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Did you know that there are currently over 1,000 cryptocurrencies in existence? The most well known are Bitcoin, Ethereum and Ripple, but all share the common feature of being based online – i.e. with no physical coins or notes. Blockchain is the technology which records all transactions in a cryptocurrency, acting as a publicly-available digital ledger. Sounds simple enough so far, but how does cryptocurrency work exactly. Moreover, what is “crypto mining”?
In this article, our investment team here at Bure Valley Group offers eight answers to commonly asked questions on cryptocurrency and mining. We hope you find this content helpful. Find out more about our EIS and other investment opportunities by visiting our portfolio page here. To enquire regarding our latest projects and funding, you can reach us via:
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What is crypto mining?
“Mining” may conjure images of quarries, heavy vehicles and vast physical excavation projects. This makes the word sound strange in the context of a digital currency. How can something on a computer be “mined”? Here, it helps to remember that cryptocurrencies like Bitcoin are finite – much like a natural resource in the ground. To get hold of one, you need both time and the right equipment. This allows Bitcoin miners to legitimise and monitor Bitcoin transactions (1Mb = one “block”), who are then eligible to be paid in cryptocurrency for their efforts.
Is crypto mining illegal?
Cryptocurrencies like Bitcoin are not controlled by central governments or banks. The legality of each one, therefore, varies by jurisdiction. In 2021, most countries do not regard it illegal to use cryptocurrencies, some restrict its use and trade. A minority (e.g. in north Africa) ban it.
Is crypto mining profitable?
Similar to the California gold prospectors in 1849, mining cryptocurrency can lead to no reward or to huge wins. Fortunately, in 2021 there are ways to engage in crypto mining which do not require investing large sums in computer hardware. NexGen Cloud Computing, for instance, is an innovative business offering a platform which allows investors to make use of underutilised hardware around the world – an approach known as the “Airbnb of cloud computing”. You will need to weigh carefully whether mining Bitcoin could be more profitable compared to simply buying it and selling later at a gain. However, GPU mining for Ethereum is more efficient than mining with Bitcoin with an ASIC machine.
Which cryptocurrency is most profitable to mine for?
The answer is not set in stone and changes as technologies advance and consumer behaviour fluctuates. Those who use a GPU for mining will likely have a much wider range of coin choice, and your video card model will impact your choice of cryptocurrency. For many users in 2021, Ethereum Classic (ETC) mining is likely to be an attractive choice.
What is crypto mining malware?
Since crypto mining needs computer processing power, cybercriminals try to access more by breaking into other people’s machines without their knowledge or consent. This usually involves putting malware on a PC which can slow down its performance, or stop it working completely. To keep your device/computer safe, try to follow best practice regarding IT safety (e.g. do not open an attachment in an email from an unknown or untrusted sender).
What do I need to mine cryptocurrency?
Not too long ago, it was possible to mine and compete for blocks using a standard PC in your home. However, this is no longer so. Bitcoin, for instance, tries to produce one block every 10 minutes. Since more computers are now solving these hash problems, however, the difficulty has risen sharply that your PC will be the first to solve it and receive a prize in cryptocurrency. As such, to compete in 2021 as a crypto miner you need powerful computer equipment like a GPU (graphics processing unit).
What are the risks of mining cryptocurrency?
Thankfully, unlike the California gold miners of the 1800s, mining for cryptocurrency does not mean embarking on a life-threatening journey which could ruin you if it fails. That said, however, crypto mining does come with regulatory and financial risks. On the former, your resident state could – if it chose to – restrict or ban the use, trade and mining of cryptocurrencies. You need to weigh how likely this is. On the latter, you need to consider whether the money spent on mining equipment will plausibly lead to a return on your investment.
What if all of a cryptocurrency is mined?
We mentioned that cryptocurrencies like Bitcoin are finite – so what happens when a digital currency is fully mined? Bitcoin, for instance, is limited to 21 million – which are introduced to the Bitcoin supply at a fixed rate of one block every ten minutes. Once all Bitcoins are mined the supply will be finished (expected to happen in the mid-2100s), but miners will still have a fee incentive to process transactions.
Conclusion & invitation
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