A few days ago, the bitcoin remarkably broke the $9000 mark. What does this mean? Well, at this point, nothing really. Unless you are prepared to dish out serious amount of cash to get in on the action, small time players will have to find other ways to puncture through the market. It’s a simply a case of too little too late on the conventional fronts. Buying might still be an option, but there’s no real forecast on where the value of the coins will stabilize, hence a considerable risk.
Mining, was another way in but the mines have started drying up, so to speak. As most of the bitcoins have been mined, it now takes extreme computing resources to dig up coins, putting in question its profitability. Back then, a few lucky visionaries have earned millions of dollars mining coins that were worth only a few cents then. Currently however, as the industry became more and more mainstream, corporations and even governments have taken control of the vast majority of the mining operation. This, in no small part, is due to the enormous costs of hardware and maintenance required.
The fleeting market may have taken the wind out of the mid-level sails on the bitcoin but people have taken notice on several bitcoin alternatives, or altcoins, to cater to the speedy growing cryptocurrency demand. Dogecoins and Litecoins are examples of these.
The Dogecoin, made famous by its namesake Doge, a widely circulated meme, is shrouded with skepticism. What is blatantly a currency named for humor, definitely casted doubts on itself. But that is exactly how, perhaps unsurprisingly, the Dogecoin has been used. Its value is derived from a tipping system from boards for posts that piques the users’ interests. From its otherwise, jocular, beginning, the Dogecoin now has a capitalzation worth $227 million. Currently, a Dogecoin is worth a fifth of a cent.
Perhaps, the most closest to the Bitcoin is the Litecoin. Both currencies started nearly at the same time. The main difference between the two is difficulty and cost it takes to create a Bitcoin is significantly less than that of the Litecoin.
A simple feasibility study found that it is in fact profitable to mine altcoins. Particularly, a $1000 worth of hardware for mining can be recouped after 2 years. The gain is miniscule and will not be enough for a living. The real price you’re paying for though, is the small chance that the cryptocurrency you’ve been mining spikes in value ala Bitcoin.
So how do we mine coins? Far from its name, what you would be doing if you decide to start mining is an accountant’s job. That is, to help maintain the blockchain. To do this, you need hardware that will be running round the clock. And you will get paid in small portions of the coins you are mining once in awhile. The challenge will then be, to keep the costs(electricity, hardware repairs, internet, etc) down while speeding up the transactions.
Here are the 3 thing’s you’ll need when mining.
1) Coin wallet – Each cryptocurrency has it’s own version of the wallet. In all of them, the main purpose of the wallet is to capture transactions and put them in a database.
2) Mining package – Depending on the coin, you’ll need the mining software used by the currency. It’s important to get the right one as currencies varies greatly in how they create coins.
3) Mining pools – Usually, the mining gains jump exponentially to improvements in hardware. This notion is exploited by hobbyist miners by banding together to improve their gains.