what this is about.
Why do we need it?
Why do we need to do it?
Cryptocurrencies have evolved, there's over 1,000 different cryptocurrencies on the market
now.
It's still very high risk and very volatile, something that you need to be very careful
with, but from a mining aspect, there's two different paths you can take.
Path number one is to go with the ASIC dedicated miners to mine Bitcoin, because Bitcoin is
kind of the gold standard of cryptocurrencies and it's something that a lot of people recognize.
It's got a lot of recognition since it first started in 2009.
Bitcoin mining uses a system called SHA256.
This system is mining a cryptographic algorithm, so what you're doing is you're contributing
to the blockchain, and the blockchain is a public ledger system.
The problem is, even though we've already mined over 80% of the Bitcoins right now,
and they feel, "Well, what's the point?"
The point is that you will always need mining, because you will always require people to
contribute to the blockchain, because the blockchain is what's keeping track of any
single time a transaction is performed when it comes to Bitcoin transactions or any other
cryptocurrency transaction.
If you're going to send money from one wallet to another wallet, these are digital wallets
online, you need to verify that information and permanently write it in the public ledger
system, which is the blockchain.
Even after you've mined 100% of the cryptocurrency and you're not making anymore, which you were
gaining from rewards, the system still needs to be able to verify and record all of the
transactions that occur.
The second type of mining that you can do is a system called ERC20 tokens, and the biggest
one there that you've heard of the gold standard on that side is Ethereum.
We've got other coins like Litecoin, Ripple, and Dash, and a whole bunch more.
Literally, there's over 1,000 different cryptocurrencies.
Ethereum uses different processors, so it's not an ASIC-based, which is like a single
purpose computer that all it can do is crunch through Bitcoins.
No in this case, you're using high end graphics cards, GPUs.
This is the kind of stuff that gamers are used to.
That's why right now, if you go into a lot of hardware stores to go and buy computer
parts, a lot of them are sold out of power supplies and graphics cards.
It's because of all the people that have been jumping on, going and doing mining, specifically
for the Ethereum and other kinds of coins and tokens based on that.
Now, mining from that purpose is running again, a lot of electricity, a lot of cooling, but
I think the interesting part about this to me, I think it's kind of neat, is that you're
not using a single purpose computer, that the only thing you can do is mine Bitcoins.
You're actually using computers parts, in this case graphic cards, high end graphic
cards, which are going to have a value at some point.
Now the interesting thing is you're setting up these computers to have multiple graphics
cards.
It's not just each computer has one graphics card and one power supply.
No, actually quite the opposite.
Mining specific motherboards that you can get that have up to 13 or even 19 slots for
graphics cards that can connect to it so that you're actually using 19 different GPUs at
the same time on the same system for mining, and they don't even all need to match, you
can use different programs out there like one called Claymore, which can mine Ethereum
and other coins.
The interesting thing about that is that if you ever decided, "You know what?
This is just not profitable anymore.
My electricity's too expensive.
The difficulty of mining has gone up too much, and I just don't want to do this anymore,"
not all is lost.
It's not like you've invested a whole bunch in hardware that is not recoverable.
You can actually take those high end graphics cards, these GPUs, and sell those afterwards
to gamers or to auto-cad people or people who need essentially high end graphics cards
for the computers.
Now, depending on the climate you live in and the environment you're in, you do have
to consider that the power is going to be a problem.
Getting into it a little bit more, imagine a computer that has multiple video cards.
Well, most power supplies only can support a certain number of six or eight pin power
leads for feeding those high end graphics cards, and because of that, you're not only
limited by the amount of power that the power supply can put out, whether you can even plug
it into a regular household 15 amp circuit, but you're also limited to the number of video
cards that you can actually connect to each power supply.
For example, one mining rig that I have running has 13 cards on it, but it's split over four
power supplies with roughly a balance of three to four video cards per power supply, and
then two of the power supplies are connected to a regular household outlet, so you need
two household outlets.
Now power costs throughout the world are different by country, and of course climates are different
by country depending on whether you're in a cool climate or a warm climate, and then
knowing that the byproduct of running this all the time is heat because you're putting
off a huge amount of heat that needs to be cooled off of these devices, you're probably
better off to do this in countries that have lower power costs and that are generally cooler
by nature on the average over throughout the year.
Mining in general is something that's high risk, highly volatile market, and you have
to decide, do you really want to jump into that space?
What is your goal?
In a lot of countries, they're becoming regulated, and you need to report for tax purposes the
profit that you're making and what you're mining from your rig.
