There is more than one way to get into Monero other than buying on exchanges. Anyone with a decent, modern computer can actually earn their own XMR coins through mining. In a nutshell, this refers to dedicating your own computer for hashing when exchanges are made. It uses an algorithm to solve mathematical problems so that a transaction for that specific coin is verified.
Mining to verify transactions garners a reward of a small amount of coins from the network. While this might seem like a means of passive income, there are some very important considerations to keep in mind before pursuing this venture. There are also some crucial choices to make which may affect whether or not this is something you should do.
If you’re thinking about mining Monero, here are a few things to consider before you do it.
Preparing to Mine
To even consider mining, you need to check if you have the equipment necessary to start mining. Of course, the XMR coins need to go somewhere, so you have to set up a free Monero wallet first. Do note that not all wallets support Monero since it utilizes its own unique codebase for security. You also must take care of your wallet keys and seed phrase.
For the mining rig itself, the community recommends having at least 4GB of RAM. This will be necessary to run any mining software smoothly. If left alone, your computer should be able to run it without regular supervision.
As for processing power, there are no compatible ASICs developed for XMR. Instead, mining Monero can be done through CPU or GPU, so investing in upgrades for either of these components would be a must. Given the computational strain on your device, you ideally place the setup somewhere cool to prevent it from overheating.
Choosing how to mine
If you have the necessary equipment, the next consideration is whether to mine solo or to join a mining pool. There are pros and cons to both, depending on your circumstances, but for most people, pool mining is the more accessible and recommended option. Nevertheless, it is worth knowing what there is to consider between these two options.
Solo mining allows all hashing rewards to go directly to your XMR wallet. To begin, you will need to download the right software or just use the official Monero GUI app. While this method is free, it will require downloading a copy of the entire blockchain to serve as a node which may take days. Fortunately, Monero does offer blockchain pruning to require only a third of the blockchain for mining.
Joining a mining pool does not require holding a copy of the blockchain. Instead, several users pool their computers to mine together with joint resources. While there are more options for pool mining software, it does cost a service fee to enter. Furthermore, the earnings are divided among users in the pool based on their contribution in processing power.
Cloud mining is a new method that borrows computing resources hosted from the cloud. Here, you also pay fees to make use of the service provider’s mining utilities through their cloud servers. Although this diminishes the need to buy expensive hardware, it may cost a larger fee over regular intervals. More importantly, you must be careful of cloud-based malware.
Accounting for cost-benefit
It is important to realize that crypto mining is not free money. Even for solo miners without a mining fee, there are still costs to account for at the end of every mining session. First of all, building a decent computer for mining is already a heavy investment. In addition, this draws a lot of power constantly, which means huge spikes in the electric bill.
Despite all the preparation, you have to realize that mining does not guarantee a steady income. The blockchain tends to favor more powerful rigs with better specs. You can either pay for upgrades, or you can settle for less frequent hashing opportunities. If you end up paying more for mining than you actually earn from it, then maybe it is not for you.
Another point to consider is the long-term since mining rewards in crypto decrease with time. Although mining Monero will reward you with something for your efforts, it still decreases as the more blocks are mined. This means that there is no going around that as you mine longer, you earn less and returns diminish.
Hopefully, these insights have helped you to make the right decision on whether to start mining or not. Even if it can serve as a decent source of passive income, it does demand great commitments especially from your finances. If you know for sure that mining is within your capacity, you’ll be helping the community by keeping the blockchain trustworthy and secure.