By Prashant Jha
Cryptocurrencies are based on blockchain technology has been always propagated as a tech of decentralized future. There are various aspects to it which makes it unique and a potential financial solution.
Mining and trading are two different concepts, we will discuss each one separately and then try to understand which can prove more beneficial in 2019.
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In a centralized financial ecosystem, every transaction you make through your bank is checked for authenticity by the authorities and then approved. However, the Satoshi vision of a peer-to-peer cashless network with no middlemen involved.
In order to fulfill the ambition, cryptocurrencies are based on the concept of the distributed ledger, where each transaction on the network is encoded with a 256-bit digital signature, and peers on the network verify these transactions by solving the cryptographic equation attached to the transaction.
This process of transaction verification by peers is called mining. Only those cryptocurrencies which use Proof of Work protocol is mineable.
Now not everyone on the network is capable of solving the cryptographic equation and verify the transaction, as transaction verification aka mining requires specific hardware, software and a ton of energy. Thus the mining process requires a lot of capital for initial setup.
So, why do people agree to mine?
The answer is Block Reward, every cryptocurrency has preset block reward attached to it, which is awarded to the address or user verifying the block, which gets lower after a certain number of blocks have been mined.
The mining process is basically your computer running a set of high-level codes which requires high capacity computational power. The power required to mine the blocks is measured in Hash Rate. the more hash rate your computer generates, the easier and faster it is to mine a block.
So can I increase the Hashrate of my computer?
Well, you can’t, the Hash rate is directly related to the hardware you are using, and you can only replace the hardware and not increase its efficiency to a level where it can generate more power than it is capable of, so what is the solution?
There are specialized mining rigs makers who sell these rigs, with high-power GPU or CPU based processor. A good Mining rig can easily cost you around $1500-$2500, which is very expensive.
Looking at the Bearish dominance in the crypto market individual mining is almost impossible in today’s time. But there are still better ways through which you can earn good rewards by mining. These options are, being a part of the mining pool or mining farm. These mining pools combine the Hash power of multiple computers which increases the efficiency of mining and people participating in it can still make a profit.
So Who can Make Profit From mining?
- People in countries like Switzerland where energy rates are dirt cheap, as mining rigs consume a ton of energy, the low energy bills can prove a very important factor.
- If you own a good gaming PC, you can still make a profit from cryptocurrencies with a low ming difficulty.
Crypto Trading is no different from any other form of the trade market, you buy a certain cryptocurrency against the fiat, and then start trading it against the other pairs depending on the exchange you have chosen.
Anyone with a good sense of trading and market can manage to make a good profit out of cryptocurrency trading as well. There are numerous exchanges all around the globe which allows and help the user to trade, buy and sell cryptocurrencies.
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Trading or Mining – Which is more beneficial?
If it would have been 2010, the answer would have been mining for sure, as the cryptocurrency was a fairly new concept and mining difficulty was very low, making it possible to mine even Bitcoin with your normal PC.
However, as in 2019, the choices are completely different and no one can be certain which way to go, to make a good profit.
Mining can still be seen as a free form of earning crypto riches, however, the mining difficulty combined with a significant increase in the number of miners, it is almost impossible to gain some free cryptocurrency without putting a huge sum for initial Mining rig setup.
So, the choice is yours, either you can go for a mining pool or if you are well versed with the trade market and understand its complexities, go for trading instead.
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As a content writer Prashant believes in presenting complex topics in simple laymen terms. He is a tech enthusiast and an avid reader.