Cryptocurrency mining requires heavy initial setup costs compared to buying the coins on the open market causing some to choose cryptocurrency trading rather than engage in mining. The cost of electricity and the competition in the virtual currency mining space adds to the unattractiveness of the venture. Despite the obstacles, there are scenarios when crypto mining would be better than buying the coin itself or conducting crypto trading.
Below we look at the main reasons why you would consider setting up a cryptocurrency mining rig instead of just getting your preferred virtual currency from a cryptocurrency trading platform such as Binance or Coinbase.
But first, let’s get the basics out of the way.
What is cryptocurrency mining
Cryptocurrency mining is the act of confirming transactions on a blockchain and receiving a predetermined number of the blockchain’s native coins as a reward. Crypto mining applies to decentralized protocols like Bitcoin that employ the proof of work (PoW) consensus mechanism.
PoW is electrical-energy hungry causing harmful effects to the environment thus forcing miners to shift to cheaper and cleaner sources of energy such as solar, wind, and geothermal. Another consensus mechanism used by popular blockchains like Tezos is the Proof of Stake (PoS) where validators need to stake or hold their coins in a wallet to earn the right to confirm transactions on a blockchain.
What about buying or trading cryptocurrency?
The process of buying cryptocurrency simply involves heading over to the likes of Binance or Coinbase, depositing supported fiat currency such as the U.S. dollar, and then using it to buy Bitcoin or any other crypto. Unlike cryptocurrency mining, the amount needed to buy crypto can be as low as $5.
Reason why crypto mining would be better than buying the coin itself
You receive virgin coins
One main reason why crypto mining would be better than buying the coin itself is that cryptocurrency miners get freshly minted coins meaning that they are the first owners of the virgin/untraded coins. Reports have emerged that some crypto traders are ready to pay up to 20% more on freshly minted coins especially BTC, giving crypto miners an edge over those buying the coin itself.
Since virgin coins have no transaction history, a miner is protected from buying coins with a tainted history such as being held by a known criminal or suspicious entity. Note that if the Feds decide to banish certain crypto addresses you risk losing coins that have those addresses in their transaction history.
You get more than new coins
Apart from getting new coins, miners also receive a share of the transaction fees charged to move coins within a blockchain. In most PoW platforms, a rise in activity translates to an increase in transaction cost meaning bigger rewards for miners.
You get the coins at a discount
In the case of BTC, mining a single coin can cost not more than $10,000 having factored in all the variables such as the cost of electricity, mining equipment, labor, etc. With the current Bitcoin price of $27,000 (at the time of writing), this shows that miners are getting coins at a massive discount. With miners constantly looking for ways to optimize a crypto mining setup to boost profitability and the rising price of cryptocurrencies, the discount gets bigger with time further adding to the reason why crypto mining would be better than buying the coin itself.
Maintains value in case of a crash
In case crypto prices crash, something that’s likely in the crypto world, mining equipment tends to hold its value, something that some in the space may consider a safer bet than constantly speculating on the coins’ price through trading.
The fun part
Crypto mining, unlike buying the coins themselves, gives an individual the chance to work with high-end computing devices such as application-specific integrated circuits (ASICs) and graphics processing units (GPUs). It also provides a chance for an entity to be part of those making decisions on a decentralized network.
Conclusion
From our above discussion, crypto mining would be better than buying the coin itself if you are looking to hold untainted coins, get a share of the transaction fees charged on a blockchain, hedge against crypto price crashes, and have fun with high-end computing devices.
However, for those looking for a less cost-intensive path to owning cryptocurrencies, then buying crypto on an exchange is the way to go. It all boils down to how much you want to get involved in a blockchain’s day-to-day activities.
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