Cryptocoin Mining and Trading: What’s the difference?

If you have been reading about Bitcoin and Cryptocurrency lately, chances are you have come across the words “Cryptocoin Mining” and “Cryptocoin Trading”. In essence, both are ways or methods to acquire tokens. Each has their own strengths and weaknesses and are different in so many ways.

But before we start comparing, let’s define each of the two first.

What is “mining” and how does it work?

Cryptocoin mining is a process of validating cryptocurrency transactions. These transactions, called blocks, are then added to a chain of records, hence, the term blockchain. As basic as it sounds, the process takes a lot of effort and might last for a few minutes.

To be a miner, one must have a mining rig. It’s a type of computer set-up that is powerful enough to solve blocks using a mining software. To solve a block, several miners would have to crack hash values and the first one to do so would get coins as reward.

Similar to real-world mining, one must invest in his equipment in order to increase the chances of mining rewards. Energy is essential to mining so the more powerful the rig is, the better it can mine. Back in 2009, when Bitcoin was first introduced, a personal computer can mine about 200 bitcoins. Fast forward to 2018 and it will take more than a hundred years to mine just 1.

This, however, does not mean that a miner should wait for eternity or invest a hundred thousand dollars in his rig just to get returns. Solo mining became a thing of the past as more and more people are finding it more efficient to do a mining pool, a technique that strikingly changed the mining game.

What is “trading” and how does it work?

Trading is much more simple than mining. It’s very similar to stock trading and to most kind of online trading for that matter. To start buying coins, one must have a cryptocurrency wallet. As the name suggests, it is a kind of wallet where cryptocoins are stored. Buying coins would cost either fiat money or primary coins like Bitcoin and Ether.

Trading is performed on an online exchange site where other traders purchase coins of their interest. There are several cryptocurrency exchanges out there. The more popular ones are Binance, Kucoin, Cryptopia, and Bittrex. Signing up for an exchange would require a number of steps for the security of the trader.

The prices of different coins are determined by the demand. The more buyers there are, the higher the prices get. Some coins can double up their price in just a few days. Take a look at Ripple’s XRP last 2017. On December 22, it was priced at $.85 but suddenly spiked to $2.51 by the end of the year. It even reached its highest so far last January 4, 2018, at $3.81. It didn’t last long though. XRP’s price is continuously dropping since the day it skyrocketed. From $3.81 to $2.93 in a day, then to $1.71 a few more days after. This only shows that the more favored a token gets, the more it becomes susceptible to market vulnerability.

To lessen this kind of risk, some traders try to diversify their investment by participating in Initial Coin Offerings or ICOs. Companies that are doing ICOs set their tokens at a very low starting price. Ethereum, at the time of its crowdsale in 2014, was priced at $0.311 per Ether. NEO token, on the other hand, was at $0.032 during its ICO in 2015. Interestingly, a trader can still get discounts on the already low starting price by buying during pre-sale.

Buying tokens from pre-sales and ICOs might not give immediate returns but it sure is safer than trading sought-after tokens.

While we’re on the topic, we will be doing our own ICO this 2018! Our platform is called AQWIRE, a global real estate platform powered by blockchain technology. Check out our website at AQWIRE.io to find out more.

Mining vs. Trading

Mining is proven to be best when investing in long-term. The average mining rig costs around $2000 and can generate a few dollars a day, depending on which network it is mining from. In most cases, miners will gather up with their mining rigs to do pool mining. This is where they combine their computing power to solve blocks. Miners are then rewarded based on what they have agreed upon.

Pool mining is much more efficient than solo mining. With the growing numbers of miners, solving a block alone is next to impossible. Mining pool divides bigger algorithms into smaller ones that are less complex and easier to solve. And because of the combined computing power, the chances of solving a block raise significantly.

On the flip-side, trading is much more accessible. Opening a crypto wallet won’t be as difficult and as expensive as building a mining rig. There are also more materials and social groups that are dedicated to crypto trading. Joining online communities on Bitcointalk, Reddit, and Cryptocurrencytalk is very much helpful for someone who likes to start trading. Nevertheless, investing in cryptocurrency through trading would require a lot of guts. Cryptocoin prices fluctuate like crazy, making it very difficult to predict, so timing is very crucial in this one.

In the end, mining and trading both have their pros and cons. One does some things better than the other, so no one can really conclude which one is better overall. Choosing which one to invest in is just a matter of preference.

Tell us which suits your taste! We would love to hear your thoughts on this subject. Send us an email at support@qwikwire.com or message us directly on our official Facebook page.

Also, don’t forget to visit our ICO website, AQwire, to learn more about our platform and token.

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