Savvy readers of yesterday’s article, The Eight Most Popular Cryptocurrency Transaction Types Are Not What You Expect, may have noticed an important omission: any discussion of processing cryptocurrency (crypto) transactions, what the crypto cognoscenti call mining.
Fear not: this is the second of a two-part article. In this part, I discuss the most popular crypto mining business models – that is, ways to make money mining.
Crypto like Bitcoin are intentionally set up with an automatic, decentralized mechanism that creates Bitcoin out of thin air to provide rewards to miners for processing transactions. The result: a booming business in mining.
Anyone with a rack of high-speed computers and access to electricity anywhere in the world can essentially print money, simply by running free software.
Crypto Mining Business Model #1: Legal, Competitive Mining
In the early days of crypto, mining was a boon for small-time entrepreneurs – but soon the mining business became increasingly competitive, as miners purchased massively powerful computers while scaling up their operations to remain profitable.
Risks seemed low, as the original Bitcoin software was supposed to account for falling prices, making it easier to mine as the number of miners remaining in the game dropped, thus ensuring that there would always be enough miners to process all the transactions.
Then the Bitcoin crash came, severely limiting the ability for miners to churn out crypto while still making a profit. As it turns out, inefficiencies in the mining algorithm, combined with market pressure on the transaction fees that were supposed to partially compensate miners, has led to a squeeze on the ability for anyone to mine at a profit.
Legal crypto mining using electricity at market rates is now becoming increasingly unfeasible, even in places like Iceland, which have exceptionally low electricity rates combined with temperatures conducive for data centers filled with heat-generating computers.
What, then, are the remaining mining business models? Let’s take a closer look.
Read the entire article at https://www.forbes.com/sites/jasonbloomberg/2019/01/20/the-six-ways-to-make-money-mining-cryptocurrency-are-equally-surprising/.
Intellyx publishes the biweekly Cortex newsletter, advises companies on their digital transformation initiatives, and helps vendors communicate their agility stories. As of the time of writing, none of the organizations mentioned in this article are Intellyx customers. The author does not own, nor does he intend to own, any cryptocurrency or other cryptotokens, neither long nor short. Image credit: Jason Bloomberg.
