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From managers to miners: is it possible to mine for a comfortable retirement?


Mining farms, blockchain technologies, ethereums and other specific terms can bring to a grinding halt a person who encounters all this for the first time. However, it's not so difficult as it may seem, the experts will help to understand – is it worth immediately purchasing a farm for mining and what stands behind the fancy word "blockchain".

How are bitcoins and blockchain connected?

The words "bitcoin" and "blockchain" are often used together. Are these concepts connected and can they exist independently of the other?

Aleksei Pospekhov, CEO at FUTUR CAPITAL, explains that blockchain (as a technology) is a completely revolutionary solution that allows you to get rid of the institution of trustee (i.e., intermediaries in any area related to the registration of any actions – banks, notaries, etc.)

Due to implementation of blockchain it is possible to significantly reduce the cost of any transactions compared to the current value when using trustee). Such actions require calculations which are carried out by so-called "miners" who get an appropriate reward.

Bitcoin itself began to move away from the technology of blockchain, and tends to exist more autonomously in terms of economics. Since bitcoin is almost the only point of enter for "fiat" money, its value automatically grows with demand for any other crypto assets. Ethereum has a similar situation: technologically it is a fork of blockchain platform. It is ethereum that used for the most of current ICO. Accordingly, the value of these two cryptocurrencies directly depends on the total demand and supply of other crypto assets.

Mining: late or not?

"To become a miner, you do not need a special mathematical education or be a programming guru. Everything is done by a computer. The main problem is that high capacity computers and access to electricity are required. Every year, mining becomes more and more complicated and brings less result in the number of bitcoins received.

Mining is in fact a process of obtaining a cryptocurrency. Computer and technical capacities of the miner are involved in solving math problems and creating new blocks in a distributed platform. Therefore, there is no centralized issue, the issue is made by those who mine cryptocurrency," points out Dmitry Yukhnevich, CEO at Linkprofit.

However, Vadim Petrov, deputy head of the web development department of QBF, warns:

"Mining resembles a process of mining gold. To work with cryptocurrency, you need expensive equipment: you need to build a server based on powerful video cards (CPU can also handle it, but GPU is more efficient), purchase a certain power supply, a high-quality cooling system and a motherboard. On average, the miner has to invest in equipment 100-200 thousand rubles ($1,500-3000) for one production unit, called the farm. The price for top-end video cards reaches 500 thousand rubles, but it's possible to manage without extremely expensive excesses. The payback period for average costs is from several months to one and a half years."

To mine cryptocurrency every year is becoming more profitable, since their cost has increased significantly over the last years. If in 2009 you could give less than a dollar for a thousand bitcoins, then in August this year, the cost of 1 bitcoin exceeded 4500 dollars. Growth of bitcoin is based, first, on the legalization of cryptocurrency in a number of countries, in particular, in Japan. Official status can be granted to digital money in India, Australia and Russia. More and more companies accept payment for goods in cryptocurrency, for example, in July 2017 Aeroflot announced that it intends to begin accepting virtual money for tickets.

"However, it is necessary to understand that there are legislative risks. At the moment there are no legal acts regulating the status of mining in Russia. Consequently, the scales can be tipped in any direction, and if the mining is declared illegal, the owners of the farms will suffer heavy losses, or go underground," continues Vadim Petrov.

Vitaly Golovanov, bitcoin entrepreneur, dispels the myth that the mining is equal to financial pyramid:

"Mining is a set of specific hardware that is configured to processing of code belonging to a specific currency. When a farm is connected to the network, hardware starts processing certain algorithms. For all this miners get an appropriate reward. It can be compared to giving a car for rent in a taxi service. Your car is used to earn money and you get your share. When hardware is connected to the network for mining digital currency, it is connected to capacities of other computers. In fact, mining is leasing your computer's capacities. All of the participants get commission which is paid for processing of transactions.

Those who believe that mining is a pyramid – are mistaken. In mining money is paid for processing algorithms whereas in the pyramid you need to invest your money. Then you are promised a 300% income a month which is backed by nothing. You are waiting. Meanwhile organizers collect money from other people. A month passes, you take your money plus additional 300%. But these 300% – other people's money. You are lucky. But then the shop is closed down and 90% of people lose money. But you can be among those 90% of people.

There is no scam in the mining. But there are no miracles as well. Mining is also a job. You need to know much about the hardware you use, maintain it, and configure it. You need to follow the news and be ready for any scenario."

Is it possible to make money on cryptocurrencies and what is the danger of this kind of profit

"Any opportunity to earn much money quickly always attracted people's attention - that's human nature. Cryptocurrencies (there are thousands of them apart from bitcoin) are no exception. The main thing to remember is that quick earnings may turn into serious losses. The higher the income, the higher the risk. This law of economics can not be refuted even by cryptocurrencies," says Sergey Hestanov, a broker at "Otkritie".

Bitcoin has grown from $1000 to $4500 pretty quickly. The trouble is that sometimes cryptocurrencies, on the contrary, become cheaper too fast: for example, bitcoin dropped to $130 from $1000.

Cryptocurrency can be generated ("mined" is a common saying) by yourself: all that is required is a high capacity computer and the Internet. The difficulty is that the cost of such computers (it requires very powerful and expensive video cards) and the cost of the Internet and electricity can exceed the cost of the generated cryptocurrency.

"P.S. There are no miracles – high earnings on cryptocurrencies are counterbalanced by very high risks. Therefore it is reasonable to leave this sphere to those who are good at it," summed up Sergei Hestanov.

Dmitry Yukhnevich, CEO at Linkprofit, also warns that states are closely looking at a new participant in the financial market, and there is a risk of a government ban on the functioning of the cryptocurrency. "Mining losing its relevance every day, it becomes too difficult and expensive."

Bitcoin and other cryptocurrencies

Bitcoin is not alone in its "universe". There are other cryptocurrencies that grow and fall in price, serve as tokens for ICO, and probably will compete with bitcoins. What do experts think about BTC's relations with other cryptocurrencies and traditional fiat money that we are very familar with?

Dmitry Yukhnevich, CEO of Linkprofit, is cautious in assessing:

"The most famous cryptocurrency is bitcoin, but there are other types of cryptocurrencies, litecoins, peercoins and so on, they all have their own characteristics, many of these currencies are easier to mine. Some of the cryptocurrencies are structurally tied to bitcoins and therefore will never be able to achieve such success and scale."

Aleksey Pospekhov, CEO at FUTUR CAPITAL, talks about the advantages of other cryptocurrencies:

"Monero and DASH are absolutely anonymous means of payment, they do not leave information about transactions and owners. Other cryptocurrencies can also be used for various service applications."

Konstantin Gubin, managing partner of the RB Partners Group reflects on whether it is correct to compare bitcoins to the US dollar:

"The term "weaker" (US dollar against bitcoin) is not relevant. If we denominate dollar, say, 1/10000, that is to give 1 new dollar for 10,000 old dollars, nothing will change. It will just be inconvenient to use, but the dollar will be "stronger". Exchange rate in this case is nothing more than a countable proportion."


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