You are currently viewing Crypto Mining Business vs Crypto Exchange Business

Crypto Mining Business vs Crypto Exchange Business

Crypto mining vs crypto exchange business model

The dawn of cryptocurrency has brought about new forms of business endeavors. And new business opportunities always excite and inspire entrepreneurs. After all, who wouldn’t want to be in an income-generating business with little competition? Crypto exchanges are widely-known business opportunities in the DeFi and CeFi space. Yet, one of the least talked about topics is crypto mining as a lucrative business opportunity.

In this blog, let’s look at what these businesses are, how they compare, their types, and their potential for the future.

In 2009, with the introduction of Bitcoin, mining became a hot topic. It started with simple CPU mining, where people downloaded the blockchain on their laptops and mined Bitcoin by solving hash equations.

Then, as crypto prices went up, mining started becoming more profitable. And that profitability bred competition. That competition encourage people to switch towards GPU mining (gaming rigs). Why? GPU mining is more efficient than CPU mining. They started using computers with graphic processing units, which had a higher output for computing power.

As mining rigs became more powerful, so did the competition, and the price of these types of equipment skyrocketed. However, this did not last for long. With crypto-halving events and a steady rise in complexity of crypto hashing, GPU mining has fallen out of use.

Now, most mining falls within the category of ASIC mining. ASIC (application-specific integrated circuits) are even more efficient mining rigs. The introduction of ASIC mining quickly replaced GPU mining. Why? While gaming rigs (GPU miners) can mine for crypto, that is not their sole purpose.

ASIC mining is a different kind of beast. ASIC devices are for one purpose, and one purpose only, mining as much crypto as possible, as soon as possible. That kind of dedicated piece of hardware mining consistently outperformed the best GPU miners in the market.

As the reliance on hardware mining rigs grew, mining equipment became expensive. A decent ASIC miner with a competent hash power (TH/s) will easily cost up to $10K, at least. Even so, there is no guarantee that it will make the user an acceptable profit margin.

And this is where pool mining comes in as a proper alternative. The majority of users who wish to mine crypto are not tech-savvy programmers. And neither are they interested in the technical aspect of things. They are regular people interested in cryptocurrencies.

Users who do not want to buy special mining rigs or have the time to run blockchain nodes can pay a third-party mining company to do it for them. The company that does the mining pays its users with the piece of crypto they mined while taking a small part of it for themselves. The user will be leasing or renting a part of the hash power.

And this is the idea behind the crypto mining business model.

As of writing this, there are 522 crypto exchanges online. Are they all needed?

Before we can consider the potential of crypto exchanges, let’s look at the history of crypto exchange business model.

Before exchanges, the only way to get Bitcoin was by mining it yourself or arranging a peer-to-peer transaction in forums such as Bitcointalk. Then in 2010, the very first crypto exchange emerged out of Tokyo, Mt. gox. By 2013, Mt. Gox was handling over 70% of all Bitcoin transactions in the market.

Then tragedy struck in 2014 with the infamous Mt. Gox hack compromising the exchange, pushing it into bankruptcy and eventually shut down. In the end, hackers stole 644,408 Bitcoins, worth over $400 million at the time.

The collapse of Mt. Gox created a power vacuum in the market. Exchanges such as VirWox, Coinbase, LocalBitcoins, Bithumb, Bitstamp, and many others tried to seize their glory, but it was not enough. Soon new exchanges emerged, such as FTX, Binance, and Huobi. Crypto exchanges in every country and currency.

Somewhere along the way, the crypto community craved more options. And thus came DeFi exchanges like Waves, IDEX, Bancor, etc. And DeFi helped leapfrog the crypto phase adoption.

And today, we have more cryptocurrencies and crypto exchanges than ever before. Now, let’s get back to the initial question. Are they needed? Do we need crypto exchanges? Yes, we do.

Why? Because crypto is still largely unregulated, and mainstream adoption is still not underway. Crypto right now is like the early internet of the 2000s. There are over 7 billion people on the planet, and only 300 million are using crypto. That’s less than 5 percent of the global population. Imagine that.

I wouldn’t consider that crypto has reached full mainstream adoption until there are 2 billion users. So, we still have ways to go.

Starting a crypto mining business or a crypto exchange are both viable business ideas in 2022. There are more cryptocurrencies than ever, which is promising for mining and trading. More traders and miners are good for business.

Comparatively speaking, both mining and exchange businesses models have drawbacks. For example, an ASIC miner is a depreciating asset. The moment you buy the hardware, its value starts dropping. Newer models of hardware mining equipment become available each year, so constant upgradation is necessary. If the business cannot keep up with the competition, you will lose your users to your competitors.

Likewise, the crypto exchange platform requires constant updates and upgrades and a dedicated team of software experts to develop better platform versions. The only consolation is that, unlike a massive one-time expense with crypto mining each year, you will need to spend resources spread out throughout the year, which is more manageable.

When it comes to cost, expenses, and profits, both are much the same. Launching a crypto exchange requires just as much effort as setting up a crypto mining facility. The only difference is that mining is limited to the crypto you can mine, but an exchange covers all cryptocurrencies. Hence an exchange business has a bigger market to rely on, thus, more flexibility. Also, securing access to macro resources such as electricity for a crypto exchange is far more efficient than mining.

But, regulations for crypto exchanges are far more strict when compared to a crypto mining facility. Most governments consider crypto as a threat to their monetary policy than as a boon; due to its history in money laundering and terrorist activities. However, more streamlined govt guidelines and cyber security is changing the crypto risk factor for the better.

Still, in the grand scheme, I would give a crypto exchange business more potential than crypto mining. Especially; in the case of a global crypto mass adoption.

Starting a crypto exchange business may seem like a task, but it is easier than you think. Definitely, easier than starting a crypto mining business. Whether a crypto mining business or a crypto exchange business, keep in mind that professional support will always help any startup.

There are many independent crypto exchange script providers in the broader market. Approach a professional crypto exchange software provider with positive reviews, experience in the crypto field, and a portfolio of successful projects. Finding skilled programmers and developers for a cryptocurrency exchange startup may be difficult, which is why a technical support firm will be most helpful.


New to trading? Try crypto trading bots or copy trading

Leave a Reply