What is Cryptocurrency?
The first time I heard about Bitcoin, I rolled my eyes like many others have done. “It won’t last,” I said. “How can you have a currency that isn’t backed by anything of value?” That was way back when it was possible to mine Bitcoin for low cost on a personal computer. As the price rose, I would say, “I guess I should have mined or bought some, but it’s going to crash, so no need to bother now.” The price continued to rise, and I never questioned my decision not to invest in it because I knew the bubble would pop, and it would all come crashing down when people realized it had no actual value.
The price of Bitcoin recently peaked at sixty thousand US dollars for a single coin, and other cryptocurrencies have reached new highs as well. People are making YouTube videos showing the Lamborghini, or another exotic car they bought with money made from mining Bitcoin, parked next to a wall of dedicated ASIC miners. So over the past two years, I have dabbled in cryptocurrency to see if it is still possible to make money from it.
If you don’t know exactly what Cryptocurrency is, no worries. The way I think of it is, it is a digital currency without a physical asset. A Bitcoin is worth the same amount of Bitcoin anywhere in the world. Of course, the dollar or euro value of that Bitcoin will change, in the same way that the yen to dollar exchange rate changes as markets fluctuate. Digital currencies such as Bitcoin are limited so that when people have mined them, there will be no more. People are holding Bitcoin, and people are mining and losing Bitcoin that will never be recovered. A man in 2013 accidentally threw out a hard drive with 7,500 bitcoins on it. That coin is now forever gone. This creates a scarcity value, even though that item is all digital. They will also, potentially, increase in value as they become scarcer.
Bitcoin and other cryptocurrencies are built on blockchain, which is a digital ledger of transactions that is duplicated and distributed across an entire network of computer systems, making it nearly impossible to hack and very secure. There are thousands of digital currencies that have been made available thanks to the security of blockchain, allowing some businesses to start accepting payments in cryptocurrencies along with traditional currencies.
Now that we have an idea of what cryptocurrency is, how do we get some? For me, my first stop was at the most accessible place, a coin exchange. These are online businesses that provide a digital marketplace for the buying, selling, and exchanging of various cryptocurrencies. Multiple websites offer exchange services with an easy to sign-up process. With the four exchanges I tried, I found that after the sign-up process is complete, the buying and selling can be a bit more of a challenge.
When it comes to dedicated exchanges for cryptocurrency, the most well-known is Coinbase. They are currently the largest exchange in the US. The user interface (UI) is easy to navigate, and they have dedicated apps for Android and iOS. The sign-up process required me to hold my driver’s license to the phone and let the camera take a picture of it. In my case, no matter how well lit the driver’s license was, the app kept denying it, which was frustrating. Eventually, I was able to get my account set up and verified. Funding the account and connecting it to my US bank was easy enough. I deposited and purchased $100 worth of bitcoin.
Since I am currently living in Europe, I tried Bitpanda, a European company based out of Germany. The sign-up process was simple enough, but it went downhill from there. In order to buy currency, I needed to complete a series of verification steps. The first was signing up, which accomplishes nothing since you are not allowed to buy cryptocurrency just by signing up. The second (bronze) level caps the amount of currency people can buy to €50 a month. All I needed for that was to add a phone number to my account. Since I wanted to fund my account with €100 like my US account, I needed the next level. To do that, they require people to provide ID. This is done through an online video call to one of the verification services they use. I joined the video call with my Irish ID, my US passport, and any other documentation I thought they might need to prove that I am who I am and can legally live in Ireland, work, and bank in the country. The person on the other end was not helpful or friendly or useful at all. When I asked if there was someone else I could speak to, who might be able to help me, she hung up. It is also further proof that customer service jobs will be the first to go when AI gets better. Anyway, I canceled my Bitpanda based on how terrible the customer service person was at the other end of the video call.
Like Bitpanda, Luno will allow people to sign up for an account easily, they just don’t let you do anything after that. Also, like Bitpanda, they don’t like the idea of an American living in Europe using their service either.
“Please note that Luno currently cannot verify US citizens. While you can use our wallet for sending and receiving Bitcoin, you cannot buy or sell them or use our Luno Exchange services.”
