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Cryptocurrencies - The Mining Games

Commentaries & Views

Cryptocurrencies drew a significant amount of attention through 2017, though not always for the right reasons. The evolution ofBitcoin Cash and Bitcoin Gold through hard forks were particularly headlined grabbing, as the disagreements between Bitcoin’s core developers and mining cartel resulted in different priorities from a blockchain perspective and outlined the mining conflict in the crypto world.

The mining cartel was looking for efficiency gains in transaction speeds, while the core developers were looking to prise away the hashpower that the mining cartel had garnered since the creation of Bitcoin, which has ultimately led to a centralization within a decentralized world.
For the cryptocurrencies, miners will always be looking for the greatest earnings potential. For Bitcoin, in particular, the cost of mining equipment has become significant as the power costs that result from the energy consumption of sizeable warehouses of mining equipment that run 24/7 weigh on the mining process.

Market outlook towards cryptocurrency prices over the short, medium and long-term are rather nascent and, while certain cryptocurrencies have gained support through a greater acceptance of the respective blockchain technologies, it remains unclear whether the majority of the coins will remain on the rise.

Miners are left with little direction and with the investments made into the front-runners, which include the Bitcoin Clan and Ethereum, new projects look to enable miners to use existing mining equipment. It’s somewhat of a chicken and egg when it comes to cryptocurrency valuation and hashrates that stem from the amount of mining that is ongoing within a particular cryptocurrency. Some suggest that, without surging prices, miners would look elsewhere. This may be the case for some, but others will be looking for early entry opportunity to benefit from early exponential gains, which have been seen through 2017 and in December 2017 in particular.

From a cryptocurrency perspective, there is no debate over the importance of miners. The transaction verification process is a step in the evolution and advancement of a cryptocurrency as is the technological advancements. If there are no miners, there are no verifications and Bitcoin cannot be considered as a fiat currency alternative. Miners are a necessary part of the crypto world.

As the market becomes well versed on the key drivers for the cryptocurrencies, the cryptomarkets will consider hashrates, hashpower and hashrate concentration in the investment process. A stable mining foundation is certainly a must when it comes to price appreciation and this is certainly one of the reasons behind Bitcoin’s success. High barrier to entry costs may have resulted in the creation of the mining cartel, but the same capital expenditures mean that Bitcoin miners are unlikely to sell out and move across to less hardware intensive mining, since earning power versus CAPEX just doesn’t cut it.

The recent launch of the Cboe and CME Group Bitcoin futures markets is one that will likely have a profound impact on mining and hashrates. Miners finally have a price forecasting platform that will enable them to become more cognizant of where hashpower should be directed. Since the launch of the Bitcoin futures market, we have seen volatility pick up, but without any significant decline in the futures price. Miners remain supportive of Bitcoin in particular, with Bitcoin hashrates far higher than those of Bitcoin’s siblings.

Investors have now been given two key elements to consider when it comes to opportunistic investment, these being hashrates trough mining and Bitcoin futures prices. Barring a few exceptions, there is an underlying influence of Bitcoin futures prices on the broader cryptomarket. The combined influence of hashrates and futures prices could be quite telling in the months ahead…

Cryptocurrencies to Mine in 2018

Mining is all about earnings potential, with miners looking to recoup investment costs as soon as possible. Initial investment costs can be significant, depending on the cryptocurrency and Bitcoin is certainly one of the more challenging and expensive cryptos to mine.

Deciding upon which cryptocurrency to mine is not too dissimilar to deciding which stock to invest in, which car to buy or even which house to buy. While cryptocurrency price potential is of particular importance, so is mining profitability, which considers the cost of hardware investment, transaction speed (average block time), network stability, security, transaction fees and of course, the cost of electricity. Also, while Bitcoin’s hashrate far exceeds the rest, there are over 1,300 cryptocurrencies in the cryptomarkets today and some don’t require expensive ASICs equipment, which reduces the investment element significantly.

