Max Sun

These Reasons Make Users Purchase NFT Without Hesitation

2023-01-19T01:56:16.845Z

The liquidity of NFTs can vary greatly depending on the specific NFT and the market it is being traded in. Some NFTs have high liquidity, meaning that there is a large number of buyers and sellers actively trading the NFT, and it is relatively easy to buy or sell the NFT at any given time. Other NFTs may have low liquidity, meaning that there are fewer buyers and sellers, and it may be more difficult to buy or sell the NFT without significantly affecting the price.

In general, the liquidity of NFTs tends to be lower than that of more traditional financial assets, such as stocks or commodities. This is because the market for NFTs is still relatively new and small, and many NFTs are highly specialized and may only appeal to a narrow group of buyers. However, as the market for NFTs continues to grow and mature, it is likely that liquidity will improve over time.

It is also worth noting that the liquidity of NFTs can vary significantly depending on the platform they are being traded on. Some platforms, such as Nifty Gateway and OpenSea, have a large and active user base and tend to have higher liquidity for NFTs. Others may have lower liquidity due to a smaller user base or less robust trading infrastructure.

There are a few ways that financial means can be used to inject liquidity into the market for non-fungible tokens (NFTs):

Offer financial incentives for buying and selling NFTs: This can include offering discounts or bonuses for purchasing NFTs or creating referral programs that reward users for bringing new buyers into the market.
Provide financing options for NFT purchases: This can include offering payment plans or loans to help buyers afford to purchase NFTs.
Invest in marketing and advertising campaigns to increase awareness and demand for NFTs: This can include social media marketing, influencer partnerships, and targeted advertising to attract new buyers to the market.
Develop partnerships with other companies or platforms to expand the reach of NFTs: This can include integrating NFTs into existing games or platforms, or collaborating with other companies to promote NFTs to their customer base.
Offer liquidity services for NFTs, such as exchange listings, Cyan BNPL(buy now pay later), pawn, and secondary marketplaces: This can help to create more opportunities for buying and selling NFTs, which can increase liquidity and demand for the tokens.

Non-fungible tokens (NFTs) are a type of digital asset that represents ownership of a unique item, such as a piece of art or a collectible. They have gained popularity in recent years due to the emergence of blockchain technology, which allows for the creation and transfer of NFTs in a secure and transparent manner.

There is a lot of interest in NFTs and their potential to revolutionize various industries, including art, gaming, and collectibles. As the market for NFTs continues to grow, it is likely that liquidity will also increase. This means that it will become easier for buyers and sellers to find each other and trade NFTs.

However, it is important to note that the market for NFTs is still relatively new and highly speculative. As with any emerging market, there is a risk of volatility and uncertainty. It is difficult to predict exactly how the market for NFTs will evolve, but it is likely that liquidity will continue to improve as the technology and infrastructure for NFTs matures.

Should I Invest in Cryptocurrency? Reasons to Invest Now

2022-04-12T05:29:21.394Z

With interest rates plummeting globally and the stock market showing signs of vulnerability, cryptocurrency investments seem to be the flavour of the town. However, crypto investments can be risky, and people still ask, ‘Should I invest in cryptocurrency?’ So, here is a discussion that examines the reasons to invest in cryptocurrencies now.

You might have heard this story that in May 2010, a Californian student, Jeremy Sturdivant, received an intriguing request offering 10,000 bitcoin to deliver two pizzas to a Floridian resident, Laszlo Hanyecz. Though the request sounded bizarre, he accepted the deal and arranged for the delivery, making it the first physical purchase made with bitcoin.

(Image Source: Pixabay)

On May 22, 2010, the deal was worth $41. Unaware that bitcoin values could reach astronomical heights, Jeremy spent the money to cover his business trip expenses. This incident does not have much consequence except for the fact that 10,000 bitcoin today have a value of more than $380 million. Which investment would ever generate such astronomical returns? If only Laszlo or Jeremy had held on to the bitcoin, they would have been multi-millionaires today. So, if you ask, ‘Should I invest in cryptocurrency,’ this incident proves that you should.

Why Should I Invest in Cryptocurrency?

