Most of the cryptocurrencies on the market today, including Bitcoin and Ethereum, are mined by computer. This means that in order to get these digital assets into circulation you need to spend some computing power, which is mostly done through a process known as “mining”, i.e., using your computer’s CPU in order to create new coins out of thin air.
How Crypto Is Mined?
Mining can be quite profitable and even turn a profit. However, there are many high-end video cards that have been designed specifically for this task and they offer immense computational power at a much faster pace than even the best gaming PC can produce. This has caused a rise in the number of people who are investing in a mining rig, which is basically one or more graphic cards (also known as GPUs) that have been combined with a computer’s central processing unit (CPU) in order to maximise mining output.
Now, since these graphic cards have been designed for this purpose, they tend to be more efficient than even high-end computers found on the market and can produce several times more power per square inch of surface area. So while your gaming PC may be able to hit 30 MH/s (mega hashes per second), graphics cards can easily reach 300 MH/s or higher.
Is Crypto Mining Profitable?
While this may sound great, with more and more people mining, the difficulty and cost of mining is increasing. This means that those who are mining are spending more power than they are earning in the form of newly minted coins. Ultimately, miners will be spending money (on high-end GPUs) to mine cryptocurrencies which they may be able to sell for their true value, but only if they can sell them fast enough before their price drops or rises.
This creates a crypto tax on every computation or “hash” that your computer performs while searching for a new block, and it becomes very expensive after just a few months of mining. In fact, the cost of mining Bitcoin using GPUs can go from a few cents a day to over $100 a day depending on the exchange rates.
Investment For Mining Crypto
So if you are going to invest in mining, you may want to invest in quality video cards. These have been designed so that your computer can maximise performance, but you may pay more for them on the market than what they cost when they were designed. This is because there is no industry standard for new cryptocurrency mining graphic cards, and some of the best cards are selling at rather high prices. In short, Ethereum miners around the world need to upgrade their rigs before they will make any money.
Conclusion
Crypto mining is one of the best ways of passive income but, along with this there is investment and taxation which results in degrading of the profit. Different countries have different rules on how crypto mining is taxed, if your location is favourable for mining then you should definitely go for it. For the taxation you can use online services like Binocs which will file your crypto tax automatically.