When searching for which cryptocurrency to mine for, profitability is the name of the game. A number of sites provide prospective miners with the necessary details on which cryptocurrencies are the most profitable, with the ability to adjust for electricity costs, depending upon location. Cryptocompare’s mining calculator is certainly a useful tool in deciding whether it would be profitable to mine for a particular cryptocurrency when including power consumption costs. That’s not too dissimilar to a mortgage calculator that considers interest rates in the domicile of a prospective home buyer…

The mining calculator assumes that the decision has already been made on which cryptocurrency to mine for, though it does offer a number of choices to select from. Another website, whattomine.com provides miners with additional information, including block times, block rewards, estimated rewards and profitability. Each of the cryptocurrencies in question is compared to Ethereum profitability.
In 2017, which was certainly a poignant time in the world of cryptocurrencies, the number of currencies to mine increased exponentially. It was no longer just about Bitcoin and Ethereum, but a myriad of choices. There’s been plenty of debate over which was the best to mine and which will be the best to mine going into 2018, all based on profitability.

For 2017, the top 7 were Steem, Ethereum, Monero, DASH, Litecoin, Ethereum Classic and Bitcoin in ascending order, though it depends upon which cryptocurrency profitability is being compared.

When considering which cryptocurrency to mine, while all the key considerations need to be made, the reality is that the cryptocurrency will also need to continue to exist and not collapse anytime soon. Market cap is a good guide, but the actual blockchain technology on offer is also relevant. Will it stand the test of time and can it go mainstream?

But with the cryptomarkets having drawn a significant amount of news coverage through the last year, the market is expecting a sizeable influx of mining interest going into 2018. Deciding which cryptocurrency to mine for is certainly a daunting task.

There’s no conclusive list of which are the best cryptocurrencies to mine for in 2018. Perhaps not surprising considering the scale of theInitial Coin Offering market today compared with the years prior.

The outlook for a particular cryptocurrency will need to be positive and from there it’s down to profitability. There’s little point in entering the Bitcoin mining world, with the mining cartel holding the majority of the hashpower, so looking at alternatives is advised and there are many to choose from, as both of the websites provided above testify to.

People, Get out of my Devices

It’s no secret that cyber warfare is not only alive and well, but on the rise in recent years. With it has been reports of sanctioned countries hacking and stealing cryptocurrencies to fund military advancement or worse.

With cryptocurrency mining seeing significant interest 2017, cryptocurrencies have made it even easier for ‘want to be’ miners. As with any technology, there is always the dark side and the crypto-world is no different.

Some will perhaps be surprised of the fact that miners are now hacking mobile phones, tablets, laptops and desktops to mine cryptocurrencies and the owners of the devices are not even aware.

Browser-based mining has surged over the last few months, with website owners able to use the CPU power of each of the website visitors to mine. The visitors are unaware that the devices are being used and, while browser-based mining previously required the visitor to remain on the website, new coding allows website owners to continue using the computer hardware of the visitor after they have exited.

While some may see this as opportunistic and perhaps harmless, those who have been hacked will pay the price, with energy consumption costs associated with mining on the higher side. The hacker is free from the power costs, whilst generating the mining income. Quite a scam and more and more websites are likely to consider incorporating browser-based mining code.

It could go beyond browser-based mining, with the ever-increasing use of web-based platforms for making voice and video calls also a likely target, with handheld devices a major target for the dark side of the mining community.

Hacking into thousands of devices at once to mine for a cryptocurrency is significantly less expensive than having the hardware on site and that’s before considering the power consumption costs.

Power consumption for mining Bitcoin alone now exceeds the power consumption of some countries. When considering the fact that electricity and hardware costs are key factors in deriving profitability, it’s not surprising that some miners have found a way to harness hashpower without having to consider the costs of either.

If a phone or tablet starts to heat up after visiting a new website, it might not be the manufacturer's fault. The device owner may have been hacked and the hardware and power are being used to mine at the owners’ expense.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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