Bull Run, Mining New Coins or Staking More? ADA Advantages
Bitcoin mining in 2021 is no longer profitable for the common man. The new fashion in crypto is "staking".
When XCH, Chia opened up for being mined this year, it went directly to over 2k. Now it's just $149.28 on coinmarketcap.
Low BTC Mining Motivation
We have entered a new crypto cycle, the spirits have re-ignited, the gains in crypto are attracting attention, everyone is talking about crypto. People are increasingly wondering if bitcoin mining is still a profitable business in 2021.
To mine bitcoin, you need powerful computers or specialized hardware that costs money, and the energy consumed also costs. So you have to spend a lot of money before you start mining bitcoin. And because technology is advancing, every few months the equipment needs to be upgraded to keep up with the competition. These expenses make mining practically unprofitable. The profit margin is so small that you will most likely lose money trying to mine, especially if the cost of electricity in your area is very high. In fact, you are competing with industrial-scale mining farms that use cheap energy directly from the source.
However, the idea of gaining from cryptocurrency remains valid. Twelve years after the advent of bitcoin, the technology of decentralized systems has evolved a lot, targeting several aspects such as energy efficiency, scalability, and sustainability over time through self-governance. One of the most promising of the new generation decentralized platforms is Cardano.
Cardano's native token is the ADA cryptocurrency, which uses a Proof of Stake consensus mechanism. This consensus mechanism does not use physical labor to guess the numbers that ensure the evolution of the blockchain over time but uses a validation system by drawing lots. Proof of Stake refers to the fact that by holding the ADA token you prove that you are part of the system, which allows you to participate in the validation lottery that will have the right to add the next block in the blockchain.
Consensus mechanism, staking
If in Proof of Work the validation process is called "mining", in Proof of Stake participation in the consensus mechanism is called "staking".
Unlike bitcoin mining, where the work is done by guessing the code that had the right to validate the last block in the blockchain, in the Cardano network the validator is chosen randomly through a complex cryptographic mechanism of the lottery, the validators being represented directly by the over 23 billion tokens in staking. The node delegated by that token will do the proper work but through an insignificant energy effort. The performance of a node in the Cardano network is not related to the mining power, so implicitly to the electricity consumed, but only depends on the amount of cryptocurrency delegated on that node. The Cardano network currently has over 1,800 public validation nodes, many of them running on extremely low-power systems, such as Raspberry Pi development boards. It is estimated that at this time the entire Cardano network now consumes 35 KW /h/year, which makes it over 2 million times more energy-efficient than Bitcoin.
How much money do ADA delegates receive? Regardless of the storage environment, the revenue from staking remains the same, being directly proportional to the amount of cryptocurrency held. The Cardano platform can bring in revenue of about 5.5% annually in ADA cryptocurrency. Unlike bitcoin mining where you have a bill to pay for electricity, and the equipment has to be constantly upgraded, you don't have any of that on Cardano. All you have to do is buy a few coins and delegate one of the more than 1,800 nodes and thus start "mining" the ADA cryptocurrency without any additional effort. Over time, its value can be assessed, given the limited quantity and utility in the network.
This article doesn't represent:
- a piece of financial advice, especially because I haven't invested in ADA
- future investment I shall take
I was advised by a good Hiver I have met around here to invest in HBD and look into Terra and maybe I will do this for the long run, Leo is also one of my first options. We have another 4 years until the next bull, right? Or do you think things are unpredictable in crypto and...who knows? Some coins might advance better than others. I intend to stake as much as I can starting with the end of this year maybe.
Thank you for reading! Mike/Zpek
