Trading vs. Mining in 2020
Investments in cryptocurrencies can look different. You have the opportunity to invest in the necessary tools, hardware and software, for mining and validation of cryptocurrencies. You can buy coins and tokens and speculate on the free market or you can decide to invest in the technologies that form the basis of the cryptocurrencies and other developments.
However, every investor, old or young, needs a solid and secure starting point at the beginning. No matter what the investment should look like, it needs secure and reliable information to immerse yourself in the world of cryptocurrency and survive in the long term. Trusted platforms for trading the coins and tokens are just as important.
Speculation vs. Mining
Basically, both speculation on the free market and mining have similar laws and are legitimate ways to invest in cryptocurrencies. The former may seem simpler and more direct than the second, but to be successful you shouldn’t underestimate that every investment requires a good level of research and a pinch of wit.
At first glance, the speculative business appears to be a simple undertaking. You go to the crypto exchange you trust, buy some speculative objects of your choice, wait a few weeks and Tada! Profit. Nothing easier than that, is it?
Wrong! This type of investment requires at least a proper understanding of how the selected cryptocurrencies work. From the special network of the cryptocurrency to the way in which a consensus is reached, to the technologies that characterize the coins and tokens. Only then can an investor better understand when to buy, when to sell and when to go HODL (HODL is a term used in the crypto scene with the meaning of sticking to a currency even in bad times).
Even investors who see themselves as experienced traders have to make an effort to read the books from time to time. That’s because cryptocurrency markets tend to fluctuate much more than other tradable assets. Each cryptocurrency also has subtle nuances that can cause that particular coin or token to perform much better than others in a given quarter.
On the surface, mining appears profitable and simple. However, if you take a closer look at the mechanisms, mining turns out to be either very expensive or quite complicated. For example, if someone wants to “mine” bitcoins, they either have to have their own computing power or invest in serious computing power, such as ACIS machines — and they are anything but cheap.
If a “miner” wants to look beyond the mining of bitcoins and find out how he can generate money through transaction fees in other networks, there are a number of things that he should know. First of all, it is essential, for example, to find out how a specific cryptocurrency reaches its consensus. With most proof-of-stake processes, it is necessary to have a small initial capital in coins or tokens from the start before you can contribute with mining or computing power.
What about cryptocurrencies?
Currently, cryptocurrencies have many fascinating uses, and even with the global economic downturn caused by a coronavirus, the future looks set to be very bright. This is mainly because only a few cryptocurrencies actually work like currencies. Many are designed for use in conjunction with other technologies.
For example, for the generation of reports and compilations of supply chains — a must in a world in which the majority of purchases are made via online deliveries. Or for the so-called smart contracts — computerized transaction logs and financing instruments that check and execute the conditions of a contract, such as remuneration. Or maybe even the ability to connect all banks and all currencies without incurring large fees or massive delays in funding.
The truth is that each of these examples represents just technology that is being promoted and developed by existing cryptocurrencies. As you can see very clearly, these application examples and many, many more can be of enormous benefit to us. As a new paradigm, cryptocurrencies could remedy the teething problems of current and global economies, revolutionize society, and simplify our life together.
Author: Marko Vidrih
Featured image credit: Pixabay