At the end of the day, the only thing that matters in cryptocurrency mining is profits. With a multitude of blockchains to mine, and a variety of hardware and software solutions to choose from, it seems everyone has their own methods of maintaining as much profit in mining as possible.
There are, however, many roadblocks to mining which get in the way of miners maintaining their profits for the long term. These come from poor decisions on the part of miners, and an inability to plan for the long-term. Try to avoid these pitfalls if you are looking to mine cryptocurrency effectively.
Recognizing Hardware Obsolescence
The mining industry moves extremely fast, and it can be hard to keep up with the newest technological developments available to miners. Hardware which may have been useful for mining at one point could be inadequate less than a year later.
In order to maintain profits make sure you have the best available hardware which is fast enough to successfully mine your desired blockchain. At the same time, you must keep in mind that your hardware, whether it is ASIC or GPU, will likely be obsolete in a short period of time. This means you must plan on doing as much mining as possible right away in order to capture the most benefits from your current hardware setup.
Miners take a huge risk by storing the bulk of their profits in cryptocurrency. While it is obvious that miners are supporters of cryptocurrency and believe in the industry’s viability for the future, wild price swings can cause mining profits to go from successful to non existent.
Unfortunately, at the moment, most mining costs like electricity and hardware can only be purchased via fiat currency. In order to maintain or grow a mining operation, fiat currency is a necessary resource to make such purchases. It is always smart to convert a portion of your mining rewards into fiat so as to not be fully exposed to the price swings often seen with cryptocurrencies. Otherwise, you might be stuck with cryptocurrency worth a fraction of what you expected.
Not Taking Into Account All Costs
There are greater costs to mining than many miners calculate. It isn’t just the hardware and electricity costs which play a role in determining long-term profits, other costs need to be factored in as well.
Mining equipment needs to be cooled, and creating a cooling system for hardware is a cost which at-home miners will certainly incur. Additionally, no matter how good you treat your equipment there will be malfunctions and maintenance needed. This will require hiring a professional to make any necessary repairs on your hardware, a potentially costly proposition. Even if you are skilled enough to repair your ASIC or GPU hardware yourself, money for parts will be a factor, as will the time spent on making any repairs.
As mining has become more popular many businesses have sprung up claiming to help miners via cloud mining. Cloud mining is often touted as a way to mine cryptocurrency without having to purchase any costly equipment or storing mining hardware on-site.
However, these businesses are at best siphoning off their customers profits, and at worst, outright scams. If you get stuck in a contract with one of these companies you may not even realize that you are losing out on potential mining profits.
Make sure you do your due diligence in vetting any third party mining company you work with. Getting stuck in a contract with hidden fees or less rewards than you had initially been quoted is the last thing you want to do.
Mitigate Your Costs
The only way to achieve substantial profits mining cryptocurrency is to identify these roadblocks and be prepared to handle them at the onset of mining. Most of these will require you to mitigate your costs in every way. One method to do this is to purchase better quality mining equipment which could last a significant period of time with less repairs necessary. Even if this upfront cost is more, it will be more financially viable in the long-term as you won’t have to replace the hardware as frequently.
Another way to mitigate costs is to outsource the electricity, cooling, and repair costs to a third-party. Utilizing a mining services company to store and run your hardware allows you to collect profits without having to worry about unforeseen costs and expenditures along the way. Just make sure you find a mining service which doesn’t hit you with hidden fees and costs.
These tactics will help you get over the hump and moving toward profitability more quickly.