At least they were upfront about it, unlike Bitpanda.
When I attempted to cancel my account with them, I emailed the support email address and couldn’t get through. I’m still not sure if the account has actually been canceled, as I have never received a response.
Still looking to buy and sell crypto and fund my account in euros, instead of dollars, I turned to Kraken. The verification tiers allow for a larger deposit and withdrawal amount at T2 than Bitpanda. And the ID verification process with Kraken simply involved uploading a copy of my ID vs a video call with a rude German customer service agent. They use a similar tier system to Bitpanda, where the first tier is simply signing up, but the 2nd tier allows for up to €2000 funding. Since I only wanted to fund my account with €100, I stopped at that tier. The Kraken UI isn’t as user-friendly as Coinbase and even though they offer two-factor authentication, they don’t make it easy to set up and activate.
There are quite a few other exchanges out there, but since I got what I wanted out of Coinbase and Kraken, which was to buy a little and dabble in the market, I stopped my search.
On another note: I found it odd how difficult it was to set up and fund these exchange accounts. The idea of cryptocurrency is that it is an alternative to the status quo. Yet, setting up and using currency exchanges involved providing a lot of personal information such as addresses, phone numbers, IDs, and bizarre hoops to jump through. Not to mention the fact that most can’t seem to accept that a person from one country might live in another country. I read about one exchange that requires applicants to provide a link to their LinkedIn profile. A problem if you don’t have a LinkedIn profile, and just an odd item to ask for. I’m assuming some of these inconsistencies will work out as time goes on, exchanges merge, and government regulators decide on rules and regulations for coin exchanges.
A cryptocurrency wallet is similar to an exchange. In fact, an exchange can also act as a wallet, while wallets cannot necessarily act as an exchange. It is basically the same as the wallet in your pocket, except it is more difficult to use and charges you a fee every time you insert or remove currency from it. Okay, actually, it is more like a credit card than a wallet. There are three main types of cryptocurrency wallets.
The first is an online wallet with an exchange similar to Coinbase or Kraken previously mentioned. Besides allowing the exchange of currency, you can also hold cash or currency in the exchange as a wallet. Think of it like going to your bank account online and transferring money in and out. That is what this would do. The difference between an online wallet and your bank, however, is that your bank is FDIC insured (US banks) by the government. If someone steals the money out of it, the government will cover the cost up to a certain amount. A cryptocurrency wallet or exchange is not insured like a bank. So, if someone steals your money from it, the government will not cover that loss.
A Mobile Wallet
This is an app on your phone. The primary purpose of a mobile wallet is as a safe storage place for your cryptocurrency. For example, if you mine Bitcoin, you can have the mined coin go directly into a mobile wallet.
The nice thing about mobile wallets is that the currency is stored with you. You can take your phone out and use the mobile wallet to pay for things and make currency transfers. The downside is if you lose or break your phone, you might not be able to recover the currency on it, especially if you don’t have the security keys. So, if choosing a mobile wallet, find out if there is a way of backing up your currency. Then if the phone gets lost, stolen, or broken, you can recover your money.
Note: keys are a series of words, both public and private, used to track ownership of currency. If you lose your private keys, you can pretty much say goodbye to your cryptocurrency.
The third is a hardware wallet. The hardware wallet is even more secure as it is not connected to the internet, so it can’t be hacked or stolen from a phone. A hardware wallet is usually a device the size of a USB flash drive that stores your private keys.
This is a small USB flash drive that stores your currency. The drive is secured and password-protected so that only you can use it. The catch with this is, don’t break it or misplace it. This is the recommended method of storing your cryptocurrency if you have large sums worth.
Paper and Desktop Wallets
There is also a paper wallet and desktop wallet. A paper wallet is an actual piece of paper with your currency information on it. Think of it like the old days when buying stock shares in a company and receiving proof of ownership on paper. And a desktop wallet is installed on your computer.
Mining Apps and Software
The main way to make money crypto mining is with dedicated mining machines such as ASIC miners. However, it is possible to install mining apps on a computer or use small USB ASIC miners. The question, of course, is: can these be profitable when calculating the cost of electricity to run the computer and equipment, compared to the currency earned?
