# Crypto mining and its methods

**What is crypto mining?**

Crypto mining is the process by which new coins are entered into circulation, but it is also a critical component of the maintenance and development of the blockchain ledger. It is performed using very sophisticated computers that solve extremely complex computational math problems.

**How much does a Crypto mining rig/machine cost? What are the additional costs associated with the mining process?**

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1.  A mining rig also called a GPU (Graphics processing unit) cost approximately $3,000.
    
2.  Generally, 40% of the value of coins mined is your expense in the form of:
    

-   Equipment costs
    
-   Electricity costs
    
-   Repairs
    
-   Rented space

**A Few Mining Methods:**

**CLOUD MINING**

A process where you rent a mining rig which is owned by another party or large corporation.

They mine the coin for you, collect rent for their machine + other expenses, and the remaining amount is transferred to your crypto wallet in the form of coins earned.

(Coins mined - rent + other expenses = net coins mined & transferred to your wallet)

Cloud mining involves minimized risks & lesser costs.

**CPU MINING (Central Processing Unit)**

Particular rigs with certain specifications are needed to be purchased. Mining coins using a regular laptop or computer might damage the machine due to overheating.

This is a slow and costlier process considering high electricity, rent, & cooling costs involved.

**GPU MINING (Graphics Processing Unit)**

Designed to mine coins using graphic cards

Includes a Processor, Motherboard, Inbuilt Cooling unit, Rig frame, 2-8 graphic cards.

Cost-efficient and relatively cheaper compared to CPU mining.

**How is Cryptocurrency mining revenue taxed?**

Just like other business operations, an income statement is prepared for crypto-mining activities.

Income equals to the value of coins when they were mined (Daily rate of coins earned multiplied by the quantity of coins mined on that date & time)

Expenses like electricity, rent, & cooling costs are written off against income earned in the form of coins.

Mining rigs are reported as long-term fixed assets on the balance sheet which can be depreciated over a period of its anticipated life span. Most assets have an estimated life of 5 years which can be applied towards mining rigs.


![h.webp](https://cdn.hashnode.com/res/hashnode/image/upload/v1650832570825/17vFLzfT3.webp)