Hi Platinum Crypto Followers,
In this article, we will cover if it is indeed possible to create an additional source of income from mining Bitcoin and Altcoins.
There is a lot some ground to cover, and we wanted to give you one comprehensive look at this particular type of passive income opportunity. But before we proceed please if you haven’t already check out our previous article on Tether and impact on Bitcoins price.
WHAT IS IT CRYPTOCURRENCY MINING?
Mining is the process of processing blocks on a blockchain, there are various systems, but Proof Of Work is the one which has had the most money thrown at it. This is because of its potential to generate passive income. How to start a mining quickly:-
- Hook computers to a (preferably) cheap power source
- Set them to process a special algorithm which determines the next Bitcoin or Ethereum block
- If a specific computer gets the result right then, it is awarded a reward.
FIDELITY HAS BEEN MINING CRYPTO SINCE 2015
ADDITIONAL TERMINOLOGY TO HELP NAVIGATE THIS SECTOR
Mining Crypto currencies has a mine field of terminology this section will help you navigate it
Mining Algorithm – The type of software which performs the “analysis” or “computing” needed to mine the coin this can be completed on Bitcoin, Ethereum and many other crypto currencies. A mining algorithm is best run on specific hardware or a mining rig.
Mining Rig – This is the hardware used to complete the mining
Cryptocurrency Block – This is the specific algorithm the Mining rig will be computing
HashRate – How much competition is there to find the next block, the higher the HashRate the lower the income per Hashrate you invest
Mining Pool – Some cryptocurrencies have such a high hash rate that the likelihood of discovering a block is small. Mining pools coordinate the mining of several miners to share the passive income block reward to all those who contribute to the pool.
MINING AND DIFFICULTY
Bitcoin mining has hit the highest difficulty level in the past one week. According to BTC.com, the last recorded difficulty level was a 14.23% increase to approximately 9.06 Trillion. However, experts predict that in the next 11 hours this difficultly level will be surpassed hitting slightly above the 10 Trillion mark (which will be +11.87%)
Cryptocurrency mining difficulty is a target set by a crypto network used to show how hard it is to form a block in the blockchain. This target is set by the Network to control the rate at which miners are discovering the blocks.
CRYPTO MINING HARDWARE
In the past, people were using the Graphic Cards for mining cryptocurrencies. The cards were an upgrade of CPU, and they used the Graphics processing unit to do the mining. With technological improvements came the Application Specific Integrated Circuits. ASICs made the mining fast and efficient: they enable a cryptocurrency miner or a mining pool to solve the hash at a faster rate and thus to discover block very fast.
Every digital currency has a network that controls the mining by putting the difficulty level. The level puts in place a constant time for completing a block. If the hash rate is high, the time taken to discover a new block will be less than the set time, and this will make the network increase the difficulty level to increase the block discovery time.
These changes are necessary to ensure the reliability and smooth functioning of the digital currency network.
CRYPTO MINING – A SOURCE OF INCOME
There is, however, the other side of the coin which brings us to the topic of discussion. Can this increase in difficulty be a source of income? Some changes take place whenever the difficulty of mining increases. By analysing these changes, we can conclude whether crypto mining can be an additional source of income.
One of the factors that make the difficulty level to increase as stated earlier is increased mining hash rate. When the difficulty level increases the rate of power consumption per block will be high. As much as this is a loss on the miners because of the high electricity cost, it can be a source of income for power providers. More electrical stations can be put up: this is additional income.
ISSUES WHEN MINING CRYPTOS
An increase in difficulty levels can also be brought about by intensified competition among miners. This competition is caused by the large number of miners in the network. Mining of cryptocurrencies requires specific machines and equipment. With the many miners in the system, the demand for these machines will increase. Having an enterprise that deals with these machines can be a good source of income.
Mining Cryptocurrencies alone can take you years to get one coin into your wallet. This will be even harder when the difficulty level increases. The wise thing to do is to be part of a mining pool. With mining pools, you get to put your heads together, earn more, and then share the earnings. A large-scale mining organization can create job opportunities by hiring blockchain experts to mine for them at a salary.
COMPANIES WHICH CAN HELP – CLOUD MINING
The three mining services have a long history of being online.
- Genesis Mining One of the longest could mining services and most reputable in the industry
- BitCoin.com – Mine Bitcoin easily on the cloud without having to buy hardware or plug your own hardware into the world’s highest paying mining pool.
TAXATION AND IMPLICATIONS
Finally, the government can also benefit from Cryptocurrency mining. According to the IRS of The United States of America, all cryptocurrencies are considered as property. This means that, if for instance, you buy Bitcoin, you will not be liable for a tax turn, but if you carry out any Bitcoin transaction, you’ll be responsible for paying tax. They taxable income will be on the gain or loss made in the transaction.
If you “sell” Bitcoin, that you bought within the previous year, at a profit, you will have to report short term capital gains on your tax return. On the other hand, if you sell some bitcoins that you acquired in less than a year, you will only have to report a long term capital gain. So the government will get tax returns on any cryptocurrency transaction. The cryptocurrencies exchanges are the primary source of taxes for governments.
Cryptocurrency mining has the potential for passive income. There are several ways to create a stream of income from crypto, some are more passive than others. Finding the right which is the right match between your financial resources and personal skills is the key to success. If you need any further information please don’t hesitate to get in touch. Profitability is dependent on three main things:
- The time you buy your mining contract/ or mining rig during the bitcoin cycle
- Total Price of your setup cash flow to maintain the setup
- The price at which you sell your mined coins
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Hopefully, you have enjoyed today’s article. Thanks for reading!
Have a fantastic day!
Live from the Platinum Crypto Trading Floor.
Earnings Disclaimer: The information you’ll find in this article is for educational purpose only. We make no promise or guarantee of income or earnings. You have to do some work, use your best judgement and perform due diligence before using the information in this article. Your success is still up to you. Nothing in this article is intended to be professional, legal, financial and/or accounting advice. Always seek competent advice from professionals in these matters. If you break the city or other local laws, we will not be held liable for any damages you incur.