Any investment is a personal decision, and one should understand the benefits and drawbacks before investing in a specific asset. Below are nine reasons to answer the question, ‘Why should I invest in cryptocurrency?’:

1. Easy to begin with: Though the cryptocurrency concept appears complex, technological advancements have made it easy to explore the investment option. Signing up for a trading account with a trusted crypto exchange and creating a crypto savings account is a straightforward task today with platforms such as POKKET.

2. Portfolio diversification: The golden rule of investment teaches you not to put all your eggs in the same basket. Investing in cryptocurrency provides you with opportunities to diversify your investment portfolio, with the option to invest in Bitcoin, altcoins, stablecoins, NFTs, and more. Furthermore, similar to a typical bank account that gives you interest on your savings, you can generate a considerable passive income by holding your crypto through a crypto savings account.

3. Astronomical returns: The incident described above proves that an investment in bitcoin can generate tremendous returns. Bitcoin reached the $1 mark on February 9, 2011. Today, eleven years later, Bitcoin has a value exceeding $38K.

4. Greater transparency: Cryptocurrency transactions work on encrypted, publicly distributed ledgers with no chance of alterations or manipulations.

5. Higher acceptability: Cryptocurrency has changed significantly since May 22, 2010, Bitcoin Day. Many e-commerce websites and businesses accept cryptocurrencies as valid transactional value today.

6. Unrealized potential: What the world knows today about cryptocurrencies and the blockchain is just the tip of the iceberg. However, the unrealized potential of blockchain is massive. This has already been proven by the decentralized financial ecosystem, which is gaining more and more prominence by the day.

7. Tremendous scope: The future of monetary systems is in cryptocurrencies. The below graph is self-explanatory; it shows daily transactions in cryptocurrencies from January 2017 to November 2021.

(Image Source: Statista)

8. Increased awareness: People today are more aware of how cryptocurrency works. With a plethora of online resources available, it becomes possible to make informed decisions.

9. Blockchain is here to stay: Blockchain has not yet reached saturation levels. Besides, technological improvements and increased awareness have resulted in its widespread acceptance. It is similar to how the potential of the internet was not realized in the late 1990s, and today, life would seem impossible without the internet.

Should I Invest In Cryptocurrency Now?

The above list elaborated the nine reasons to invest in cryptocurrency. However, many people are still in doubt, given the current Russia-Ukraine war scenario. The question is whether it is worth taking the plunge right now? If you had asked this question five years ago, the answer would have been an emphatic YES. On December 31, 2016, the Bitcoin price was $963.74 per bitcoin. Today, it is in the range of $38,000. The below piece of statistics should explain things better.

(Image Source: Statista)

The graph shows how the price of bitcoin moved from October 2013 to March 2022. Since October 2020, the prices have fluctuated wildly, with Bitcoin crossing the $60,000 mark in June 2021. However, the graph shows no drastic fluctuations during the days of the Russian war. So, if you ask, ‘Should I invest in crypto now,’ the answer would still be a YES. The following prospects for the future will support the decision further.

Chances of appreciation: Though Bitcoin’s value has come down drastically since the highs attained in 2021, the trends show that Bitcoin price should touch the $100,000 mark in the forthcoming future. Cryptocurrencies tend to be volatile in the short-term and show growth long-term.

Higher institutional adoption: More retailers, especially e-commerce websites, have started accepting cryptocurrencies as payments. Fintech establishments are also allowing users to purchase crypto on their platforms. The situation can only improve. The more the demand, the higher its value.

Crypto ETF approval: Bitcoin ETF debuted on the NYSE in October 2021. Thus, it opens a more conventional way of investing in crypto. More crypto ETFs are likely to get launched in 2022 and beyond.

The clarity in crypto regulation: With more countries regulating cryptocurrencies, it has become safer for investors and less appealing for malicious actors. Better regulation can increase taxes on crypto gains, but it is a good thing for investors because it guarantees the safety of their investments.

How to Invest in Crypto And How Much?

After learning the prospects of crypto investments, now the question is how to invest in crypto. One of the ideal ways to invest in cryptocurrencies is through reliable crypto establishments, such as POKKET. POKKET is a cryptocurrency savings platform created by financial and technology experts. It offers the flexibility to earn interest on your idle cryptocurrency investments. Such crypto investments help you hold on to your assets and gain from price appreciation in the future.