Then you have to decide, "How am I going to convert that to FIAT currency?"
How do you actually take something online, unless you're reinvesting it in something
else, other cryptocurrencies or buying stuff using cryptocurrencies, how are you converting
that into actual money or taking it out, assuming that you wanted to pay back your initial investment?
The big calculation that a lot of people need to do is understanding what is their hashing
rate, how fast the cryptographic calculations that your mining rig can do, and you total
that up over all of your graphics cards or your ASICs that you're doing if you're doing
dedicated mining on the Bitcoin side, and this is typically measured in terahashes or
gigahashes.
There's calculators online that allow you to put in what your power consumption is,
your power costs are, your original hardware investment, and what the current rate is.
Being that it's a highly volatile market, what do you base the actual cryptocurrency
that you're earning?
That could change and fluctuate within a day.
There's huge spikes, ups and downs, on the cryptocurrencies themselves.
The next problem is that because of all the people who are mining, you're going to have
increased difficulty.
That means that every two weeks on Bitcoin's side, the difficulty is adjusted and that's
based on how fast the prior two weeks was achieved.
The typical transaction to the blockchain is supposed to take 10 minutes.
If the average transaction over two weeks takes less than 10 minutes, it's going to
make it more difficult for the next two week period which means there's more people who
are mining, the total hashing rate globally is very high, higher than the prior two weeks,
and therefore the payout that you're going to get for your share, your contribution of
your hashing rate, is going to be a lot lower.
Now, where people are hoping is that over time, the cryptocurrency itself is increasing
in value, but this is just like a stock and bad things can happen.
You really have to take into play and account for all of these different factors that come
in, so it's not just, I've got an initial hardware investment.
Can I even get the hardware because a lot of it is sold out right now and you can't
even get your hands on it.
Do you have the right power supply?
Do you have the right adapters?
Once you build it, are you monitoring this thing?
Unless you're going with a single-purposed one, which is for Bitcoin only, where are
you going to place this thing?
Is it too loud?
Is it going to put off too much heat?
Are you going to need special power for it?
Can you afford the power that is going to it?
Is it going to go into some kind of different digital wallet, and how are you going to convert
that or use that and report that to the different regulation and tax authorities that are applicable
for your region?
All of this needs to be investigated and decided before you go and jump on the bandwagon.
One of the easiest forms of mining right now, and it's not really profitable, but if you
just want to have some fun, is something called Monero.
Interestingly, you've probably heard of a new form of malware or spyware that's infecting
people's computers called cryptojacking.
Cryptojacking is where you're being displayed ads on YouTube or on a website popup or maybe
it's your running some kind of Chrome extension, piece of software that you've installed on
your computer, and you don't realize it, but all of a sudden your computer's CPU, the main
processing unit for your computer, so again, not a graphics card, the computer itself is
actually mining this Monero coin.
Now, for cryptojacking, it's going to somebody else's wallet.
You're not even making that.
Somebody else is using your computer resources nefariously to make themselves some money,
but if you want to try it out yourself, you could try out Monero, run it on your computer,
see what you think, and experiment with the thought of having a digital wallet, mining
a cryptocurrency, seeing a taste of how much the hashing rate for that is and how much
you earn within a 24 hour period, and just kind of dipping your feet just to see what
is this mining thing about and what do I do with it.
Have another friend go and set up a digital wallet as well and learn how to transfer money
between each other, because now when you go and transfer money between digital wallets,
people don't realize that you get charged transaction fees.
The transaction fees are a portion of the cryptocurrency that's going to be charged
to you, shaved off the amount that you're transferring, in order for that transaction
to be logged into the blockchain so that it's being basically written into the general ledger,
which we call the blockchain technology.
Another fascinating thing that I find, I think it's coming in the future, and why I kind
of see a lot of sex appeal to the entire Ethereum network, are the distributed application programs,
the DApps, that people can go and basically run on the Ethereum network.
Think about this.
You've got all these computers around the world who are contributing and running, mining
on Ethereum, so they're contributing to this cryptographic algorithm, but could you imagine
having that and being able to run programs on it?
It's kind of like a super computer at your fingertips that you can rent time on.
I think that has a lot of future potential.
On that note, this is all to explain to you that there are a lot of risks, a lot of costs,
and a lot of factors involved in getting into cryptocurrency mining, and it's something
that you should seriously investigate and maybe just don't jump in feet first by going
out and investing a whole bunch into this.
I think you need to investigate it, maybe just try it out a little bit with something
like the Monero coin or whatever it might be.
That's some information for you on cryptocurrency mining.
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