We saw how the fabulous profits for investors turned to the strategy of “buy and hold” in the case of cryptocurrencies. Bitcoin, which once cost less than $1, in December 2017 was increased to $20,000 and some altcoins have risen by thousands of percent.

There is another option earnings — you can buy shares of exchange traded companies whose business depends on cryptocurrency. For example, the Bitcoin Investment Trust owns a relatively constant amount of bitcoins, which allows investors in such an indirect way to invest in cryptocurrency.

But perhaps the most interesting way of earning cryptocurrency is mining. Mining is so arranged: people or companies owning powerful computers compete with each other, and each player seeks first to solve a certain mathematical problem that is associated with the next block of transactions.

These complex mathematical equations are important for encryption, which protects data stored in the blockchain, from unwanted changes. When a solution is found, a block of transactions is considered correct, and, in particular, to certify that no funds have been spent twice, then it is added as previously approved blocks, forming a kind of chain — a blockchain means “chain of blocks”.

Why do miners verify transactions? The first member of the network, solved problem, receives a so-called “reward for the closing of the block”. This award is paid in tokens check the cryptocurrency, and the amount of the reward and the difficulty of solving the problem for different currencies are different. For example, bitcoin miners receive at the closing of the block to 12.5 bitcoins. However, every 210 000 blocks of Bitcoin reward is halved, that is steadily declining.

It is also important to say that mining is not possible with all cryptocurrencies. Bitcoin, ether, litecoin, Bitcoin Cash can be mine, and Ripple, EOS, Cardano and Stellar — no. Such currency transaction verification is done differently, this does not create a new token and not is the reward.

It seems that this is a great way to make money: sit yourself while the computers grind numbers. However, you cannot forget about the costs and the main items three.