The birth of Bitcoin marked a new era – the era of cryptocurrency. Most people today have heard of Bitcoin, and are regretful they didn’t discover it sooner. Nowadays, the price of Bitcoin fluctuates rapidly, yet it is still expensive to buy a whole one outright. With this in mind, this guide will provide an introduction to mining new altcoins – a potential avenue for those who missed out on the rise of Bitcoin.
If you’re unfamiliar with the term ‘altcoin,’ it’s essentially used to describe alternative cryptocurrencies that launched following the success of Bitcoin. Many altcoins, though not all of them, try to remedy what they perceive to be limitations in the way Bitcoin works.
However, be warned that mining for altcoins can be risky business. You’re essentially mining them based purely on speculation. For instance, you may look to mine tokens such as Ethereum, Litecoin, or Dogecoin, and as you may well know, their current values are well below that of Bitcoin. The hope for mining altcoins is that in the future their value will increase.
What do you need?
- A cyptocurrency wallet: Without one of these, you’ll have no location to store your newly acquired tokens.
- Free mining software: For mining altcoins, you’ll want to do some research to work out which software is best for the altcoin you intend to mine.
- Access to a mining pool: A pool is where a group of miners get together to combine their computers/devices to bolster their chances of cracking the cryptographic puzzles to add a fresh transaction to the blockchain, thereby granting them the reward tokens and the transaction fee.
- Access to an online currency exchange: This is where you will exchange or trade your cryptocurrency.
- The right hardware setup located in an air-conditioned space: There is a wide range of hardware available, such as the DragonMint T1, Pangolin Whatsminer M3X, Bitmain Antminer S9i, and so on. Again, the right hardware will vary depending on which altcoin you intend to mine.
- A powerful desktop: Or a custom-built one that is specifically designed for mining.
- A mining ASIC chip or a special GPU mining rig.
For those looking to mine new altcoins, you should know that it’s significantly easier than mining Bitcoin. This is because the current network hash rate for mining Bitcoin is exceedingly higher than many altcoins. With a lower network hash rate, the mining process tends to be quicker.
In the beginning, Bitcoin was intended to be mined on a CPU. However, miners soon discovered that they could attain greater hashing power by using graphics cards. The use of graphics cards, however, was soon made obsolete by the use of ASICs (Application Specific Integrated Circuits).
Electricity cost is another big factor when it comes to mining in general, not just for altcoins. On average, mining computers cost 14 cents per kilowatt hour (kWh), and this is roughly the mark you want to hit. Above 14 cents, and your mining may start to become unprofitable. You also need to consider your dollar-per-day rate. If you decide to hold onto your freshly acquired tokens, you could potentially not see a repayment on your hardware investment for a long time. A method to help alleviate these costs could be to lock in your electricity bills. Some, not all, suppliers will allow you to do so. If you are able to lock in 14 cents or less per kWh, then it may be worth it.
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Certain altcoins function differently than Bitcoin in the mining process, such as Litecoin. Litecoin, at its core, is similar to Bitcoin in its code, but whereas Bitcoin allows transactions to be approved every 10 minutes, Litecoin allows them to be approved every 2½ minutes. Furthermore, Litecoin allows for a grand total of 84 million coins to be minted, which is exactly four times higher than Bitcoin. Immediately, you can see that the odds of mining Litecoin are greater than the odds for mining Bitcoin.
Whereas Bitcoin relies on SHA-256, Litecoin instead relies on scrypt technology, which ultimately is more memory intensive than other proof-of-work algorithms. This does come with a drawback, as the use of scrypt demands that mining hardware like a GPU mining rig is required, which uses significantly greater processing power. So, while Litecoin is faster and, in theory, easier to acquire than Bitcoin, it comes at the cost of needing huge amounts of processing power.
Dogecoin is another altcoin that loosely follows the Litecoin protocol. It similarly makes use of scrypt technology as its proof-of-work scheme and bears a block time of a single minute. To add to its speedy acquisition rates, there is no limit to how many can be produced. This naturally brings about negatives. For instance, because it deals with large numbers of coins, their individual value is incredibly low. This can prove beneficial in its accessibility and creates a vacuum for smaller transactions to be enacted, but it would be hard to turn a profit dependent on how expensive your mining setup is.
One of the more well-known altcoins is Ethereum. This coin relies on its own platform-specific cryptographic token, Ether. In essence, Ether can function in multiple ways – it can be traded like any other digital currency and it can even run applications within it and monetise work. It is noticeably quicker for new transactions and coins to be created due to the fact new blocks of data are approved every 15-20 seconds.
This guide is certainly not an exhaustive list of altcoins. There are so many out there today with more and more popping up as time goes on. Litecoin, Dogecoin, and Ethereum are some of the more well-known altcoins, but that does not necessarily guarantee they are the best. As always, cryptocurrency is an investment, and there is a huge risk that your tokens won’t increase in value but rather decrease. Do keep in mind that the hardware you require can vary and that there is no certainty that you won’t end up losing money.
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Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.