Though there are many good things to say about crypto investments, you could wake up one morning to see that certain countries have banned cryptocurrency. This worry brings up the question, ‘How much should I invest in crypto?’ The amount to invest in crypto depends on the individual. However, prudence says that one should not invest more than one can afford to lose. The recommended share is between 2% and 5%.

Final Words

Investment in cryptocurrencies seems attractive because of the tremendous appreciation in their prices over time. However, there is an element of uncertainty. Therefore, the answer to those who ask, ‘Should I invest in cryptocurrency?’ is this: Investment in cryptocurrencies is profitable but can be risky. While one should reap the benefits of crypto investment prospects, one should also be careful while investing. If you are not experienced in crypto, it would be best to seek guidance from experts. There are many reasons to use crypto savings platforms like POKKET, where you get excellent opportunities to earn passive income while holding on to your crypto assets.

What Causes Cryptocurrencies To Fluctuate?

2022-04-12T05:22:24.326Z

Cryptocurrencies have gained traction recently as a viable alternative to the widely-accepted fiat currencies. However, it has its demerits in the form of volatility in its prices. After going through this post, you will have an understanding of what causes cryptocurrency to fluctuate.

Many countries have begun the process of framing appropriate legislation and regulations for cryptocurrency. The day is not far away when you might be able to order almost all of your day-to-day necessities via cryptocurrencies. On the other hand, cryptocurrencies have proven to be a viable investment instrument, generating massive returns for early adopters. However, there’s one aspect that makes new investors skeptical about investing or trading in cryptocurrencies, which is volatility.

(Image Source: Pixabay)

Over time, one can observe the fluctuation of the most volatile cryptocurrency, Bitcoin. For example, in September 2021, the value of one bitcoin was $41,412. In October, it jumped to $61,374. Today, it is around $45,635. This chart should help you visualize the volatility.

(Graph Source: Statista)

So, what exactly drives the volatility in the prices of cryptocurrencies? Let us examine what causes cryptocurrency to fluctuate, which would help you better understand how it works and why it makes for an excellent investment instrument even after its volatility.

Why Do Cryptocurrencies Change Value? – Understanding the Reason Behind the Volatility

Before focusing on the volatility of cryptocurrencies, it is important to understand that cryptocurrencies do not operate in a regulated environment like fiat currencies or government-backed exchanges. Cryptocurrencies derive their value elsewhere. Due to the fixed supply, cryptocurrencies are immune to inflation. Hence, they derive their value from market sources.

The following points explain the aspects that drive cryptocurrency’s volatility:

Supply and Demand Position

The prices of a commodity depend on its demand and supply position. For example, if the demand rises faster than the supply, the price increases, and vice versa. Similarly, cryptocurrency values vary according to the demand and supply position. If the demand is more, the prices go up. Alternatively, if supply exceeds demand, the price goes down.

The cryptocurrency supply mechanism is well known because each cryptocurrency publishes its Tokenomics. For example, Bitcoin has a pre-determined maximum supply of 21 million. On the other hand, Ether does not have any supply cap. Therefore, some cryptocurrencies resort to burning tokens to prevent a mismatch in the supply and demand position.

Today, the demand for cryptocurrencies, especially Bitcoin, is high because of higher adoption and the active participation of institutional investors. So, the demand has outstripped the pace of creating new bitcoins.

The demand-supply position is a significant driver to determine the most volatile and the least volatile cryptocurrency.

Production Cost

Cryptocurrencies are produced through mining, a computational process that consumes massive computing power. One needs expensive and sophisticated equipment for mining the top cryptocurrencies today, such as Bitcoin. The leading cryptocurrency technologies like Bitcoin and Ethereum use the Proof-of-Work (PoW) system, where miners get incentives for mining cryptos.

The production cost has increased tremendously over the years. For example, in 2009, miners used to get 50 BTC for mining one block. Today, the rate has come down to 6.25 BTC. The mining pools today use sophisticated equipment. All these factors contribute to the cryptocurrency’s pricing. However, miners are required as long as there is demand for cryptos. Therefore, the prices fluctuate.

Availability

Scarcity is another crucial reason why cryptocurrencies change in value. The most popular cryptocurrencies, such as Bitcoin and Ether, are traded on all popular crypto exchanges. Smaller tokens, on the other hand, do not have this privilege.

