To Mine or Not To Mine - A Basic Introduction to Mining Cryptos

A friend asked me recently about mining crypto-currencies, and here's my thoughts. I'm not an expert at mining, but I do understand how it works and did try mining a couple years ago for Ziftrcoin, which never made anything out of itself.

You can mine Solo or through a Pool. Bitcoin Solo mining is out of the question unless you have really deep pockets to put up a whole data center like John McAfee and MGT, or the other mining farms around. You can solo mine for other coins, but the kicker is that if you don't crack the whole equation for the whole coin, you get nothing, and have to start over again with the next calculation.

Mining with a pool means you take a portion of the entire calculation, and therefore your gains are just a fraction (not the entire Bitcoin or other crypto). The capacity of your hardware determines the difficulty of your calculations, and hence, the number of shares you solve, and the amount of cryptos you get per hour/day/etc.

On those pools, you can use your hardware to mine, or you can "rent" their hardware(aka cloud mining) to mine (you pay them, they set it up and run it and maintain it -- much better option).

Most decent mining pools will give you a calculator so you can estimate your profit/loss.

Here is the Bitcoin calculator -- fair warning, it's a bit depressing!

Here's my latest analysis on mining through Minergate.com

Bottom line for Bitcoin mining: due to the number of people mining it, I think you'd have to spend too much money before breaking even.

Invest	GH/s	Yearly Income	Yearly fees	Profit/Year
1 BTC ($17k)	89285	$18,525	$10,767	$7757
2 BTC ($34k)	178571	$37,044	$21,535	$15,509
10 BTC ($170k)	892857	$185,245	$107,675	$77,570

As you can see above, there isn't a single model where you'd have your investment paid for in a single year. Obviously the rates would change depending on the value of Bitcoin in USD. Don't forget mining difficulty increases all the time, as does the amount of hardware trying to mine it.

For Monero mining, you start to make enough profit in your first year to cover your investment, so that's good news.

Monero is a privacy-minded coin, competing with Dash (DSH), ZCash (ZCH) and Bytecoin (BCN). There are many others. These are the ones I follow.

Here is the Monero (and other coins on the same algorithm) calculator.

So, if you:

Invest	GH/s	Yearly Income	Yearly fees	Profit/Year
1 XMR ($300 USD)	441	$548	$108	$440
3 XMR ($900)	1300	$1631	$324	$407
10 XMR ($3000)	4406	$17943	$1080	$16,862

So, as you can see above, some coins are worth mining. Monero is the highest paid coin on Minergate (due to Ethereum and Bitcoin being at a very high difficulty level).

WARNING:
Per the IRS, your known mining activity is taxed at your regular income rate and not as capital gains.

When you trade cryptos (or the stock market, or buy and sell real estate) you have to pay Capital Gains tax at around 15%, I believe. You can read more about Capital Gains here.

When you mine, that is treated as regular income, and is added to your usual income for the purposes of calculating your tax amount due. So if you made $50,000 from your day job and $10,000 in mining, you are expected to declare $60,000 on your tax return.

CHECK WITH YOUR TAX PROFESSIONAL ON THIS -- I AM NOT A FINANCIAL OR TAX ADVISOR

There are plenty of articles about the best mining pools. Genesis I think is the top Bitcoin pool, and they were having some issues recently. But that's a hole other topic of who can you trust, and I'm not the best person for that as I have no experience in the matter.

If you do decide to start mining, I recommend you get a secure mail like a Proton Mail account, and I also recommend you download the full client (e.g. the Monero full client, which will put the entire Monero blockchain on your machine) so you can create/have a new address that isn't tied to any exchanges or other places that have to comply with "know your customer" regulations -- organizations that can be hacked and leak your information. It's always safer to hold your own cryptos.

It is extremely important that you keep said machine with an updated anti-virus and anti-malware software, and DO NOT VISIT SHADY websites (including porn) on that computer -- those sites very often have malware which can then be used to steal your information.

If you want to be very safe, get a hardware wallet. They're not cheap but they're worth it in peace of mind. Trezor or a Ledger Nano are good brands. Don't get an off-brand which may be a scam. Protect your cryptos.

Good fortune to you, and as always, thank you for sharing your Light with me.

Download the Tor Browser here - protect your cryptos from hackers and malicious websites.
Sign up for ProtonMail here - protect your crypto related communications from hackers.

Hold your own cryptos -- don't leave them at the exchanges:
Download the Jaxx wallet here.
Download the Exodus wallet here.
(I do recommend you download and install both!)

Convert your worthless fiat into cryptos:
Sign up on Coinbase here, and we both get $10.
Sign up for Kraken here
Sign up for Gemini here

Or feel free to shower me with cryptos:
Bitcoin: 12Npj8xAAKnf7EJxZStgeecpniE1pbSvcd
Ether: 0x2636538545ebbcea63fd47af1d4fe3e27f5c3936
Dash: XjGWDB7twAHiN9jk3RUmcQRHq6FxvHvYJu
Litecoin: LN4DeZwJDgTbcaXoBXatrGq2JaXVfkMdi5
ZCash: t1fwHkzXfNGCDV19Xq9esWkCRLcCQFcDddN
And Doge, just because it's Doge: D7wuTkhicw2P2vwKx49RXJ9dhVJoXJoKTQ