Bitcoin isn’t the only option when it comes to crypto mining. Altcoin markets are huge and often very profitable. In many ways, altcoins may be easier to mine, particularly in terms of the equipment required and the associated expenses.
In this article, we’ll go over how to choose which coins to mine when Bitcoin isn’t an option. The miner should carefully analyze the altcoin market before embarking on the mining process. Mining is expensive and requires initial investment, which is why choosing the coins carefully can lower the risks involved.
Understanding the Hardware
The hardware used for mining is the most limiting factor when it comes to the coins that can be mined. For example, ASICs (Application-Specific Integrated Circuits) are designed for one algorithm. This means that the types of coins you could mine are very limited – Bitcoin and Litecoin are the only options.
On the other hand, GPUs (Graphics Processing Units) are more versatile and can mine multiple coins. If you’re starting a mining business from the ground up, it’s best to invest in this mining solution. Mining a variety of different coins allows for diversification and reduces risk.
It’s also important to note that using hardware to mine isn’t the only option. There are software solutions that provide these services, allowing users to poll resources communally for a fee rather than purchasing their own equipment.
Calculate Profitability
Once the miner has decided on which coins they plan to mine, based on their technical capabilities, they should compare those coins in terms of profitability. The process is similar to determining the profitability of any other business – potential profits are calculated by subtracting expenses from revenue.
The expenses include the cost of mining equipment, its maintenance, and the energy costs associated with mining. The revenue comes from selling the coins, and that’s the most difficult part to predict and calculate, as the value of crypto coins changes based on market forces.
Check Network Difficulty and Hashrate Trends
The next step in the analysis should focus on the difficulty and expense of creating coins. Network difficulty determines how hard it is to solve a block. A lower difficulty means that it’s easier to create coins, especially as a solo miner.
On the other hand, hash rate refers to the computing power of the network. Changes in the hash rate come based on the market interest in the coin you’re creating. A spike in interest can signal that more investors are trading the coins, but it can also indicate that more miners are looking to make short-term gains.
There are sites and app tools available that can help novice miners access that data. These are easy to use, provided the miner has some technical knowledge.
Long-term Variability
Deciding on how profitable a coin will be in the long run is a much more difficult calculation to make. However, in the long run, most coins have proven profitable despite the short-term market fluctuations.
Miners should check for developer activity on sites such as GitHub, as this indicates that the coin is actively being developed. It’s also useful to know the real-world use cases for the coin, as the coin mustn’t be just an asset to be held.
The miner also benefits from following exchange listings and trading volume. That data shows a snapshot of how the currency is being used. Daily trading volume is a crucial metric, as is the level of exchange support. Other metrics, such as social media engagement related to a coin, are harder to follow and measure, but they could be significant if carefully gauged.
Energy Costs
The largest ongoing cost for miners is the energy required for mining. That’s the next step in the analysis needed to choose the coins. Start by knowing your local electricity rate, as that’s where you’ll be getting the power from. It’s also important to note that the rate changes as you consume more.
Coins with lower hash rates will require less energy to mine. If you live in an area with expensive power, those coins are a better option.
Some sites calculate the entire energy-to-profit ratio for you based on current coin prices.
To Sum Up
There are many other options for mining outside of Bitcoin. Choosing which coins to mine requires some effort on the part of the miner, as they must calculate the costs and potential profits.
When doing so, the miners should take into account the cost of the equipment and power, as well as the potential income from selling the coins. It’s also important for miners to consider how easy it is to produce coins. Altcoins can prove to be just as lucrative as Bitcoin if you choose the right ones.
