One of the unique selling points of cryptocurrencies is that the money’s production takes place outside of the control and remit of central banks.
One of the unique selling points of cryptocurrencies is that the money’s production takes place outside of the control and remit of central banks. In fact, the entire process is a democratic one, as anyone with a powerful enough computer and access to the Internet can theoretically play a part in the process.
Manufacturing physical currency is complex and expensive, and on the face of it, mining Bitcoin and creating other digital coins seems much less complicated. However, various statistics about the power consumption levels currently used to make Bitcoin alone show that they range in scale from those of medium to large nations to entire global metal production industries.
Whatever the truth of these claims may be, the fact is that individuals lack the processing power to make their own digital coins feasible, and of course, the technical knowledge and expertise needed is also far beyond that of most casual cryptocurrency supporters.
A new approach
Anyone trading in cryptocurrency CFDs will be interested in an innovative approach to this situation. A new company is trying to change the whole dynamic surrounding digital coin production with a device that will make cryptocurrency mining an achievable reality for average users.
Coinmine, a startup based in Los Angeles, California, claims that its new $799 (£626) device allows “a new level of accessibility into an otherwise confusing activity and makes crypto easy for everyone.”
Essentially promising a plug-and-play style of accessibility to the process of producing digital coins, the company’s offering involves both a physical device and phone application. The device receives power from the mains and needs a Wi-Fi connection to perform the actual task of mining, while the phone app gives users the option to switch between various cryptocurrencies.
This choice can be based on price movements, and the MineOS operating system will initially support mining for Ethereum, Ethereum Classic, Zcash and Monero. The system will also work with Bitcoin’s Lightning Network, which means that users will be able to earn fees by routing transactions to the cryptocurrency’s blockchain.
Money
Coinmine will make its own money by taking a 5% cut from each mining transaction as well as from the initial sales income of the device and app. The ambitious startup has raised $2m (£1.56m) from investors already, including Arrington Capital and Coinbase Ventures.
Whether it will be a profitable enterprise for users is a valid question. The severe drop in cryptocurrency prices this year combined with electricity costs might make success a bit of a stretch. Futurism magazine calculated that at current rates, many in the US would only make negligible profits from using the device. In its examples, mining for Ethereum would turn a profit of $1.37 (£1.07) per month, and those mining Monero would gain a profit of $0.70 (£0.55) per month. However, users mining Ethereum Classic would actually incur a loss.
New currencies
Perhaps one of the most interesting aspects of the Coinmine concept came to light via the company’s response to Futurism’s article. Coinmine CEO Farbood Nivi said that the company has plans to support cryptocurrencies immediately after their launch and before they list on cryptocurrency exchanges.
This would mean that due diligence can take place on a promising new cryptocurrency, and users could then mine it before it lists, most likely raising its price. The chance to get involved in a new digital coin can provide opportunities that more established cryptocurrencies do not have, so in terms of CFD trading, this could be a significant area that opens up a wider playing field.
Relative strength
Using the Relative Strength Index (RSI) for CFD trading would obviously not apply in these circumstances, as the “momentum oscillator” approach can only be effective over a set period of time.
However, once the new currencies list and start to exchange, traders can compare recent gains and losses and accurately measure the speed and change of price movements. RSI could then help CFD traders identify momentum in a new cryptocurrency and use their own strategies to gauge the likelihood of success,
Regulatory impact
While the relative lack of regulatory control over digital coins is one of the many aspects of the appeal that they have for forex CFD traders, new structures for governing cryptocurrency mining are cropping up in various territories. Of course, one of the biggest areas coming under the spotlight is the actual production of digital coins, and various financial regulatory bodies across the world are looking for ways to seize back control.
However, as well as the threat of government-level interference, centralised mining operations for some of the current large currencies also factor into the overall picture. In terms of the ultimate success or failure of Coinmine and any similar initiatives, the sheer scale of these operations make them significant influencers on the cryptocurrency world.
Future implications
At the moment, individual miners who go on to become players in the markets find themselves reacting to the actions of large mining conglomerates that control availability. So, whether a new company can make an impact on the big-picture crypto scene by creating a viable, sustainable and profitable model for individual miners over the long term is a question that many will avidly look to see answered.