Minergate is a program that can be installed on a computer to mine different cryptocurrencies. Minergate can also be installed on 32bit Windows systems, so I installed this on my netbook and my 64bit gaming laptop. When downloading, my computer’s antivirus software flagged the program, so I had to disable it during the installation process, then re-enable it after the program was installed. When setting it up, the program lets people select from the coins to mine if they want. Or users can let it select for you. Right now, the most profitable coin on the app is Monero. And like me, if you use your computer at the same time, it gives you the option of selecting the CPUs for mining so you can put it on a lower number if needed while using the computer and switch it to a higher setting if you are letting it mine while not using the computer. I was also able to install Minergate on my old 32bit netbook, which was handy as I could just plug that in and let it mine 24 hours a day.
It was not well-reviewed based on a few Reddit threads I read; however, I found it to be easy to install and use. Overall, the program is very easy to use and figure out. You can view your stats via the phone app or the website. There is a 1%–1.5% payment fee depending on what pay-out option you want and what currency. They also have an achievements program to get prizes that pop up every once in a while, although it is not clear what you need to hit for each achievement or what you get for prizes, so I just ignore it.
NiceHash is similar to Minergate in that it is a software program that can be installed on a computer to mine different cryptocurrencies. This one seemed to get the better reviews of the two on Reddit. However, it can only be installed on a 64bit system. The installation process and the setup was longer, as it needed to scan and benchmark my system. And I received a few errors while it was benchmarking that I had to fix and work past. Then once installed and running, they sent an update that started giving me an error: No compatible devices, and I had to find an older version and switch back to get it to work. After struggling to get it working, it seemed to mine more or a higher value of coin than Minergate; however, it wasn’t long before I began having issues with the installation and had to follow a long list of troubleshooting steps to get it to work. Users don’t have the option of selecting the coin to mine, it will do it automatically. Also, like Minergate, I had to disable my antivirus software to get it to install.
NiceHash is the more resource-intensive of the two programs on my computer. When working, I can let Minergate run in the background, while with NiceHash, I can only do that if I’m doing low-resource work such as content writing. The payout fee varies depending on the wallet the currency is being sent to.
Script mining simply involves downloading an application that runs a command to mine cryptocurrency using the GPU of your computer. For this, I went with one called ccminer, an open source miner that mines Litecoin. This involved downloading the script, editing the wallet info, and directing it to the mining pool I decided to use. I also used a similar process to mine some Zcash. The installation process and resource usage were the same between the two, so I ended up uninstalling it to focus just on Litecoin.
Once installed and running, it was easy enough to save and launch the script each time I wanted to mine some Litecoin. And I have had no problem with it since it is not a software program that needs updates or gets flagged by my antivirus each time I try to use it. Like Minergate and NiceHash, this is resource-intensive, and I can only run it if I’m not doing anything that involves using computing memory for something else at the same time.
As mentioned, all of these programs were flagged by my Norton antivirus security, so depending on what security software you are using, you might have an issue with this. I had to disable mine for the install, then set rules to allow them to work and keep Norton running at the same time. Norton will also sometimes remove Minergate without notifying me, and I will need to reinstall it.
Dedicated Hardware Miners
These are now considered the best way to make money mining Bitcoin because of the hashrates and electricity cost. Hardware miners, referred to as ASIC miners, are machines that have one purpose, and that is mining cryptocurrency. Multiple companies build dedicated miners. Think of these as devices like computer-sized servers that can be set up and let run continually to mine Bitcoin or other cryptocurrencies. The catch with large ASIC miners is they have a high upfront cost.
If considering getting a dedicated miner, keep in mind where you will set it up, as they run loud because the fans needed to cool them.
USB Stick ASIC Miner
I do not have a good location in my apartment or studio for a large ASIC miner, and I did not want to spend the money on the upfront cost. However, wanting to try a dedicated ASIC miner, I ordered a Scrypt USB-Stick Miner for mining Litecoin from a company called futurebit. The miner cost around $65. The nice thing about it is that it is a small device that plugs into the USB port on my laptop. Also, since it does the mining work, my computer isn’t slowed down when it is running.
