Mining is how new units of cryptocurrency are released into the world, generally in exchange for validating transactions. While it’s theoretically possible for the average person to mine cryptocurrency, it’s increasingly difficult in proof of work systems, like Bitcoin.
“As the Bitcoin network grows, it gets more complicated, and more processing power is required,” says Spencer Montgomery, founder of Uinta Crypto Consulting. “The average consumer used to be able to do this, but now it’s just too expensive. There are too many people who have optimized their equipment and technology to outcompete.”
And remember: Proof of work cryptocurrencies require huge amounts of energy to mine. It’s estimated that 0.21% of all of the world’s electricity goes to powering Bitcoin farms. That’s roughly the same amount of power Switzerland uses in a year. It’s estimated most Bitcoin miners end up using 60% to 80% of what they earn from mining to cover electricity costs.
While it’s impractical for the average person to earn crypto by mining in a proof of work system, the proof of stake model requires less in the way of high-powered computing as validators are chosen at random based on the amount they stake. It does, however, require that you already own a cryptocurrency to participate. (If you have no crypto, you have nothing to stake.)
How Can You Use Cryptocurrency?
You can use cryptocurrency to make purchases, but it’s not a form of payment with mainstream acceptance quite yet. A handful of online retailers like Overstock.com accept Bitcoin, but it’s far from the norm.
Until crypto is more widely accepted, you can work around current limitations by exchanging cryptocurrency for gift cards. At eGifter, for instance, you can use Bitcoin to buy gift cards for Dunkin Donuts, Target, Apple and select other retailers and restaurants. You may also be able to load cryptocurrency to a debit card to make purchases. In the U.S., you can sign up for the BitPay card, a debit card that converts crypto assets into dollars for purchase, but there are fees involved to order the card and use it for ATM withdrawals, for example.
You may also use crypto as an alternative investment option outside of stocks and bonds. “The best-known crypto, Bitcoin, is a secure, decentralized currency that has become a store of value like gold,” says David Zeiler, a cryptocurrency expert and associate editor for financial news site Money Morning. “Some people even refer to it as ‘digital gold.’”
How to Use Cryptocurrency for Secure Purchases
Using crypto to securely make purchases depends on what you’re trying to buy. If you’d like to spend cryptocurrency at a retailer that doesn’t accept it directly, you can use a cryptocurrency debit card, like BitPay, in the U.S.
If you’re trying to pay a person or retailer who accepts cryptocurrency, you’ll need a cryptocurrency wallet, which is a software program that interacts with the blockchain and allows users to send and receive cryptocurrency.
To transfer money from your wallet, you can scan the QR code of your recipient or enter their wallet address manually. Some services make this easier by allowing you to enter a phone number or select a contact from your phone. Keep in mind that transactions are not instantaneous as they must be validated using proof of work or proof of stake. Depending on the cryptocurrency, this may take between 10 minutes and two hours.
This lag time, though, is part of what makes crypto transactions secure. “A bad actor trying to alter a transaction won’t have the proper software ‘keys,’ which means the network will reject the transaction. The network also polices and prevents double-spending,” Zeiler says.