Furthermore, trade volumes also influence cryptocurrency prices and add to cryptocurrency volatility. As we discussed earlier, the steady supply of any commodity raises its value in the long run since it is anticipated that demand will likewise grow. Because there are only a few coins in circulation, this produces scarcity. Some cryptocurrencies even have a burning mechanism, implying that a portion of the coin supply is destroyed, reducing the availability, and making it scarcer.

Intense Competition

When Bitcoin was invented in 2009, it did not have any competition. As of Feb 2022, there were over 10,000 cryptocurrencies. However, not all cryptocurrencies enjoy sufficient trading volumes and popularity. Thus, there is intense competition among cryptocurrencies to survive in the market. As new competitors gain momentum, it affects the competition and causes price fluctuations.

(Graph Source: Statista)

Influencers

Recently, Elon Musk tweeted that he would not be selling his crypto holdings, including Bitcoin, Ether, and Dogecoin. Within minutes, Dogecoin attained its swing high of the past five days. An earlier tweet in January 2022 stated that Tesla would accept cryptocurrency as payment for their merchandise. As a result, Dogecoin’s value increased by 10% within a day. Thus, like a negative rumor around a company can bring down its stock price, the same is the case in the world of cryptocurrencies, where such internet influencers trigger such volatility.

Change in Consensus Mechanism/Governance

Cryptocurrencies work on a system of internal governance. Some cryptos have introduced governance tokens that give holders a say in any project’s future. For example, Ethereum is updating its network from a Proof-of-Work (PoW) system to Proof-of-Stake (PoS), rendering its expensive machinery redundant. Automatically, it will impact Ether’s pricing.

Regulations

Though cryptocurrencies work in a deregulated environment, governments worldwide have started putting forth provisions to regularize them. However, there is confusion as to which entity should regulate cryptos. For instance, the Securities and Exchange Commission wants to categorize cryptocurrencies as bonds and stocks in the US. In contrast, the Commodities Futures Trading Commission equates cryptos with commodities like gold.

Various countries are exploring regulatory impositions on cryptocurrencies, including taxing gains from crypto trading. Besides, products like ETFs and futures contracts offer more access to cryptos for investors. Speculations around such aspects give rise to cryptocurrency volatility.

Final Thoughts

No single factor determines the value of cryptocurrency, but several factors, as discussed above, are the reason behind cryptocurrency volatility. However, in the long term, one can notice that the value of the most famous cryptocurrencies has only risen. Thus, if you’re striving to be a successful crypto trader, you must be well-versed with the answer to the question, why do cryptocurrencies change value? But, if you want to be a long-term investor and want to compound your crypto portfolio, the best way to go about it would be to hold your crypto assets through a crypto savings account, like the one offered by Pokket, that allows you to safely “hodl” your cryptocurrencies, and make passive income through interest on your holdings as well.

Will Cryptocurrency Survive? The Future of Cryptocurrency

2022-03-29T06:20:50.679Z

Cryptocurrencies have always fascinated investors and traders, especially in recent years. Their values have skyrocketed to unprecedented heights, making investing in such assets a lucrative venture. However, some concerns can weigh down perceptions, too. Let’s take a closer look at the future of cryptocurrency and what are relatively safe avenues you can invest in?

What is the future of cryptocurrency? Most cryptocurrency investors and traders are looking for the answers to these questions. However, the answers to such questions and concerns depend upon which side you look from. Cryptocurrency proponents will see unlimited potential, while critics might see nothing but risk. So here is an attempt to find sensible answers to questions like, ‘Is cryptocurrency really the future?’, and ‘how many cryptocurrencies will survive?’.

(Image Source – Pixabay)

The Future of Cryptocurrency

If the number of users is the only criterion to decide whether cryptocurrencies will survive, then the answer should be a resounding YES! The following statistics drive home the point firmly. The graph clearly shows how the number of cryptocurrency users increased from 5 million in 2016 to nearly 221 million by the middle of 2021. By the end of the year, the figures had swelled to more than 300 million globally.

Here are some more statistics that prove cryptocurrencies have a promising future.

