Mining Farm: what is it in simple words

Cryptocurrency has been attracting investors as a type of passive income for more than 10 years. The most profitable form of such earnings is mining on farms. But if a few years ago the profitability of investments in mining farms was not in doubt, today the question of profitability becomes relevant due to the high competition of miners.

Mining Farm: what is it in simple words

Mining Farm

Mining in English means the extraction of ore in a mine. By analogy, the mining of cryptocurrencies was also called this way.

At the heart of working with cryptocurrency is the technology of the blockchain network. Its complex mathematical algorithms require a lot of computer power. In fact, the user provides his computer for rent to create new blocks in the blockchain chain. For each successful operation, he receives payment in cryptocurrency.

The power of a single computer for mining in modern conditions is usually not enough. The use of network technologies can help, as a result of which several computers are combined into a network for mining. Such a device is called a mining farm.

How the mining farm works

Mining does not require active user participation. The calculation process is automatic.

The mining farm is based on distributed computing technology: the algorithm is divided into several parts that are independent of each other and run on different computers. It can take from several minutes to several days to search for one block in the blockchain chain.

The organization of mining requires significant investments:

  • for expensive equipment and components;
  • for the organization of a high-quality cooling system;
  • on electricity costs.

The latter type of spending is constantly increasing due to the rise in the cost of electricity.

Types of mining farms

According to the type of equipment used, the following types of mining farms can be distinguished:

  • based on video cards. Now this method is rarely used and only for mining cryptocurrencies alternative to bitcoin (their common name is altcoins). There are not enough video card capacities for bitcoin mining;
  • FPGA (field-programmable gate array) modules, more productive compared to video cards, but also an outdated solution for mining farms;
  • ASIC processors. Currently, this is the most progressive solution for mining.

It is impossible to place large farms with a large amount of equipment in an ordinary apartment. They buy special containers for them.

What affects the profitability of the farm

The profitability of a mining farm is affected by the following main factors:

  • the volatility of the cryptocurrency exchange rate, which is very difficult to assess;
  • the need for continuous modernization of equipment;
  • there is a big competition in which it is difficult for single miners to survive. Competition increases when the cryptocurrency starts to rise in price.

All these factors lead to the fact that the profitability of mining is constantly falling and is already far from the amounts received by the owners of the first bitcoins or ethereums (while these currencies remain the most profitable).

How much can the farm bring in

There are many stories about millionaire miners on the Internet (usually their names are not disclosed). But at the same time, they are silent about how much money they spent. Therefore, the future profit of your own farm should be evaluated, first of all by calculating the initial investments.

There are cloud services for evaluating the profitability of mining, for example, . To use it, you need to know the hashrate indicator – the speed of mathematical calculations on your computer. You can evaluate this value on the service . And you can evaluate the potential income from mining online on the website . There are other similar services on the network. But it should be borne in mind that all such sites are English-speaking.

Since mining is a very risky type of business, you should not invest credit funds in its development. The probability that they will not pay off is very high.

Let’s summarize the results

So, mining on farms is a potentially highly profitable, but risky type of earnings that requires large initial investments. Therefore, it is advisable to compare the expected profitability with the amount of investments, as well as consider other types of crypto mining, for example, cloud mining.

Published: 23 July, 2021

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