Crypto mining – the secret sauce to getting rich. Well, in 2016-17, that still would have been believable, however, today the cost of crypto mining for deploying a single device and running it can go up to thousands of dollars. Therefore, crypto mining does not make you rich overnight, but it’s definitely something you may consider as a passive income model if you can afford the investment and give it the downtime to break even. Plus, there are a plethora of crypto mining apps in the market today that pool together the power of several devices including yours to mine crypto. The rewards you generate from these apps are obviously much less than what you would get from running your own machine (if it manages to solve the computational problem which we are going to discuss). But the investment reduces significantly, since you will basically have to bear the extra electricity cost now as running these apps/software eats up a significant amount of energy. But do you need a supernova-level internet connection to do crypto mining? Not really. We will get into that. First let’s try to understand how crypto mining works.
How Does Crypto Mining Work?
Bitcoin is a decentralised currency that is not regulated by any government or bank. Since there are no banks acting as intermediaries between the sender of payments and receiver of payments, you might ask who maintains the ledger and verifies each transaction to make sure there is no double spending occurring within the system? Enter computers or nodes that are running across the globe and validating these transactions and adding them to the blockchain.
The people who are operating these computers are called validators or miners. When a transaction is generated, these computers receive an alert and then they start the process of solving a complex mathematical problem which is to correctly guess the target hash function associated with the transaction.The secure hash algorithm (SHA) with a digest size of 256 bits, also known as the SHA 256 algorithm is the hash function and mining algorithm of Bitcoin and many other cryptocurrencies. Hash function refers to the process of taking a group of characters and transforming it to a different/unique value of a certain length, called hash. Mining computers are basically computing these hashes at a colossal speed to find the value closest to the threshold value. The validator who guesses the correct answer is rewarded with the cryptocurrency in question for showing the Proof-of-Work.
Now, there are parameters to determine the correct guess but we are not getting into that. What we need to understand is that every time a cryptocurrency is mined, the difficulty level of the mathematical problem increases. This, in turn, is an indicator of the fact that with time the cost of mining will keep increasing as more advanced technology will have to be employed to solve the problem. Previously a Graphics Processing Unit would have done the job, but today you need a special type of machine called an ASIC mining machine to mine crypto.
Learn more about crypto mining rigs, cost and profitability here.
Do I need a Really Good Internet Connection to be a Cryptocurrency Miner?
In short, you need an advanced computer to mine crypto and with time the overhead will increase if you want to continue crypto mining. These computers come with a high-end computational power, meaning they consume a significant amount of energy and need constant cooling. But do they need a super-high speed internet as well? Not really. The Internet speed is not a deterrent for anyone to get into crypto mining.
A 2-3Mbps internet speed is enough to run thirty-forty crypto mining rigs. You might ask, how is it possible? After all we are talking about running a blockchain server which is supposed to process a lot of data. Well, it is correct that you are running a blockchain server. But the mechanism of how blocks are added on a chain is different like we have just learnt. The machines basically receive a question, put in a lot of hard work to find the correct answer and ping the answer back to the system for the other nodes to verify. This might be an energy-intensive process, but as far as data is concerned, we are on the safe side.
It does nor rule out the fact, however, that you do need a stable internet connection to keep your machine or software running, because if you lose internet every 5 minutes, you might face problems. A 4G adapter is enough to ensure this. Obviously if you plan to run a crypto mining farm, you need better internet plans, like a business plan. However, for the general public, the basic internet connection one uses for their home is enough to get started.
Find out more about whether crypto mining is a profitable venture in 2022 here.
Crypto mining as you might have already guessed it by now is not an easy pursuit unless you are signed up with one of the many software that offer crypto mining as a service. Even then it’s not like you will get guaranteed rewards. Another way to get into crypto is via the spot market through an exchange like C-trade that offers lightning fast transaction speed. The basic idea is to buy a crypto when the price is low and sell it off when the price increases.
You can even profit off the rising and falling price of crypto, by trading crypto derivatives. Crypto derivatives are the only trading instruments that can generate a profit when a crypto asset’s price is plummeting. This is possible because with crypto derivatives you enter into a ‘contract’ with another party to buy or sell a crypto asset at a said price and ‘not the asset itself. So, it also works as a hedging instrument for crypto asset holders.
A crypto derivative is also the only instrument that can multiply your profits by letting you add leverage. C-trade supports both spot cryptocurrencies and derivatives of the world’s most popular cryptocurrencies. It offers crypto derivatives traders an advanced and beginners’-friendly trading view feature to help them make the right trading decision.
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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. C-Trade, its affiliates, agents, directors, officers, or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability as to any loss arising from any investment based on the same.