Are you wondering if it’s still right timing to invest in mining equipment and build your own mining farm ?
First of all you must understand what is crypto mining.
Many blockchain are using the “Proof of Work” (POW) bloc validation system.
It simply means, that each single blockchain bloc (that contains all transaction data executed in between two different bloc), is validated and confirming all transaction as soon as a miner hit the solution data to authenticate and validate all these transactions.
That specific miner (basically just a wallet address) is getting reward for being the lucky one who served as a blockchain bloc validation.
It’s kind of random for who gets the winning hash solution. This is the lottery side of mining.
But simple fact, the more hashrate you run, the more chance you have to hit winning hash and get rewards more often.
So how a small miner can compete with big farm ?
He can’t, but he can share it’s hashing power with thousands of other small miner, and act as a big farm, splitting the rewards among all participant regarding their hashrate power.
This is called a mining pool, anyone can connect to it, it’s all free and all free to go elsewhere at any time.
The more miners and different pools running, the more secure the blockchain is, preventing from “51% attack” and “double spent coin” exploit.
What you need to understand, is that there’s a limited amount of coin released (generated, minted) every day, the more people are willing to get the same coins, the less chance they have to find it, or their pool rewards share will be low and sometimes even pointless as there’s really way too much people on the digging.
It’s just like gold rush pattern.
One guy find some, then he tells his friend, who also spread to other people until there’s too much competition and it’s not worth it to keep digging.
The smartest people in there, are the earliest one to dig while it’s still profitable cause offer is bigger than demand (bid and ask).
The parallel other smartest, are the business runner, they understood that the market is already too busy and exploited, they wish to build a business plan to supply the miners, host em, feed em, sell them the fantasy that if they come here and use their stuff, they have a higher chance to be more competitive on the market.
IMO these business runner are the smartest, developing new needs and requirement for dreamers.
I’m sure you’ve got the point about gold rush logic and how most of the business in human society are just scaled on this pattern.
Success story => fantasy growth and feed => material supply & services
This principle is old like money.
So how come there so many miners still running farms ?
Well most of them have been in the mining game long time before it become really mainstream. Most of the initial investment is already turned into profit long time ago, when they now only reinvest profit.
When it was still very uncommon to mine cryptocurrency, like there’s no exchange, no endless twitter feed, no real concrete usage of the coins, just pure speculative investment, how many people to you think ended in it seriously ?
I can tell as I met a few, just a few people did believed in this enough, to spend a lot of money onto this new technology ecosystem.
Most of them in high-tech industry already, software engineer, coders, network manager, hardware supplier, I guess anyone with computer skills was able to adopt crypto even when it’s all line code application, no Friendly User interface, that came way later.
At the beginning it’s more a seed planted on internet community, with no plan or anything, just some literature about how it can release money from actual big cash holders, how it could revolutionize the standard economy.
Step by step, mind after mind, it all started to build some platform to interconnect it all.
Lucky most of early attracted people was in “Tech IT Dev”, and could develop many useful projects that are now well known and widely used.
It’s like a natural fruit seedling process.
The apple falls from the tree, the worm attracted by the fruit will replant the seed deeper and offer predigest food for the plant with the organic => mineral transformation process.
And the new tree will produce new apple that will feed new worms.
That tree is now a jungle called cryptocurrency, blockchain, smart contract, Defi, Stablecoins.
Back to mining context, as all these big and very early miner, are most probably still running astronomic hash power, you’ll never be able to compete with them on actual big project already rushed by everyone with your own material.
But you still can spot a new promising project, where attention is really exclusive and team seems to be serious and legit, support them early, mining their blockchain with rented hashing power (on Nicehash or Miningrigrentals) and be a competitive miner, temporary, without having to run rigs yourself and all negative and heavy points in having to host a mining farm.
If the project runs masternodes, go mine until you get a masternode or two, and then stop the mining, set your masternodes and patiently wait for the project to be listed on an exchange. Sometimes they even multiply in days, so that’s potentially multiplication of your investment.
If it’s a staking project, it’s just the same.
The more early you start holding these coins, the less competition there is and the more profitable your investment will be.
The only way to get such early position on a coin, while it’s not even listed on exchange, is mining.
This strategy made us earn tons of profit and I can’t advise enough, new miner to understand all that process and how to benefit the most with these temporary new gold mine spot.
You will need to learn a few things, like how much coins you will get if you are having a specific amount of hash power.
That’s the only formula you need to know.
The formula to calculate your daily mining session profitability
86400 / A * B / C * D = X
86400 = number of second in a day (60 * 60 * 24)
A = Blocktime (in second)
B = Blockrewards (in coins)
C = Nethash (total blockchain hashrate)
D = Minerhash (Your own hashing power)
X = The number of coin you’ll mine on 24h session
Now that you have the formula, you can simulate the price of a mined coin, using cloud mining platform.
Finally identify the real price of the coin, as long as it’s not listed on an exchange. Because you know how much it cost to mine X coins.
I can’t help you more on this post, lets mature it and I will post articles about how to use Nicehash and how to optimise your simulation with google calc sheet 😉
Also if you have any specific question, I highly invite you to join us on discord to meet and share experience more in details.