More than 18,000 business enterprises accept cryptocurrency payments globally. The major industries include the retail sector, luxury goods, remittances, and gaming.
Most cryptocurrency owners are in India, followed by the US, Nigeria, Vietnam, and the UK.
Bitcoin value reached astronomical heights of more than $65,000 in February, April, and November 2021. However, it has now reduced to around $40,000 in March 2022.

(Image Source – Statista)

Thus, the cryptocurrency future of money seems bright from an optimistic viewpoint. However, there are worries about using the underlying technology and its capacity to disrupt the established traditional financial systems.

Cryptocurrencies – Boon or Bane

The prime quality of cryptocurrencies and their underlying Blockchain technology is their inherently trustless system. Furthermore, decentralization ensures that financial institutions, governments, or national regulations do not regulate these financial platforms. Hence, its supporters feel that cryptocurrencies are superior to fiat currencies, such as the US dollar, because they are not dependent on the US Federal Government.

On the other hand, its primary drawback is that cryptocurrencies are not entirely trustless. Their function relies on the underlying infrastructure powering these cryptocurrencies. Therefore, much depends on the whims and fancies of the organizations and governments that can theoretically make changes to their function at a fundamental level.

Cryptocurrencies – Vision Compromised

Cryptocurrencies were designed to be a borderless and decentralized alternative to fiat or centralized currencies. They rely on a P2P network of systems for verifying and authenticating transactions rather than depending on a third-party mediator. However, fourteen years since the invention of Bitcoin, the initial vision seems to have been compromised because investors with massive cryptocurrency holdings can control its prices in the market. In addition, it has resulted in sacrificing the efficiency of mining farms.

However, the positive aspect is the constant growth of a vibrant crypto ecosystem with more than 300 million users today and with platforms such as Pokket that allow users to earn interest on their crypto assets. Furthermore, with over 11,000 cryptocurrencies traded on exchanges globally, blockchain technology proves its worth solving complex financial issues. Consequently, institutional investors have started to consider crypto assets as viable investments.

Cryptocurrencies – Increasing Acceptance

Cryptocurrencies are gaining acceptance globally today. For example, El Salvador became the first country to announce Bitcoin as a legal tender on June 9, 2021. While the US dollar is its primary currency, El Salvador allows using cryptocurrencies for business transactions. Besides, several countries have been considering passing legislation for cryptocurrencies’ regulations, hinting towards their acceptance, at least as a “digital asset.” It shows that the world is gearing up to accept cryptocurrencies openly. Thus, it supports the cryptocurrency proponents who foresee an optimistic future for cryptocurrencies.

Cryptocurrencies – The Drawbacks

Currently, cryptocurrency is at a crossroads between using it as a medium for daily transactions and being a store of value. The following are some minor downsides that are likely to be resolved in the near future.

Volatility: While many governments are considering to allow cryptocurrencies as legal tender, their volatility proves to be their most significant stumbling block. For example, the value of Bitcoin rises to US$60,000 one day and slumps to below US$40,000 in a short while. However, over the long term (considering over four years), cryptocurrencies have generated incredible returns for investors. Additionally, platforms such as Pokket offer savings accounts for cryptocurrencies allow you to get the best results from your crypto portfolio.

Security: Secondly, the security issue is significant because there are numerous incidents of stealing cryptocurrencies from exchanges by malicious actors. Primarily, the security issue arises because of the lack of awareness around cryptocurrencies and the various tools required to trade or store cryptocurrencies. As people get more aware of these aspects and start adopting cyber hygiene practices, we’re likely to see a decrease in crypto-related scams.

Transaction Fee: Other issues that require immediate attention include scaling problems such as slow networks and high transaction fees. In addition, there have to be technological advancements, especially with cryptocurrency users increasing daily. For cryptocurrencies to be considered a viable investment or a form of payment, the underlying blockchain should be capable of handling millions of transactions in a short time. With new consensus mechanisms being developed, this issue will also be resolved in the forthcoming future.

As the crypto ecosystem expands, experts are optimistic that the future will witness a massive explosion of low-cost, high-speed transactions to transform value exchange, similar to how the internet changed IT.

So, Which Cryptocurrencies Will Survive?

