Main Problems and Risks

Despite the profitability of mining, high barriers to entry exist in this industry, preventing most people from taking part in it. Initially, the only way to get into cryptocurrency mining was to be an independent miner and purchase and configure equipment to mine. This system proved to be effective for most individuals who had both the technical expertise and capital to manage their own mining equipment. As the industry progressed, coordinated efforts proved to be significantly more effective than independent mining and key players were quickly able to dominate the mining industry and another risk is regulatory.

Efforts to lower the difficulty and increase adoption and participation, combined with the widespread adoption of cryptocurrencies resulted in an infrastructure known as “cloud mining”. Cloud mining allowed firms to set up mining farms and rent out hashing power at a cost to individuals, increasing the participation of lower-skilled miners. Today, both independent and cloud mining are provided as options for retail investors and miners alike, each with their own set of advantages and disadvantages.

 

Independent Mining

Independent mining can produce very high returns if the owner is experienced and the equipment is well maintained. However, the skills needed to set up and configure the mining rigs may prove difficult to individuals who lack a complimentary background. In addition to that, external factors out of their control such as electrical fees and climate could negatively impact the returns from mining.

  • Legislative Risk
    Possibility of inability to operate and restrict or prohibit crypto mining activities in the jurisdictions always exist and can result in fines or even imprisonment. Lack of access to electricity or power outages due to changes in laws is also a major factor. These are currently among the most important risks of crypto mining activities in the world in nowadays.
  • Getting Equipment
    The purchasing process of cryptocurrency mining equipment is usually the first challenge faced by aspiring miners. Procuring ASICs directly from Bitmain or other manufacturers is an unpredictable process as the stock is usually sold out within a very short period of time and delivery times may turn out to be longer than advertised. The low supply of ASICs and a strong monopoly in the manufacturing of such equipment also causes prices to soar in the secondary market, with listings as high as two to three times of the retail prices. Attempts to purchase graphics cards to construct mining rigs for cryptocurrencies without ASIC mining capabilities prove to be equally challenging due to similar problems in supply and demand.
  • Expertise and Skill
    Even if an independent miner is able to receive the equipment needed for mining, a high level of expertise and skill is required to configure the equipment and ensure maximum efficiency and output of the equipment. Optimization is especially challenging due to the additional factors for consideration, such as the increased heat output from the overclocking process. Any mistake made could potentially damage the equipment and reduce the output and efficiency of the capital spent.
  • Climate and Electricity
    External factors outside the control of the miner are able to heavily impact the returns from mining, with the two most important factors being climate and electrical cost. In this regard, climate refers mainly to the temperature and humidity of the mining farm. An ideal climate would be a cold and dry one as a cold climate offset the high heat dissipated by the mining rig and a humid climate would damage the equipment if they are exposed. Electrical costs generally account for over 30% of the running cost for operating a mining farm and if the rates per kilowatt hour is high, the profit margins from mining would be reduced drastically.

Sunk Cost for Equipment
Purchasing and owning equipment results in a high sunk cost involved in the initial capital commitment as some of the equipment such as ASICs are heavily specialized and are difficult to liquidate after using them. Some manufacturers and resellers have also defined rules against equipment that has been used for mining as their lifespan would be reduced drastically in the process.

Cloud Mining

Remote hosting and cloud-based mining helps reduces the cost and barrier to entry for investors and provides access to the same mining capabilities for mining rewards. However, a different set of problems and issues can arise from cloud mining due to the lack of ownership over the equipment.

  • Risk of Fraud
    For cloud mining, hashing power is generally purchased through mining contracts in place of buying the actual equipment. This brings about additional risk as investors often do not get to see the mining rigs or farm, making it a very common way to run Ponzi schemes. Since the funds are committed up front, in the event of liquidation of the cloud mining farm or service, investors would get nothing in return as they are paying for the service and agreeing to no ownership over any of the underlying assets and equipment.
  • Perpetual Recurring Cost
    The requirement to purchase contracts for mining duration would eventually add up to a high amount of recurring cost due to the lack of ownership over the equipment and assets. This means that if the investor plans to mine for a prolonged period of time, the profit margin would be lower unless the cloud mining company reduces their fee structure. For miners who own the equipment, the profit margin would increase once the rig has earned more than its cost.

 

  • Lack of Transparency and Control
    Cloud mining services are fully owned by the service provider and the processes and calculations are generally not made public and are non-transparent. Mining service providers can also charge hidden fees such as through the absorption or under declaration of the transaction fees collected from each block. Service providers are also free to modify their pricing as they deem fit, resulting in a business model that may not be very beneficial to investors purchasing and renewing short term contracts.

3rd Wave Solution

Before this, there were no options for public investment in green crypto mining initiatives. With 3rd Wave’s services, not only has made environment-friendly crypto mining possible but the barriers to entry have been broken down. Multi-scale green mining makes it a breeze to join a global effort and at the same time, the bleeding edge solutions offered by 3rd Wave mean that the risks involved in crypto mining are minimized with maximum effort for profitability.

The ingenious model of 3rd Wave offers people the best of both worlds: profitable investing in the crypto mining and crypto asset management, regardless of bull or bear markets.

 

3rd wave delivers the world’s most innovative green crypto mining.

 

Before this, there were no options for public investment in green crypto mining initiatives. With 3rd Wave’s services, not only has made environment friendly crypto mining possible, but the barriers to entry have been broken down.

Multi-scale green mining makes it a breeze to join a global effort and at the same time, the bleeding edge solutions offered by 3rd Wave mean that the risks involved in crypto mining are minimized with maximum effort for profitability.