Crypto mining and crypto investing are two phrases that may be easily confused with each other, especially by new investors.
There are many who have decided on one and ended up finding out they made the wrong decision because it isn’t what suits them. The two activities are vastly different, and doing one doesn’t yield the same results as the other.
If you want to enter the crypto industry but are wondering which of the two is most suitable for you, you have come to the right place. In this guide, we will provide you with all the information you need to make the right decision and everyone is happy.
What Is Crypto Mining?
There are two major consensus mechanisms which most major crypto projects use. These are proof-of-work (PoW), and proof-of-stake (PoS). PoW is the consensus mechanism used by cryptocurrencies that require mining. What then is mining?
Crypto mining is the process by which new crypto coins are released into circulation. For example, by mining Bitcoin, we mean the process by which new BTC are released into circulation.
Mining is also the process through which the crypto network is secured. Miners use specialized computers to solve difficult mathematical puzzles and in the process help to verify transactions and keep the network secure.
In return, the network rewards the miners with a fixed amount BTC as an incentive to keep securing the network. The new BTC in the hands of miners eventually enters the crypto supply and so more BTC is in circulation.
For anyone looking to enter into mining, there need for some level of technical know-how concerning the project of interest. You may not need the tech knowledge of a developer, but you need to know how the network functions and how to use the computers.
You’ll also need to buy the equipment, which can be expensive. The cost of maintaining the equipment is even more expensive, as mining, especially of Bitcoin, requires a massive amount of energy to carry out.
If you don’t think you can meet these conditions, mining may not be the best thing for you to engage in with your money.
What Is Crypto Investing?
Now that we know what crypto mining is and what is required to do it, let us also consider crypto investing which could be an alternative way to enter crypto if mining doesn’t suit you.
Crypto investing is a general phrase that refers to the act of putting money in crypto. This may even include crypto mining, but it’s much broader than that. In its strictest sense, crypto investing means buying of crypto assets for profit.
This can be done by buying the assets right off the market or by investing in new projects. Every year, new crypto projects launch, and these provide an opportunity to buy the assets at a low price prior to launch.
This gives you a higher and sometimes guaranteed chance of making profits when the project successfully launches and starts trading. There are many factors to consider before investing in an asset, including the fundamentals of the project but that is not our focus in this guide.
Unlike mining which requires money for equipment and the technical expertise required to use the equipment, all you need here is to buy the assets and hold them in a secure wallet. Your greatest task therefore is to pick the right assets, the right wallets, and the right platform or project to buy from.
Once you buy and hold your assets, you only need to allow time to pass and then sell the assets whenever you’re satisfied with the profits.
Final Thoughts
Crypto mining can be profitable if done right. It also depends on the project being mined, as some like Bitcoin are much more difficult and expensive to do than others. Crypto investing on the other hand requires much less and almost anyone can do it.
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