History shows that cryptocurrencies having value storage will stand the test of time. For example, Bitcoin, Ethereum, etc., can become preferred cryptocurrencies because they have the qualities to survive a market crash. Today, the market has many cryptocurrency investment platforms burgeoning everywhere. Therefore, choosing the right platform is crucial for investors. Pokket is a trusted platform and an excellent choice because it provides opportunities for investors to earn income on their idle crypto assets while they hold on to them. Besides, it allows crypto savings and gaining a continuous income stream for the investor.

Final Words

So, the answer to the question, ‘What is the future of cryptocurrency?’ should be, ‘It looks promising.’ However, there has to be greater acceptance from governments globally. Besides, the crypto markets require some innovative technological revolution to allow quicker and safer transactions. For those who are optimistic about the future of cryptocurrencies, the best thing to do would be to HODL your crypto assets, which you can do with investment platforms such as Pokket, which allows you to easily earn passive income.

References

Best, R (2022, January 14). Estimate of the number of cryptocurrency users worldwide 2016-2021. Statista. https://www.statista.com/statistics/1202503/global-cryptocurrency-user-base/

Best, R (2022, May 14). Bitcoin BTC/USD price history up until March 14, 2022. Statista. https://www.statista.com/statistics/326707/bitcoin-price-index/

Aleman, M. (2021, June 10). El Salvador makes Bitcoin legal tender. AP News. https://apnews.com/article/caribbean-el-salvador-bitcoin-technology-business-ed51894baf9d47ec1093005602883fd9

CoinMarketCap. Countries Which Allow Cryptocurrency As Legal Tender. https://coinmarketcap.com/legal-tender-countries/

How Does Crypto Mining Work

2022-03-29T06:05:10.981Z

The popularity of cryptocurrencies is increasing by the day. Those who delve deeper into how cryptocurrencies work need to learn the fundamentals and be able to answer the basic questions such as, “what is mining for cryptocurrency?” or “how does mining work?”. This post discusses crypto mining and how cryptocurrencies are generated.

Cryptocurrency has become a global topic of discussion today as it is increasingly being considered a new form of currency and an investment instrument worldwide. Concepts like decentralization and blockchain networks have gained prominence because of cryptocurrencies. Today, various businesses accept cryptocurrencies just like they accept fiat currencies. To understand their underlying function, one needs to be familiar with the concept of ‘crypto mining’. The following discussion explores how cryptocurrency mining works.

So, What is Cryptocurrency Mining?

Although thousands of cryptocurrencies exist today, we can understand the concept through Bitcoin, as it is the most common cryptocurrency. Fundamentally, it can be said that cryptocurrency mining is the creation of new cryptocurrency coins. The generated coins then enter circulation. Bitcoin mining is crucial to the blockchain ledger’s maintenance and development because it is the process that confirms the transactions of the decentralized network.

Just as mining gold and minerals require sophisticated machines, cryptocurrency mining involves using advanced and sophisticated hardware to solve complex computational math problems. Hence, the name “mining.” Cryptocurrency mining is a complex, costly and painstaking process. Still, it has a magnetic appeal for investors despite these negative aspects because of the hope to earn cryptocurrency for their work with crypto tokens. In addition, miners are rewarded with tokens for validating and monitoring crypto transactions. This reward motivates people to become a miner.

How Cryptocurrency Mining Works

So, how do you mine for cryptocurrency? If cryptocurrency mining were easy, everyone would have become a miner. However, Bitcoin mining involves miners solving complex math puzzles, also referred to as Proof-of-Work (PoW), the consensus mechanism behind the process. The below information provides a brief idea of how to start mining cryptocurrency.

Bitcoin miners try to guess a 64-digit hexadecimal number (comprising the numerals 0 to 9 and the alphabetic letters A to F) less than or equal to a target hash in the Bitcoin’s PoW algorithm (SHA256). The mining systems use brute force comprising multiple CPUs stacked together to guess hashes at variable rates (mega-hashes/sec, giga-hashes/sec, tera-hashes/sec, etc.). The guessing involves all the possible 64-digit combinations until they arrive at a specific solution. The system that comes the closest to guessing the target and is equal to or less than it gets rewarded with Bitcoin (6.25 at the prevailing rate).

