Cryptocurrency gets more widespread as the days go by. Unlike traditional financial systems, cryptocurrencies offer better security and transaction speeds. More importantly, however, you can make some money using them as well. Here, we shall review the 3 major ways of making money in cryptocurrencies.
The ultimate way of making profits is through mining. Most of the digital currencies in the market today allow users to mine them. Mining is the use of computing power to solve complex transaction equations. Once users solve a block of transactions, the user is rewarded in that cryptocurrency they are trying to mine.
To mine a cryptocurrency one must download the entire transaction history of the network they want to mine from. Once complete, the transaction records are run via software installed on the miners' computer. Usually, ASICs (Application Specific Circuits) are used for mining. Users can either mine solo, or join one of the several mining pools around. It’s a wiser choice to mine in a pool for small scale miners.
However, mining has become less and less profitable as the mining difficulty factor grows exponentially. This made it an uncertain and unsustainable activity. Let alone the skyrocketing cost of electric energy and the mining hardware. Currently, only large scale miners reap some profits in mining cryptocurrencies. In a similarly article published on Coinidol Mike Lorrey, a co-creator of BitGold mentioned that.
"Since difficulty is not inversely proportional to the amount of mining capacity working bitcoin, it stabilizes supply/demand on the production side, and demonstrates only that there is a higher demand for bitcoin transactions, and that miners believe there will be increased future use of bitcoin. So increased difficulty could be perceived as a sort of futures prediction of higher btc prices to come."
The other way one can earn profits in cryptocurrencies is through trading it. Cryptocurrency trading is comparable to trading ordinary securities. Users tend to buy when prices are low and sell when prices go up. The profits you will make while trading is the difference between the buy price and the selling price.
Trading is beneficial since it does not require large sums of money to start and can be done from anywhere in the world. Traders who master the art can make huge sums of profits over a short period of time. However, trading requires a lot of skills, patience and proper financial management. For novice traders, the possibilities of making losses are significantly high.
The money-making way in this method is through investing in a cryptocurrency. Just like the traditional investment market, cryptocurrency investment requires putting in money. Basically, cryptocurrency investment involves buying and holding crypto. Usually, investors hold cryptocurrencies for a long time until its prices go up.
In some instances, investors hold their cryptocurrencies for a short time and sell them off. In such cases, the percentages of profits are generally low and so are the risks. Long term holding involves buying and holding your portfolio for the long term. Usually, long term holders reap higher profits.
To discourage users from selling off their crypto deposits, some exchanges offer dividends for hodling. The dividends always come as a percentage of the amount in hodl. There are some risks associated with cryptocurrency investment as well. To mention, sometimes prices of the crypto never actually gain after the initial launch. Furthermore, some cryptocurrency projects collapse after ICO leaving investors at losses.
Obviously, we should not be discouraged of the ups and downs in the crypto industry but rather invest wisely. As many are aware, cryptocurrency is here to stay and will keep revitalizing over time till perfection. Visit coinidol.com every day for the best cryptocurrency information in the industry.