As I wait for my mining rig hardware to arrive from Amazon, I've been thinking a lot about mining and all the different types there are. I think it's a fascinating topic, and Steem in particular has a very unique type of "mining". In general, it seems like mining is such a solid investment move for anyone who can handle it. You not only get profits from the rise in value of the coin, but you get new coins as well!
None of this is investment advice or advice of any kind. I'm pretty dumb and you probably shouldn't listen to a single word I say, actually.
PROOF OF WORK - CLASSIC MINING
This is a very straightforward way to mine – on the most simple level, you run a node of the network (or join a pool that does so), and the work your computer puts in, by way of solving some kind of algorithmic problem, is rewarded with coins.
(Just as an aside, the fact that news stories and blog posts are popping up left and right decrying the fact that one bitcoin transaction uses more electricity than a decade of electricity used by the entire continent of Africa, or whatever the statistic is they are claiming – it’s ridiculous. Have you ever heard anyone complain about how much electricity banks use? Think about all their buildings, public locations, corporate offices, database centers, and on and on and on. Ever hear a peep about that?)
I also think it’s awesome that GPUs are used for mining. It’s like the ultimate revenge of the nerds. We used GPUs in our gaming rigs in high school, and now we are using them in our mining rigs…
I’m so freaking excited to build my first GPU mining rig. It’s not just the money aspect, although I do hope it will end up being profitable. It’s being able to participate directly, to be on the inside, not as a spectator and investor alone. How incredible is that?
I’m already 10 steps ahead of myself and I’m daydreaming about buying some ASIC rigs as well.
PROOF OF STAKE – THE NEW THING
People seem to think POS is the new way to go. It is simply securing the network through running a node with your wallet “open”. Those with a ‘stake’ in the platform thus have skin in the game that way. Ethereum is famously attempting to transition to POS in the near future.
I heard Dan Larimer on his Epicenter podcast interview (listen to it!!!) say that one of the issues with POS is that the rich get richer and those without a significant starting investment can’t really have a say in any way. I think it’s a pretty interesting point. The only way to make any profit from staking is to buy a whole bunch of coins first.
In practice, I’ve found investing in staking to be extremely alluring in theory, but disappointing in practice. The very high ROI coins tend to go down in value quickly, which makes sense, and the lower ROI ones just aren’t terribly exciting. Sure, 10% ROI or whatever seems great, but it seems more worth it to invest in a coin that has a better likelihood of rising in value.
The one I actually am happy with is Diamond (DMD), which claims a 25% ROI in a year. I actually just got a staking reward yesterday for the first time, and I’ve been staking for several weeks. It was about 5% of my total holdings. DMD also has risen from about $10 to $17-19ish range, so all in all it’s been a solid investment.
I also like the idea of combining PoW mining with PoS mining – meaning, after you mine your PoW coins, you trade them for a PoS coin and get even more new coins that way.
I’ve never bought a masternode for staking, because the appealing ones are too expensive, and the returns don’t seem so great in general. Congrats if you invested in a Dash masternode at some point, it’s worth a cool mil or so at this point.
Decred has an interesting system where you basically lock up a certain amount of tokens for the right to buy a ticket, enters you into the contest of discovering a block (forgive me if I am fudging this) and then, if your wallet is online when you ‘win’, you get a good reward. The numbers work out to be pretty profitable but the experience was mind-bendingly difficult to figure out. At the end, I realized I would need at least several thousand dollars for one ticket. Ehhh, nope.
DELEGATED PROOF OF STAKE
Lisk uses DPoS, but I found it a bit unpleasant to be involved with as well. You have to pay 1 lisk to vote (!!) and then you have to try and figure out who is going to give you a good return when you vote for them, and you don’t really have a clue who you are voting for.
Steem uses DPoS as well, and I can vote for witnesses whenever I want! For free! Yay.
Anyway, I don’t have to tell you how Steem works, obviously. But I have lots of rambling thoughts about how many different types of mining there truly are:
WITNESSES – These are the folks elected to produce blocks. They are basically our elected officials. Decentralization be darned, we gotta have leaders! HA!
Anyway, that strange thought aside, these people can make mad money, especially if you are one of the top 20. I don’t see myself ever attempting to do this, as I would much rather toil away in anonymity than have any sort of spotlight or attention.
PRODUCING CONTENT – If you are a very talented writer, artist, photographer, youtuber, or any type of talented social content producer, you can make good money on Steemit. Despite its myriad of flaws and growing pains, cream still seems to rise to the top on Steem. It might not be immediate, but people will notice good stuff eventually.
Me, I’m not really that kind of person. But I can still write take part in this great experiment in a number of other ways.
COMMENTING – This is highly underrated in my opinion. One reason is because the dominant Steem frontend, Steemit, conveys comments in a very casual, off-hand way, much like Reddit. I personally would love to see a forum/discussion board-like implementation of Steem gain traction. And yes I know of ChainBB, but for crying out loud, they charge 15% of your rewards. That’s certainly fine if you want to post there, but it’s way too much for me to stomach.
Anyhow, this is a great way to both make money and contribute meaningfully. It’s also a lot of fun! Just be genuine and have fun and you’ll see, you don’t have to stress about coming up with topics to post about, and you’ll make steem buddies and steem monies and everyone wins!
As a side note, please everyone listen: stop it with the meaningless comments (“Amaazing content sir, Please sir , follow me and upvote!!”).
CURATING: Ehh, there are tremendous flaws with Steem’s implementation of curation that I won’t go into. It’s exceedingly hard to directly make any kind of significant profit when voting for other people’s posts. I still do it for some reason, though. It’s seemingly an incentive that is significantly more nuanced and complex. I vote for other people’s content because I like it, and somehow that attaches me to the system more and more over time…
DELEGATING YOUR STEEM POWER FOR RETURNS: This is a fun one. It’s kind of like a hyper-POS if you do it right. It does take away from your ability to engage by upvoting others, which is a bit of a bummer, but it’s also a way to support causes you like (such as Utopian-io) by delegating to them.
BUILDING BOT SERVICES: This is the other side of the coin – there are bots which operate by taking payments and giving large upvotes in return. The way they get their SP is often through others’ delegation, which they pay back with some percentage of their earnings. Bots are a contentious issue but I think they have their place, and I’ll just leave it at that.
OTHERS: The amazing thing about Steem is that I could go on and on – want to contribute to open source software or write translations or technical tutorials? Utopian-io is your place. Want to run or participate in fun meme contests? Oh yeah, we’ve got that. I just read something about some kind of MMORPG being built on the Steem blockchain – it’s really an exciting time.
I’d really love to see a twitter replacement, to be honest. I think it’s crazy that one of the best places to go to get a pulse on the crypto world is twitter. Steem could do that! Zappl is trying to do that, and I certainly wish them all the best, but it seems like it is slow moving at best. We’ll see.
Anyway, thems are some thoughts I had about mining. I’m building my first GPU rig next week, but for now, Steem is the best mining opportunity around today, in my opinion. Keep on steemin’!