Here is an example to explain the crypto mining meaning in simple terms. Suppose the target is 27. Ask your friends to guess any number between 0 and 100. The person who thinks 27, or the number closest to and less than 27, gets the reward. If it ends in a tie, the prize is shared. The difference with bitcoin mining is that the target is not a simple 2-digit number, as in this example. It is a 64-digit hexadecimal number. It makes the situation complex. However, the above example is sufficient for anyone to understand how cryptocurrency mining works clearly. The below section looks a bit deeper into the difficulty of bitcoin mining.

Mining Difficulty Explained

Mining difficulty directly influences the bitcoin generation rate because it refers to the problem of solving the math puzzle and generating cryptocurrency. It also changes with the miners’ efficiency in the preceding cycle. Therefore, the mining difficulty increases because miners keep improving the sophistication of the machines used for mining cryptocurrencies. An increase in the number of miners will also make the puzzle harder.

The mining difficulty level as of March 2022 is 27.45 trillion. Therefore, the odds of a computer guessing the correct hash is 1 in 27.45 trillion. The present rate of difficulty makes it 91,655 times more challenging than winning the Powerball Jackpot with a single lottery ticket.

Economics of Mining Cryptos

As stated above, crypto mining is expensive. Here are the direct costs involved in Bitcoin mining.

Power (Electricity): Crypto mining requires massive computer systems to run 24x7x365. Hence, it can consume an astronomical amount of energy that could be greater than some nations consume.

Sophisticated mining systems: Initially, people used home PCs for cryptocurrency mining. However, they proved insufficient with time because of heat, bandwidth issues and increased mining difficulty. Hence, mining required investment in sophisticated mining systems such as ASIC (Application-specific integrated chip) systems. These machines are expensive and cost between $4,000 to $12,000.

High-quality network infrastructure: While a high-speed network is desirable, the network speed does not make much difference. However, the internet connection should be continuously available without interruption. The latency from other mining pools located in the vicinity is also a problem. Dedicated computer networks can reduce external dependency and, thereby, the latency.

For mining to be productive, the output should exceed the input costs. However, mining crypto is not always an attractive proposition today, with cryptocurrencies displaying price volatility. It is an expensive venture with a high chance of failure. Besides, the amount of Bitcoins awarded to miners has reduced from 50 in 2009 to 6.25 today. Hence, it is an unappealing activity for individual miners. It explains why large mining establishments such as Antpool dominate the market. For retail investors, an ideal way to make profits off of Bitcoin would be to simply hodl (hold on for dear life), and use Pokket to help you earn a passive income by providing you regular interest on your crypto assets.

If Mining is so Complex And Unproductive, How Do You Obtain Bitcoin?

As is apparent now, crypto mining is not an attractive proposition for individuals interested in investing in and trading bitcoins and other cryptocurrencies. It is easier for them to purchase Bitcoins from those who already have them than to obtain them directly through bitcoin mining. If you wish to buy or trade cryptocurrency, you need a crypto wallet and a trading account. Platforms like Pokket offer facilities to maintain savings accounts in cryptocurrencies and earn interest.

Final Words

Thus, cryptocurrency mining requires high-powered computers with massive processing capabilities to solve cryptographic math equations. Besides, mining also constitutes validating data blocks and adding records to the blockchain. It is a tedious process that consumes massive amounts of energy and resources. Therefore, an individual who understands what is crypto mining will find the method unfeasible. Individual investors are better off earning cryptocurrency through alternative methods like trading, investing, and staking with the help of crypto exchanges and crypto saving products.

References

Hong, E. (2022, March 14). How does bitcoin mining work? Investopedia. https://www.investopedia.com/tech/how-does-bitcoin-mining-work/

Frankenfield, J. (2022, March 14). Bitcoin Mining. Investopedia. https://www.investopedia.com/terms/b/bitcoin-mining.asp

Baker, B. (2022, January 7). What is Bitcoin mining, and how does it work? Bankrate. Retrieved March 22, 2022, from https://www.bankrate.com/investing/what-is-bitcoin-mining/

Freeman Law. What is Crypto Mining? https://freemanlaw.com/mining-explained-a-detailed-guide-on-how-cryptocurrency-mining-works/

Crane, C. (2020, October 16). What is crypto mining? How cryptocurrency mining works. InfoSec Insights. https://sectigostore.com/blog/what-is-crypto-mining-how-cryptocurrency-mining-works/