Risks and challenges in mining

Effective diversification also requires the use of different equipment. For example, you can apply video cards and asics. At the same time, GPUs are sometimes recommended to be transferred to mining other digital assets, if the rates of the mined coins unexpectedly decrease.

Cryptocurrency forks

Not all coin miners support the idea of crypto mining with asics. Creators of some blockchains and virtual currencies believe that the use of ASICs centralizes the management of digital networks. Therefore, they try to prevent the mining of coins with the help of supercomputers.

To achieve the goal, developers periodically update the program codes of networks – conduct forks. Improvements usually make crypto mining with asics impossible. In such cases, ASICs become useless hardware that can no longer be used in any way.

After forks, cryptocurrency miners are usually forced to buy other equipment – and spend a lot of money again.

To reduce such risks of mining, you need to study your chosen coins. If there are prerequisites for major upgrades, it is better to temporarily refrain from mining cryptoassets.

Release of new asics

The power of graphics cards of the latest generations is usually not much higher than the previous ones. On average, new GPUs of the same series perform calculations only 20-30% faster. This is not critical.

The main risk is related to the release of fresh ASIC lines. Manufacturers of asics often manage to greatly increase the power of mining equipment of new generations. The hash rate of just released supercomputers can be 100% higher than that of older models.

Owners of industrial mining farms buy new ASICs in large batches. This leads to an increase in the complexity of cryptocurrency networks. Therefore, mining with the same computer hardware becomes less efficient. As a result, the profit from mining decreases. Although this does not happen very often, there are still risks.

Technical problems in mining

In 2023, farm owners may also face such risks:

• Equipment failure.
• Difficulty in farm placement.
• Performance spikes.

Breakdown of graphics cards and asics

Any mining equipment has a lifespan. This indicator largely depends on computational loads and the time of daily operation. Also, the lifetime is affected by the efficiency of cooling. Overheating can quickly put the technique out of action.

In the process, the equipment usually works around the clock. It also experiences 100 percent computing loads.

With effective cooling, the technique can survive from 24 months without breaking down.

There have been cases when video cards have worked for more than 8 years. However, this happens very rarely. Usually non-critical breakdowns occur faster. Therefore, miners are forced to incur additional repair costs.

In provincial cities of Russia, there are few masters who know how to restore the boards of video cards and asics. Therefore, service centers send equipment to their larger partners for repair. In such cases, the repair period is from 1 to 2 months on average. During this time, the mining farm will be idle.

To avoid breakdowns, you need to regularly clean the equipment from dust and monitor heating. If the temperature of components rises significantly, it is better to immediately turn off the farm, reconfigure the cooling and ventilation systems. This will increase the service life of the equipment.

Farm placement

In some cases, several mining devices can be installed at home. But most often it is better to mount farms in separate rooms – in basements, in warehouses. This is due to the loud hum of working equipment. The noise will not allow you to sleep peacefully at home, will interfere with neighbors. Sometimes miners are even complained about.

However, installing farms in separate rooms increases the risk of theft. A similar thing happened in Russia in early 2022. A friend of one miner from the town of Vuktyl stole and sold his farm through an ad site for ₽50 thousand.

It is necessary to prepare for the placement of mining installations. It is worth thinking about the security of the farms. For this purpose, you can use:

• Difficult to break locks.
• Surveillance cameras.
• Security services.

Uneven performance

A cryptocurrency farm requires a stable internet connection. But one of the challenges of mining is related to periodic scheduled maintenance by ISPs. Service providers regularly check or repair communications. Scheduled works usually don’t last more than 6 hours each month.

There are also risks of power outages. Utility workers can shut down buildings and even areas for routine maintenance. They usually warn residents about this in advance.

It is impossible to avoid periodic disconnection of the Internet. But if the planned work of the provider is too frequent and long, you should change service providers. Regular power outages cannot be avoided either. But it happens rarely – 1-2 times a year on average.

Legal risks in mining

Officially, the legislation of the Russian Federation does not prohibit and does not allow citizens to mine cryptocurrencies. This is not a type of entrepreneurship. But miners can register an IE and use a simplified taxation system.

Cryptocurrency miners are obliged to give 6% of net profit to the state.

Some lawyers also recommend miners to execute contracts with electricity suppliers for payment of services at industrial tariffs. Such a technique will reduce the risks of receiving fines from the executive authorities of the Russian Federation.

Legal status of cryptocurrencies and mining

The turnover of virtual coins and tokens in Russia is controlled by Federal Law No. 259 “On Digital Financial Assets”. According to Article 14 of this law, cryptocurrencies are not a means of payment. Digital assets are recognized as property. Therefore, transactions with cryptocurrencies need to be declared to the tax service. There is no mention of mining in the document. But by default, any income-generating activity is subject to taxation.

Risks of cloud mining

Crypto mining through hashrate providers is a popular method among beginners. But there are many scammers in the cloud mining market. Because of them, cryptocurrency miners often lose money. Scammers promise high profits, but do not fulfill the obligations.

Summary

Cryptocurrency mining is not a 100% profitable investment. This is due to the risks of mining and its problems. Miners divide them into general and technical.

The table shows the main ways to reduce risks.

An overview of the dangers and problems of cryptomining allows you to understand how to avoid them. There are different ways to mitigate the risks. Together they allow you to buy mining equipment cheaper, reduce losses, save money, use up-to-date asics, increase the service life of the equipment.

Frequently Asked Questions