While BTC mining was a great source of income for many crypto enthusiasts in the earliest stages of the blockchain industry, Ethereum quickly started gaining traction with its own proof-of-work mechanism and algorithms allowing for GPU-intensive mining which was different architecturally from what Bitcoin networks was focused on.
Since both CPU and GPU types of mining are quite capital-intensive as more and more competition joins the industry, people who wanted to be a part of this growing industry had to join into cryptocurrency mining pools — groups of individuals pulling together resources to purchase powerful hardware or invest in companies that built mining farms using funds raised from individual investors.
While attempts at running such enterprises manually were made, automated mining pools quickly became the new norm with companies adopting a leaner approach to running their businesses. Today, automated mining systems dominate the industry and allow many individual users to join various networks and start mining using their hardware or via cloud-based mining services.
What are Automated Mining Pools and How Can They Help Enhance Cryptocurrency Mining Efficiency?
First, we need to understand how the traditional “manual” approach works in the mining industry. Cryptocurrency mining is a process of solving incredibly complex mathematical tasks to validate new blocks which are subsequently added to the network. With Ethereum switching to the proof-of-stake mechanism, the attention of miners spread across multiple other similar networks utilizing algorithms suitable for GPU mining.
It means that you have to choose adequate tokens for mining manually switching between networks as they become more profitable. All individual miners eventually encounter several important issues that make reconsider their current predicaments and switch to using automated mining pools to increase the mining efficiency.
Here are these issues:
- Creating a hardware setup that can work with multiple networks is quite hard making the switching process quite challenging.
- Switching to another network manually takes a lot of time as you need to switch operating systems and hashing algorithms each time you swap.
- Choosing the next token to mine can be difficult even if you focus strongly on researching the market to identify most promising networks to work with.
- You need to operate your hardware all the time and regularly check whether you are still mining cryptocurrency instead of idling.
While not all of these issues can be solved by using automation, it is possible to significantly improve your mining efficiency by joining automated mining pools with your hardware or even buying a share in a versatile pool that works with different types of networks.
Benefits of Using Automated Mining Pools for Cryptocurrency Mining
One of the best examples of such pools is the NiceHash pool that allows its users to use their hardware effortlessly by simply providing computational power of your hardware to the pool for a cut of their earnings. It can be done automatically:
1. The network with analyze your hardware and its potential output.
2. It will find advantageous algorithms to run on your machines.
3. The system will also identify profitable tokens to mine according to the current market situation.
These services are provided for free by the administration of the pool that runs some cryptocurrency automation tools that are useful to analyze the potential efficiency of any hardware. However, the issue with this approach is that this happens only once when new users join the pool. As the time goes on, the situation in the crypto market changes making it less profitable to run your hardware on some networks over the others.
It is imperative for contemporary cryptocurrency automation software focused on mining to regularly update its assessments of the industry and offer users to switch to other networks when technological or economic conditions change.
Unlike many other forms of automation used in the crypto industry (for example, automated crypto trading bots), mining is different. Again, it takes time to switch from one network to another. While it is a good thing when you can do it without making changes to your hardware setup, it still takes time to uninstall and install new software that works for any chosen blockchain network.
Crypto mining automation must solve this issue by allowing users to effortlessly switch between networks using the web-interface. It works with highly specialized pools that operate by using your computational power without actually running software directly on your machine. You simply push a button and switch to another network.
It can also be automated fully with the system moving your computational power without your interference when another network starts offering better terms or prices on the market shift wildly. A study conducted by Man-Ching Yuen and Ka-Min Lau from the Hong Kong Shue Yan University was one of the first specialized academic research studies in the field of mining automation.
The authors predicted the diversification of the mining industry as Ethereum’s space became vacant and multiple networks competing for the attention from GPU-powered hardware setup owners. They proposed the system where automated crypto mining pools would continuously analyze the market and the industry to push miners toward better networks without interrupting the mining process. They used NiceHash as an example.
Since then, multiple pools started offering various forms of automation-based features to their clients.
How to Choose the Right Automated Mining Pool for Your Needs
It is important to understand how to pick a great platform among many automated crypto pools that are working in the crypto industry right now. The selection process and its caveats may differ depending on how you want to work within the mining industry.
If you are a hardware owner and want to lend out the computational power to mining pools, you will need to look for the following:
1. Compatibility. It is imperative that the platform offers a wide range of compatibility options since different types of hardware work better on some networks and will underperform on many others.
2. Sizeable payouts. Many mining pools offer low rates to their miners owning hardware. Consider electricity costs and other overheads before joining a pool.
