What awaits miners amid a bear market? Vladimir Shutemov, the co-founder of CoinFly, outlines all the prospects for mining this year and reassures the worried miners.

Home Mining Must Change

Speaking about GPU mining, the overall speed of the Ethereum network has dropped, and mining is still possible, but it very much depends on the power supply and the cost of electricity. Mostly in Russia, electricity is quite expensive, although there are miners who pay for it at the cost of $0.026 per kilowatt. If a kilowatt costs $0.08–$0.1, perhaps the best solution is to turn off the equipment until better times or to subsidize.

But I believe that home miners have an excellent option as it is necessary to unite in a kind of pool to mine together. I am sure that there will definitely be a company of like-minded people who will bring miners into a sort of trade union and create a physical pool with an attractive price for electricity. Just imagine! Here it is, a bright future! And so that it finally comes, only legislative decisions remain (and we see that this is absolutely not far off) and making mining and the very market of cryptocurrencies all “white-hat” and legal.

Maybe Now Is the Time to Start Mining?

For a person who does not understand the intricacies, it is difficult to admit the very possibility that mining may now be no less profitable than buying cryptocurrencies. But for the long-term, it is now the time to enter mining if you believe in the blockchain and cryptocurrencies. Many people are nervous now, and they are leaving the industry. But we understand that we reached the bottom. I’m sure everything should stabilize soon.

But if the miner bears severe losses, then the only competent decision that I see is to reduce the risks, perhaps even to exit the business.

By the way, that’s how equipment is transferred with a huge discount from those who want to make a quick buck to those who have a financial cushion and just a store of patience.

In terms of profitability, everything is complicated these days, but there are still large investors that are entering the market right now, in a recession. They understand that growth will continue. By the way, now, against the background of a collapsed market, there is also a significant plus for miners, as difficulty is falling. For example, on the Ethereum network, the fall in difficulty over the past three months was about 10%, and on Bitcoin, 18%.

Which Currency to Mine?

Regarding which coins to mine, I recommend looking only at those that are in the top 20. There’s a huge number of altcoins that look very affordable, but, unfortunately, do not give any guarantees. Nobody knows what will happen to the rate tomorrow.

First of all, I would suggest looking at Ethereum. Its capitalization is high, and the creators will make their best to maintain it before the Constantinople fork is activated. The new date has not been officially announced yet, but the community expects this to happen in the second half of February.

This fork is designed to postpone the so-called difficulty bomb, and one of its components, EIP (Ethereum Improvement Proposal) 1234, reduces the block reward from 3 ETH to 2 ETH. This, of course, reduces the profitability of Ether mining, and this will be especially noticeable for small miners. And immediately after the release of the fork, you can expect short-term volatility caused by the transition to the PoS algorithm. Many members of the community from the very beginning were against lowering reward as it could lead to more centralization of the network. But how all these moments will show themselves in practice will become clear only with the release of Constantinople. So there is no need to worry in advance, wait and see.

Surely, you can find some ambiguous cryptocurrencies, the so-called s**tcoins, which will be much more profitable. But for the miners, they are extremely risky. There’s a huge number of sources that provide detailed information about such coins, but these currencies take off only when they are pumped, and such pumps can break any time.

You can work without success for a week or so—not a single pool will give income immediately, it is not profitable for it. When a miner enters the pool, it takes some time for the pool to bring them up to volumes, certain speeds, and make sure that the miner is trustworthy. Even if it takes three days, this is three days of equipment operation, and the pump may already fall.

Also, it is worth considering that you can encounter a huge number of lags when withdrawing coins to an exchange. We may lose time. And it is very difficult to sell a coin quickly especially when the pump disappears, and the coin flies to hell. Therefore, my personal opinion is that miners need either some very stable coin or to mine at a request, for example, when a new currency is issued, the owners usually turn to miners to support the network. This is common practice. But in no case should one be guided by impulses: “Oh, I saw a coin on some website that gives a 1,000% income, today I’ll earn $1,000 with my one GPU.” No, I don’t believe in that.

By the way, you can also use technological advances, for example, the automatic mode, which monitors the market and selects the most profitable currency. One currency slipped, and another one immediately came to its place, which has now become the most profitable, and the mining process is not interrupted.

Is There Any Salvation for Miners?

Now it’s very profitable to invest in masternodes, and there is indeed a future in them, but I cannot say that I believe in this technology globally. And there is a simple reason. I don’t see masternodes as blockchains. This blockchain is still PoW. PoS is another matter, for example, we know one coin, which several huge banks have promoted, putting masternodes into their DCs and pumping billions into circulation. This is about Ripple. This is not a blockchain, but a beautiful picture with huge investments.

In the future, perhaps, there will be some less energy-intensive PoW or a symbiosis of two technologies. The issue of energy costs needs a separate article, though. There are calculations of energy costs for the banking sector, which also include the expenses related to providing payments for cards of various payment systems, and this, in turn, greatly exceeds the costs that are in mining today. If you compare the value of one dollar in the banking sector and one dollar in the blockchain, it is clear that in the blockchain, it is much lower.

What About Neural Networks?

Neural networks, deep learning, and cloud computing are certainly an exciting area, but the technology itself is not quite ready for the mining market. Here, it is crucial to answer the question: Who’s the buyer? Large corporations that have the funds to purchase all the necessary equipment can afford it. But business in such projects, in my opinion, should be for ordinary users—for example, gamers.

Now some projects allow users to run powerful modern games on weak hardware, but this is implemented using virtual machines. No technology allows taking the power of video cards or processors that belong to miners and transferring them to gamers.

But I am sure that it is a matter of time. And there is undoubtedly some groundwork in this direction. There are consumers of mining capacity for neural networks, but their numbers are insignificant, these are not market products. Some companies study technology and address miners with requests for capacity, and miners fulfill them.

Three main tips for miners:

 Do not sell your equipment

 Keep profitability in mind, or invest your own funds in future profitability, at a level that will not ruin you if the things go south

 Do not stray off the chosen path and do not lose your will to conquer mining peaks!