It’s tough being a miner these days.
The drop in the value of cryptocurrency and, to a lesser extent, the has taken a toll on mining operations, particularly the individual computer owners and smaller organizations that find themselves competing against huge companies with thousands of mining rigs.
The notion of putting computers to use to generate cryptocurrency or tokens on the blockchain has made millionaires of early adopters and across the globe. But as larger mining operations make the space more competitive and both crypto prices and the rewards for adding new blocks continue to decline, other options exist to earn money from playing an active role on the blockchain.
Masters of Their Domain
One option, like mining, brings computer processing power to bear on the core functions of the blockchain. Instead of solving the mathematical problems that allow miners to add new blocks to a chain, however, “masternodes” perform specialized functions on blockchains, such as validating transactions. In return, their operators are compensated for their work with tokens, providing a source of income similar to the reward provided to miners.
Do masternodes seem too complicated? Mining-as-a-service (MaaS) providers host and maintain the required hardware for mining, for a price.
One wrinkle is that along with devoting processing power, blockchains typically require masternode operators to purchase, or “stake,” coins to assume the role. Doing so, however, often also offers operators a broader governance stake in decentralized networks.
The website lists more than 75 blockchains open to new masternodes; arguably the best known among them is dash (), a cryptocurrency that evolved out of bitcoin (). As with mining, the return on investment (ROI) depends largely on the current and projected future value of the blockchain’s token, particularly with the sunk cost of staking tokens to become a masternode.
“More risk-averse investors who nonetheless want to participate in the hot cryptocurrency ecosystem can look into masternodes as a way to earn a solid passive interest in addition to the appreciation of the underlying token itself,” Chain Intelligence’s Cathy Go. However, the approach has one thing in common with mining, she adds: “Setting up a masternode remains technically difficult, making it an unlikely choice for everyday investors.”
Putting the ‘G’ Back in GPUs
The 2017 runup in crypto prices led to price hikes and shortages of the graphics processing units (GPUs) that power the lion’s share of calculations that drive mining for currencies like bitcoin. This year’s more volatile market and declining crypto values have led to a .
In the view of some companies, that provides an opportunity for GPUs to be used for the purpose they were originally intended: processing graphics. For example, Otoy’s will offer individual computer users the opportunity to pool their GPU processing power for large graphics rendering projects instead of mining, in return earning the network’s token for their efforts.
RNDR’s founders argue that the growth of virtual and augmented reality (VR and AR, respectively) are driving demand for GPU processing time. “Rather than just hashing random numbers [in mining], processing rendering jobs in the Render Token network results in a social benefit by providing necessary services while guaranteeing a reward,” according to .
Mining as a Service
Both of the preceding alternatives to mining require technical know-how, as well as investments in specialized computing hardware. Another option, however, is to essentially lease someone else’s hardware to do cryptocurrency mining for you.
That’s the premise of mining-as-a-service (MaaS) providers, which, like their cloud-based software-as-a-service (SaaS) inspirations, host and maintain the required hardware for mining, for a price.
Typically located in areas with low energy costs such as Canada, a number of companies, including , and , offer MaaS services. For a flat fee, typically based on the of the mining power the buyer is “renting,” participants get whatever crypto their share of the mining power earns. The difference between the price they pay for the service and the value of the currency they earn is profit; most sites have a calculator to let would-be customers calculate ROI based on current crypto prices.
MaaS can be profitable for individual miners and the companies that provide the services. For DMG, MaaS operations provided the majority of the company’s revenue in the second quarter of 2018, “which uniquely insulates DMG from fluctuating bitcoin spot price volatility,” the company said in its .