3. Automation on the platform. It is quite important to work with a company that has the necessary technological capabilities to allow you seamless switching between network on demand. It is doubly great if it can be done automatically.
Not everyone wants to buy expensive hardware to mine cryptocurrencies. Some people see good investment opportunities in simply buying a share in a mining pool to receive returns based on the performance of their virtually owned node.
If you are one of such investors, you need to look a completely different set of features to find the best automated Bitcoin miner pool for 2021 or 2022, or 2023, or any other year:
1. Good interface. Understanding how to start investing, manage your share, and monitor the performance of the node is quite important for any user. Choose platforms that offer good use interface.
2. Stable returns. Many investors allocating their capital in various assets want to achieve consistency. Work with platforms that offer stable payouts.
3. Convenience. When it comes to investing in crypto mining without actually purchasing any hardware, it is important to have some convenience. Simple banking, effortless investment process, and responsive customer support are a must!
You should understand how to choose the right pool for your needs, but it is even more important to start investing in something instead of overanalyzing everything. This notion is especially significant for the crypto industry that rapidly changes every single year making every moment you contemplate instead of acting very impactful.
Best Practices for Optimizing Your Crypto Mining Profits with an Automated Pool
Contemporary approaches to long-term investment are concerned with reliability and potential exponential returns. While just five decades ago all investors focused on searching for ultra-stable stocks, modern financiers and managers believe that focusing on short-term investments with a dangerous risk profile can and usually are better positioned to earn money even in the long run.
The rise of venture capitalists during the web 2.0 boom was evident with many companies receiving funding without even turning profit. You needed to have an idea instead of a working business model. Now, we are witnessing how the house of cards shatters. The new big deal is the crypto industry and its many startups.
Compared to investing directly in new technological platforms and DeFi companies, crypto mining is a very safe investment and offers something that many other asset classes don’t — consistency and real investments. You don’t really own anything when buying a token, but you do own hardware when you engage in mining or use crypto mining automation.
Learning which are the best practices for maximizing profits with an auto-miner is quite important if you are concerned with the long-term success of your investment activities.
- Study the technology. While you don’t have to be a tech-savvy person to start running an automatic node, it is a good idea to understand how everything works. Updating firmware and software and switching to new algorithms require some tinkering on your part. Better yourself and learn new skills!
- Don’t skimp on parts. Some people want to cut costs by purchasing used gear or swapping recommended parts for cheaper alternatives. We won’t even go into details why the latter is wrong, but the former is quite important too. Older equipment will work slower even if it looks like it’s in mint condition.
- Test Bitcoins mining pools before parking your hardware. It is a good idea to give a new pool a couple of weeks and analyze its performance. Work with different groups of miners since you may observe different results depending on who runs the pool. The same can be said about Etherium mining pools.
- Choose the right initial parameters for your equipment. Setting up an automated miner pool can be somewhat challenging for people who don’t understand the underlying technology. It is better to start slow and use recommended settings before experimenting. Use default parameters for a pool that you want to join.
It is important to note that modern auto-miners usually come with local software or a way to connect to server that can monitor the current market situation to identify the best network and algorithm to work on.
This feature is the most important feature of an automatic mining setup. It means that you must create the required conditions for this particular feature to work flawlessly. Using a high-speed internet connection with as little lag as possible and ensuring that you don’t experience power outages are two things that you should be among your top priorities.
How Much Should You Invest in Mining?
For some weird reason, many investors believe that it is appropriate to invest everything they have in something that they strongly believe in. While it can be true in some very rare cases, you need to understand and accept the statistics which say that over 83% of all investors usually lose their money when investing in high-risk assets.
While mining is low-risk compared to buying tokens during an ICO, it is still a much higher risk when pitted against 10-year yield bonds, real estate, and even buying stocks!
Here are several important things that you must remember when investing in mining:
- Do not risk more than you can afford to lose. Disposable income and some portion of your savings are fine sources of capital to invest. However, dumping on a new piece of hardware your emergency fund is definitely not a good idea!
- Dedicate only a certain share of your portfolio to mining. Since you don’t have to run a whole mining farm to benefit from the advantages that investing in mining has, you can simply use a portion of your capital to be invested in a mining pool.
- Do not rely on the automation to do everything for you. While it’s great to have software that can automatically switch you from one network to another depending on profitability metrics, you may want to still double-check what you are mining at the moment. You may know more than an algorithm about the future of any particular token!
The main takeaway
Automated mining pools are quite great at what they are doing — making money for their investors with an impressive level of consistency. However, returns may turn out to be not as impressive as you thought. Despite having many aspects of the process fully automated, you still need to make decisions and choose which tokens to prioritize.