Before jumping head first into mining, of course, there were other options I had to consider. The most obvious being: staking crypto.
In this blog post, I’m going to – kind of – compare and contrast the two different types of passive income, crypto investments.
Now, speaking of passive income, clearly, staking is more passive. It literally requires almost absolutely no effort on your part to earn your return. You simply stake your coin and watch the income roll in.
That, in itself, I’d say is the BIGGEST advantage staking has over mining.
When you run a sizable mining farm, you’re running a business. Although, I'll admit, it’s not near as labor intensive as other businesses, you’re still going to be dealing with expenses and maintenance. Mining requires you to approach it with a business management mindset.
Now, of course, this is if you’re not opting to go the hosting route. If a 3rd party is hosting your miners, mining crypto is AS passive as staking.
One more reason that immediately comes to mind is: more consistent returns. See, with staking, you don’t have to run the risk of the price of the coin dipping to the point it doesn’t cover your electrical costs.
That’s an enormous risk for someone that doesn’t have funds stashed away in the event this occurs.
And I’d say, this is the SINGLE most important risk that you run while mining crypto. But…
I’ll talk more about this in a later blog post, but just to briefly touch on this subject, when mining, you’ll absolutely NEED to have some money put away to cover electrical costs. Clearly, so that you’re not forced to sell your mined crypto at an extreme low.
I’d say, ALL crypto mining men should hold their crypto until their predetermined sell price. And to do that, you’ll need cash to cover electrical costs.
In other words, if you’re mining crypto the right way, this risk won’t be MUCH of a factor.
So, now that we’ve covered the main points in how staking beats mining, let’s talk about my golden egg laying goose – crypto mining.
Obviously, I favor mining, as I’ve chosen mining over staking.
But let me tell you why…
And we can start by talking about the returns. The returns you receive in mining, for large market cap coins, is CONSIDERABLY more.
And when I say, CONSIDERABLE, I’m saying something around 4% vs 50% (staking vs. mining). And this is for a large cap coin like ETH.
I’d say the disparity between those returns is enough for me to take on the maintenance and management of a miner.
But here goes the MAIN reason I’ve started crypto mining…
Your income stream is secured by a PHYSICAL asset.
With staking, the only thing that secures your investment is the underlying crypto that you’re staking. That’s it.
If that project dies, or that crypto plummets, your asset is worthless.
Now, with crypto miners, you have a physical asset, a high-powered machine, that adds value to the blockchain by assisting in the blockchain’s functionality. This thing has actual value.
And being that it has value, its price on the secondary market holds fairly consistent.
So, say for instance, you have $100k that I’m either going to stake or invest into mining…
You could invest in a crypto to stake, and see your underlying asset dip in value by up to 75% at times. Or…
You could buy a crypto miner, and the most volatility that you’ll see is 25%.
Are you following me?
Meaning, if you’d have invested into staking, your original investment of $100k could dip to $25,000. Now, on the other side of the sword, if you’d invested into mining, historically, the most you’d see your $100k dip to is $75,000.
With crypto miners, because it’s a physical asset, and it provides value in the real world, the volatility of crypto miners is MUCH less than crypto itself.
Whatever the reason might be, wouldn’t you rather deal with less volatility when you’re investing a sizable amount of money?
And that’s why I mine crypto instead of stake.
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- Josh "The Mining Man" Meadows