Cryptocurrency is the modern way of multiplying your income. Whether investing in crypto or creating crypto, money is guaranteed. Don’t believe me? Well, that’s what crypto mining is all about. Cryptocurrency mining is the process of generating new cryptocurrencies. For instance, Bitcoin mining involves the practice of compensating miners with Bitcoins in exchange for verifying or validating transactions on the blockchain. According to TechStory, crypto miners earn an average of $124 per month or $1,488 annually.
But is crypto mining legal in India? And is it profitable to do crypto mining in India? How to do crypto mining? If these questions are lingering in your mind, then glad you are here. Read this quick guide and find answers to all your concerns in a few minutes!
What is crypto mining?
People often consider cryptocurrency mining to be another means to produce new cryptocurrencies. But that’s not true. Crypto mining also entails uploading bitcoin transactions to a distributed ledger and validating them on a blockchain network. Like bitcoin mining for bitcoins, this mining is done for other cryptocurrencies like Ethereum, Litecoin, Binance coin, Dogecoin, etc.
Here is an analogy to make it clearer. When money is deposited into your account, your bank sends you an SMS. It states that you have received a certain amount in your bank. This is a validation from your bank about the credited money. And this is what crypto miners do in cryptocurrency transactions. They update the digital ledger whenever an individual spends cryptocurrency by debiting one account and crediting another account.
Crypto mining in India
Cryptocurrency itself is a novel concept to most Indians. At the same time, cryptocurrency mining is still largely beyond the sphere of government laws and regulations. So, is crypto mining illegal in India? No. Currently, crypto mining is an unregulated activity in India. Although there are no rules, it is also not prohibited. Neither you need a special permit for crypto mining.
And regarding tax deductions in crypto mining, crypto miners are going to encounter specific taxation issues. According to Financial Express, the Income Tax Act limits the deduction of infrastructure expenses in mining virtual digital assets like cryptocurrency.
5 Types of Crypto Mining:
There is a wide range of approaches for crypto mining. Here we bring you 5 types of crypto mining:
1. CPU Mining
CPU mining is a type of cryptocurrency mining that employs a Central Processing Unit to validate transactions. It also creates new coins. Since all you require is a computer, this is the most convenient way to mine cryptocurrency. But these days, CPU is considered an inefficient approach to mining due to lack of processing power.
2. GPU Mining
GPU stands for Graphics Processing Units. It mines cryptocurrency using one or more graphics cards. Since a GPU has more power than a CPU, its speed and productivity have made them more effective in blockchain mining. However, compared to ASIC, GPU is also regarded as outdated.
3. ASIC Mining
ASIC or application-specific integrated circuit miner refers to hardware or software component that uses ASICs only to mine bitcoin or some other cryptocurrency. These are among the most potent choices for mining bitcoin. Even though they are somewhat pricey, ASICs are a viable option for cryptocurrency mining.
4. Cloud Mining
Cloud mining is the simplest and most efficient way to earn money from cryptocurrency mining without purchasing and operating equipment. Instead, the participant selects a platform, creates an account, deposits money, and purchases a particular hash contract. The operation typically begins very quickly. Therefore, a new bitcoin investor need not spend a long time waiting to see a profit.
5. Mining Pool
A mining pool is a collective group or network of cryptocurrency miners who share computing power across a network to locate a block and mine bitcoin effectively. Mining pools use these pooled resources to boost the chances of locating a block or somehow effectively mining for cryptocurrency.
How to start crypto mining?
Though it sounds fascinating, crypto mining isn’t that easier in reality. This is a very competitive field and requires a lot of investment to get started. For example, computers with specialised software created to solve challenging cryptographic mathematical equations are necessary for cryptocurrency mining.
If you are really keen on becoming a crypto miner, here is a list of requirements you need to start your career in crypto mining—
1. Power Pack Hardware
Hardware that can handle any task you toss at it is a must for crypto mining. Since crypto mining necessitates an extreme level of data processing, make sure to purchase the best custom-built systems available on the market.
2. Cooling System
You must spend money on a cooling system to keep your device cool. To sustain the efficiency of your systems, use liquid cooling and cooling fans.
3. Cryptocurrency Wallet
You will need a cryptocurrency wallet to store the cryptocurrency you earn with your crypto mining services.
4. Mining Software
Reliable mining software that can also house the entire mining process is required.
So, how can you start crypto mining?
First of all, invest in powerful hardware. A wallet should then be made for Bitcoin and other well-known cryptocurrencies. You may download free cryptocurrency wallets as well as more secure hardware wallets. Next, pick a place to install your miners, such as ASIC Miners or CPU.
Since miners produce a lot of heat, the location must have sufficient air circulation. Also, ensure a 220V outlet. After all this, join a mining pool. Being a member of a mining pool is essential due to how challenging mining Cryptocurrency has become recently.
Is crypto mining profitable?
When it comes to profitability, like any physical asset, gold or silver, crypto mining is also the same. Mining will become more competitive as market prices go up, and miners must become less efficient to turn a profit.
In order to comprehend whether crypto mining is profitable or not, we have compiled a list of 5 factors for you to consider for your crypto mining profits—
- Cost of the mining equipment
- Cost of electricity
- Price of cryptocurrency you are mining
- Hash Rate: Hash rate is the hashes per second produced by a mining device. The higher the hash rate, the higher your profit. It is expressed as tera hashes per second (TH/s).
- The efficiency of the device or the amount of energy the mining equipment require.
You can calculate all these costs beforehand and plan accordingly. Many a time, mining cryptocurrency may take some time to generate profits. Honestly, crypto mining is profitable when the value of the cryptocurrency reward is higher than its mining costs.
Although mining Bitcoin requires a lot of computing power, reports estimate that miners are rewarded with 6.25 BTC, or about $143,000, for each block of transactions they successfully mine. Even though it might be a very rewarding option if it makes money, you need to stick with it for a while. Therefore, mining cryptocurrency calls for a lot of research, perseverance, and a good risk appetite!