Cryptocurrency mining

The crypto school is made to let everyone learn something about the basics of cryptocurrencies for free, with explainations about mining, trading and more!

Cryptocurrency mining

One of the most important aspects within the crypto markets are the miners, which ensure that new coins are always mined from a crypto currency and that the transactions are confirmed. Only coins with a Proof Of Work (POW) algorithm need miners.

Bitcoin miners can be compared to gold diggers; there is only a limited supply of gold available, just like with Bitcoins. As with gold, there is a known amount to be issued / found. For Bitcoin, this limit lies at 21,000,000 coins. This scarcity creates a value for the product. You can, for instance, see that when very little gold is found during the entirety of a year, the price of gold goes up in order to maintain the miners’ profitability. This ensures that many people have included gold as a long-term investment in their portfolio. The harder it becomes to find gold, the higher the price. The same principle applies to Bitcoin and other cryptocurrencies.

The amount is fixed, but the difficulty of finding the cryptocurrency is not. With Bitcoin, this difficulty (= mining difficulty) is determined approximately every two weeks, based on the number of miners and the computing power these miners carry. The length of this period differs from coin to coin. If we look at Bitcoin, it is adjusted per 2016 blocks. Because it takes approximately 600 seconds to mine one block, this adds up to an adjustment every 2 weeks.

Previously, it was possible to mine Bitcoins with our computer or even laptop. However, as the concept of mining cryptocurrencies became increasingly known, the difficulty increased accordingly. Over time, mining Bitcoins was only possible with computers that had a good GPU (video card); so-called gaming PCs. When this market became completely saturated too, various companies were founded with the intention of being able to mine even faster and with more power. They then developed the well-known Antminers. This is a computer that cannot do anything else than mining Bitcoins (or other cryptocurrencies with the same algorithm as Bitcoin). Due to this development, the normal CPU miners have become completely irrelevant. On the right side of the screen, you can find a picture of one of those ASIC miners.

Is mining still profitable?

Whether or not mining is profitable for you depends on various factors: firstly, the price of electricity is an important factor. In the Netherlands for example, the average price per KWH is quite high and as a result, many miners do not mine fast enough to be profitable here. Secondly, we look at the costs of the hardware. With hardware is meant the purchase of the equipment needed to mine cryptocurrency. Suppose you buy a miner for 1,000 Euros and you make 10 Euros profit per day, then you will have made back the return on your investment after 100 days. Another important aspect is the question of whether you are going to mine alone or in a pool. If you are going to be mining on your own and you find a block, you immediately receive 6.25 BTC (currently). This is a fixed reward for everyone who solves a puzzle calculation, creating a new Bitcoin. The problem, however, is that 

There are several websites that can calculate the profitability per device. This gives you a clear picture of whether or not you should get aboard. The machines that are being developed are becoming more sophisticated and becoming faster. Technological developments are going so rapid nowadays that a currently very sophisticated miner, might be known as very slow in a year from now. As a result, it is always uncertain how long the particular miner will remain profitable. 

We have included a link to the website of one of our trusted calculators. You need to fill in the hashpower, power consumption and price per KWH to calculate how profitable it would be for you to mine cryptocurrencies.