NotePD Loader
Ideas Post

Bad idea of the day: Crypto-mining-as-a-service

Bad idea of the day: Crypto-mining-as-a-service

    1. What is crypto mining?

    Pick a cryptocurrency (like BTC), pay for space on AWS, get the right mining software, start mining, get rewarded with free coins. Note: just using BTC to explain. The mining of BTC is very difficult to make profitable so is not part of this idea specifically.

    2. Step one:

    Pick a cryptocurrency that is small but has good investors and you think has a decent future. Do #1 above and start mining that coin.

    3. Now you are making some profit

    If the coin has transactions and you are validating them, then you get rewarded with some of that coin. Again:

    A) choose a coin you think has upwards potential and has a good number of transactions per day.

    B) set up mining for it

    Collect your coins.

    4. Step two: scale it

    You can scale in two ways:

    5. Step two: vertical scaling

    repeat steps 1-4, make more profit on the same coin.

    6. Step two: horizontal scaling

    Do steps 1-4 but for different coins. So you diversify the coins you are mining so even if one coin falls flat you are mining a variety of coins and making a variety of profits/yields on your expenses.

    7. How do you calculate profits?

    The amount of coins you mine per day (converted to $) minus the costs.

    Costs = The amount of hash power (roughly: computing power) you can acquire (whether on your own computers or using a cloud service like AWS) + electricity costs.

    In most cases, Bitcoin will not be profitable, for instance, because electricity is too much. But you can research which coins can be profitable for lower costs. This is part of the problem of someone who is not familiar with all of this would have.

    In most cases, because of the crypto market, coins that use "proof of work" will not be profitable to start mining because of the costs of the computer and the electricity.

    This is again part of the problem. It's difficult to figure out which coins to mine for most profitability so solving this problem is key.

    8. Step 3: once you have found a good set of coins to mine, start a mining-as-a-service business

    For a fee plus some setup costs, people can pay you to mine a basket of cryptocurrencies for them. You make profits by taking a percentage of their profits.

    9. Step 4: vertical scaling of the mining-as-a-service business

    Provide more services:

    - you can sell their coins for them and distribute in dollars instead of coins

    - you can be the custodian of their coins so they don't have to think about wallets, etc.

    For each additional service you charge an additional fee.

    10. Summary

    1. find a crypto to mine and start mining it just to get comfortable with how to do it and the costs, and the ways to calculate profitability. Not easy but will get easier as one does it.

    2. scale horizontally by going into other currencies

    3. scale vertically by amping up the number of mining resources you put towards each currency

    4. create mining-as-a-service so others can pay you to generate passive income for them via mining. The benefit to them is not only the passive income but if the basket of cryptos rises then they (and you) make enormous profits beyond a regular yield

    5. create additional services: such as converting to dollars or custodial/wallet services.


    Costs: you have to factor in:

    a) cost of computers

    b) cost of electricity

    c) value of the crypto currency (this means you have to pick good cryptos to mine, so this is part of the difficulty of this idea)

    d) transaction fees you might be able to tack on to validate a transaction (I didn't discuss this above but these are called "gas fees", for instance, if you are mining ETH).

    e) how much of the crypto can be mined per day. (i.e. will the cryptos you choose have a lot of transactions per day and will that number be rising).

    All of these numbers change every day and so they have to be calculated constantly to determine both your profits and your potential risks.

    One idea is to setup mining for coins that are NOT profitable for you so you are ready once/if they become profitable.

    Overall is this a good idea? The answer is yes if you can manage all the costs mentioned above AND pick good cryptos. One possibility is to set up mining for coins that are still in development so you are there when they launch and airdrop free coins and have few miners.

0 Like.0 Comment
Adartisand 3 more liked this
Comments (0)

No comments.