Part of the spiel for cryptocurrencies is that they democratize money production. Instead of a centralized authority being responsible for manufacturing physical currency, anyone with a computer and an Internet connection can take part in the process. At least in theory.
The current reality of cryptocurrency is far from that ideal. At the time of writing, the power from the millions of computers on the bitcoin network is close to what Denmark consumes annually. The scale and power of mining operations make mining cryptocurrency financially unsustainable for many everyday users — to say nothing of the technical knowledge and expertise required to get involved.
But a new company is trying to flip that dynamic on its head. Coinmine, a Los Angeles, California-based startup, is designing a device that it says will bring cryptocurrency mining within the reach of average users. Specifically, the company claims that its device, which is priced at $799, will provide “a new level of accessibility into an otherwise confusing activity, and makes crypto easy for everyone.”
To accomplish this plug-and-play accessibility, Coinmine is designing a physical device and phone application. The physical device, which needs to be connected to a power outlet and local WiFi connection, does the actual mining while the app enables users to switch between different cryptocurrencies for mining based on price movements. The device’s operating system MineOS will power mining. In its first iteration, Coinmine will support mining for Ethereum, Monero, Zcash, and Ethereum Classic. It will also work with bitcoin’s Lightning Network, enabling users to earn fees from routing transactions on the cryptocurrency’s blockchain. Coinmine will take a five percent cut from each mining transaction. The startup has already raised $2 million from notable investors, including Coinbase Ventures and Arrington Capital.
Will Coinmine Be Profitable for Users?
Given the crash in cryptocurrency prices this year, that might be a valid question to ask of Coinmine. Online publication Futurism plugged in average electricity rates in the United States and current prices for cryptocurrencies into an online calculator and found that, at current rates, users will make negligible profits from using the device. Mining for Ethereum will bring in a profit of $1.37 per month while Monero mining will result in a profit of $0.70 per month. Users mining Ethereum Classic will operate at losses.
In response to the article published in Futurism, Coinmine CEO Farbood Nivi said the device has future plans to support cryptocurrencies immediately after their launch and before they are listed on cryptocurrency exchanges. This means that users can do their due diligence on a promising cryptocurrency and begin mining it before it is listed on an exchange (and its price goes up) to make profits.
A number of other questions remain unanswered. Some states like Washington are already considering new rate structures for cryptocurrency mining and that will likely affect mining profitability further. There is also the bigger question of supporting mining for cryptocurrencies that already have centralized mining operations. Individual miners who become players in the markets are at the mercy of large mining conglomerates that control the cryptocurrency’s availability in the market. Whether this can be a sustainable and profitable proposition for individual miners in the long term remains to be seen.
Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns 0.21 bitcoin and 1 Litecoin.