Note: There are a few steps to setting this up, so I created a YouTube video to walk people through it.
When I first started this process, there were a few apps available for phones. These have all been shut down by the app stores. I would not recommend trying to find one at this point as from what I can tell, any apps offering to mine bitcoin on a phone are not going to return any useful results.
Other Options for Making Money from Crypto
It is possible to make an income from Cryptocurrency besides mining it. This generally involves receiving it as a currency or buying and selling it.
Robinhood is known as a stock trading service and is not necessarily considered an exchange. However, they do offer the option of buying and trading cryptocurrencies such as Bitcoin, Ethereum, Litecoin, and a few others. You can’t send cryptocurrency to people or use it as a wallet as you can with Coinbase and some of the others. But if looking to simply buy and sell cryptocurrency, they offer it as a service with the bonus that they don’t have the fees of other exchanges similar to the no-fee stock trading the service offers.
Note: If buying and selling cryptocurrency in the US, income made is taxed as capital gains, the same as stock sales income.
Receiving Payments in Cryptocurrency
Since Bitcoin and the others are a currency, you can receive it as a payment or gift from others. For my business, I offer the ability to purchase gift vouchers on the website using Bitcoin. The process was reasonably easy to set up with a WordPress plugin connected to my Coinbase account. So far, no one has bought a voucher with cryptocurrency.
It is also possible for people to send currency directly to a Bitcoin or other currency address, using a wallet or exchange. Companies are also releasing credit and gift cards that use crypto, and the phone wallet apps previously mentioned can receive payments in cryptocurrency, and some payment process companies are accepting payments in Bitcoin.
How Much am I Making
It has been around two years now since I started this dive into the world of cryptocurrency, and I’ve found a few methods are better than others when it comes to making money.
The places I have been trying this are on my laptop with an NVIDIA GTX970M graphics card, a Moonlander 2 USB ASIC miner, an old netbook, and buying and selling on exchanges. Based on the cost of electricity in Europe, where I live, and even occasionally running these items from work where I don’t cover the full cost of the electricity, it is still cost-prohibitive in some situations to mine cryptocurrency, considering the cost of electricity to the income received. While simply buying and selling works out a little better.
Using a mining script on my laptop with the previously mentioned graphics card, I am averaging 0.000000551461 Litecoin per hour. I rarely use this method as it is resource-heavy for my laptop. This is making me about 0.00008693 USD per hour when it is running. Less than a penny and totally useless, as it slows down my machine, making working difficult. The lesson here is, you can’t mine most cryptocurrencies using a standard computer graphics card anymore. And my Moonlander 2 is worse at recouping the cost, averaging around 0.00005900 per hour. To date, I have made $3.52 in Litecoin using both these methods.
This one probably runs the most as I have it set on an old netbook that I don’t use much and can set in the storeroom of my business and let it run. On average, I am mining 0.00000071367865USD per hour. Out of these methods for mining crypto, Minergate has been the one I’ve used most since I can run it on both my netbook and occasionally on my laptop. To date, I have made $1.22. Minergate has provided me with the least return on investment, even though it is used the most.
Yes, NiceHash is a pain to install. I received errors that I had to work past, my antivirus program doesn’t like it, and it is resource-intensive when running in the background. Having said all that, NiceHash has been the most profitable of the apps I’ve used. I made $3.74 so far using this one, averaging $0.05 cents per hour when running it. I haven’t received the actual payout yet because of the threshold needed, plus I don’t run it often due to resource constraints, so we will have to wait and see how the payout process goes.
Robinhood and Coinbase
Following the same strategy used for buying and selling company stocks, of buy low and sell high, I have purchased and sold Bitcoin, Ethereum, and Litecoin, which has resulted in a total income of $22.61. But I should add that the average buy and sell amount has been pretty low, averaging a buy of around $35.00. I still have that feeling that the market will crash when it comes to cryptocurrency, so the largest single investment I’ve made was a buy for $200, which I then sold a couple of days later for $206.62. Having said that, if I had been more daring and added an additional zero to that purchase, I would have done much better when selling.
