Cryptocurrencies have attracted the attention of investors. Some digital coins can yield enormous gains to early investors. However, investing is not the only way to make money with cryptocurrencies. There are different ways to generate extra income with these digital assets. For example, mining a cryptocurrency can be profitable if you do it properly.
You can mine cryptocurrencies that utilize the proof-of-work (PoW) consensus mechanism. But what is mining in the first place? This activity consists of verifying data blocks before they are added to the blockchain. It helps to maintain a secure network. In exchange for this service, a miner gets a reward in cryptocurrency.
The most popular digital coin using PoW is Bitcoin (BTC). However, mining this cryptocurrency requires very powerful hardware miners to be profitable. Hence, mining Bitcoin is not recommendable unless you have good capital to invest in special hardware. In contrast, mining Monero (XMR) is more viable. The most effective Monero miner can be a regular personal computer.
Are you interested in mining Monero? We invite you to read this article and learn what you need to know to mine this privacy-oriented coin profitably.
Basics of Monero (XMR) Mining
Monero is a cryptocurrency that aims at enabling private and anonymous transactions between users. Unlike Bitcoin, this digital coin utilizes advanced cryptographic techniques to obscure the addresses of the parties involved in a transaction. Because of the PoW consensus algorithm, mining Monero requires finding the solution to a cryptographic problem. The miner that finds the solution first gets a reward from the network.
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So, to mine Monero profitably, you need these things:
- A computer with average or above-average computational capability
- A fast and stable Internet connection
- Monero mining software
- A Monero wallet.
As seen, you do not need anything special to mine Monero. However, solving the cryptographic problems in less time requires adequate hardware. Unlike Bitcoin, you cannot use ASIC miners to mine Monero. Instead, a regular central processing unit (CPU) is the best hardware to mine this cryptocurrency. Alternatively, you can use a graphic processing unit (GPU). However, mining with a CPU is much more effective.
If you cannot purchase high-end hardware for mining Monero, you can join a mining pool. In most cases, a mining pool is the only way to mine Monero profitably. A mining pool combines the computational capabilities of different users to find solutions to cryptographic problems faster. The rewards are then shared among users proportionally to the provided computational resources.
Investing in Cryptocurrencies: Bitcoin or Ethereum?
If you don’t want to deal with all the technicalities of Monero mining, you can invest in cryptocurrencies instead. Investing in the two major cryptocurrencies, Bitcoin and Ethereum, is regarded as a safe move. You can buy Bitcoin only and then swap Bitcoin to Ethereum on an exchange platform.
Novice investors usually ask which of these two cryptocurrencies is better. Is Ethereum better than Bitcoin? From a technological point of view, Ethereum has features that outperform Bitcoin. For example, Ethereum can handle ten transactions per second, whereas Bitcoin can handle only four. Ethereum also supports smart contracts and the development of other cryptocurrencies. However, from an investment perspective, Bitcoin is more stable. It is also a better hedge against inflation.