Trying to Get my Money Using ShapeShift
Now that I have mined a bit, it is time to trade my Bitcoin for dollars. I logged into my Jaxx Liberty Wallet to see that I had $25.80 worth of Bitcoin, plus $3.50 in Litecoin. The amount varies depending on the value of the currency, which fluctuates. The mining apps I have are set to go to the Jaxx Liberty Wallet to store my currency. I already have a phone, so there was no additional cost, such as I would need with a hardware wallet.
The first option I tried was to send the money to Coinbase and exchange it for dollars. However, there is a transaction fee to send Bitcoin. The fee varies, but at the moment I tried, it was $37.46. Which, of course, was a problem since my Bitcoin was valued at $25.80.
The next thing I tried was to exchange it for a cryptocurrency that doesn’t have as high of a transaction fee. At the time, there was no fee for Litecoin. My plan was to transfer and combine the Bitcoin to Litecoin, then exchange that at the lower rate offered to send Litecoin. So, I selected “Trade,” and to do that, I needed to use an exchange. The app gave me three options for exchanges. Two of them didn’t allow for such a small amount. However, ShapeShift gave me an option for exchanging. So, I selected it and went to set up an account. I entered my information and received a response of “Verification Failed.”
I emailed them to see why and received this response.
Your information has been received. We have determined you are not eligible for an account at this time. If you have entered the information correctly, please consider our product and services are not available for everyone. Our Terms and Conditions fully cover this topic.
We apologize for any inconvenience.
Okay, maybe I’m not eligible. Wondering what that reason was, I emailed back saying, “Why am I not eligible for an account?” expecting them to provide the reason I failed verification. Instead, I received:
We are really sorry to inform you that you are not eligible for some ShapeShift services. As a reminder, you can still use our mobile wallet and Platform to send/receive and track your crypto performance. Thank you for understanding as our decision is final.
Our Terms and Conditions fully cover this topic.
Anyone who has read a company’s terms and conditions knows that they are generic and all-encompassing. They provide a list of reasons why someone might not be approved for service, but are not going to provide the reason an individual person is going to be denied service. Getting a bit offended at this point, I replied, “That doesn’t answer the question. Why? Do you have a problem with my race, gender, age, social status, income level, nationality? What exactly makes me ineligible versus someone who is?”
and received this as a response:
We are really sorry about that. Please refer to our Terms and Conditions if you have further questions about your membership. Thank you for understanding as our decision is final and irrevocable.
Let’s be honest here. First, they are not sorry at all. They couldn’t care less. But the fact that they can’t answer the question is unbelievable. A generic response of sending someone to terms of service isn’t a response, it means they don’t know. They literally are incapable of knowing why I was denied service and are trying to pass it off. I’m assuming it was some backend system verification, but because of incompetence or laziness they don’t have the ability to figure that out.
After all this time and energy dabbling in cryptocurrency, how did it all go? Not very well, actually. After spending $65 on the Moonlander 2, I have made only a fraction of that cost back.
I did eventually get some of my money out of my mobile wallet, however. As the value of Bitcoin increased to around $50,000 per coin, the amount I had was up to $85 in Bitcoin. Avoiding ShapeShift I was eventually able to get my money through a complicated process that reduced the value to about half. First, I converted both the Bitcoin and Litecoin I had to Ethereum, which cut much of the value from the conversion fee. I then transferred that to my Coinbase account, which I could do for less than the value of cryptocurrency. I then converted the Ethereum in my Coinbase account to US dollars, that I was then able to transfer to my PayPal account receiving $44.57.
Based on my experience during this experiment, my recommendation is if you are interested in getting into the cryptocurrency business, look at a dedicated mining system. Multiple companies offer them, just be sure to calculate the energy cost required to run it versus the amount of cryptocurrency you will make in return, and make sure to have a space for it as they run loud. The second option is simply buying and selling it through an exchange or brokerage, which is my preferred method.
Coinbase — If you buy $100 in Bitcoin, we would each get $10 as a bonus.
Robinhood — If you sign up, they will give us each a share of stock in a company.