On the surface, mining for gold and mining for cryptocurrency have little in common. One involves hard labor to unearth raw gold from a rugged landscape. The other relies on a computer (most likely indoors and in an air-conditioned room) to verify cryptocurrency transactions and, in turn, receive an award in crypto tokens, the only time new tokens are created. And unlike gold miners, crypto miners are essential to regulate cryptocurrency, which isn’t regulated by a bank or governmental body like most physical money is.
Yet, at the heart of both types of mining is the hope of “finding” wealth, claiming it as your own, and living well because of it. So let’s take a look at the similarities of mining during the California Gold Rush between 1848–1855 and mining for cryptocurrency today, plus the tips that apply to both.
Do your research
The most successful gold miners didn’t start digging just anywhere and hope for the best. They made a plan. Just like you can’t wake up one morning and say, “I’m going to mine for cryptocurrency!” And then hop on the computer and go.
Gold miners of the 1800s had to determine where exactly to mine. After all, the gold fields of Northern California were vast, and some stakes had already been claimed.
Crypto miners need to decide their “where” as well because not all cryptocurrencies can be mined. The most popular digital currency, Bitcoin (BTC), can be mined, but it also has the most competition.
Fun fact: While gold created the biggest mining frenzy, the individual who made the most money mining in 19th-century America didn’t strike gold in California but struck silver in what is now Nevada. In 1874, John McKay hit silver ore worth $20-$25 million, which translates to roughly $50 billion in today’s money. The find made McKay’s mining company, the Bonanza Firm, “the wealthiest firm in America and prospectively the richest in the world,” according to the Spirit of the Times, a weekly newspaper from that period.
While Bitcoin may be the first cryptocurrency that comes to mind for most of us, the new crypto miner should consider mining for other digital currencies, such as Ethereum (ETH) or Monero (XMR). Your current computer augmented with a graphics processing unit (GPU) will likely suffice for mining these currencies. (This isn’t the case with Bitcoin, which requires a more expensive setup.) Expect to pay less for electricity than if you mined for Bitcoin as well.
Plus, less competition often equals a bigger payday. John McKay, who first attempted and failed to make his fortune during the California Gold Rush, can attest to that.
Consider joining forces
The earliest gold diggers of the California Gold Rush weren’t “digging” for gold; they were collecting it from streams with pans, not unlike plucking a daisy from a field of daisies. The “forty-eighters,” named for the year 1848, preceded the forty-niners who made the Gold Rush an official phenomenon.
A solo gold-mining entrepreneur could easily make big money in those early days. But as the Gold Rush continued, less gold was lying around for the picking. You had to dig deeper to strike gold, and to do that effectively, you had to join forces.
A Long Tom, for example, was a popular gold-mining tool that required several men to operate it. At least two men would shovel rocks, soil and potentially gold into it, another might direct water into the contraption so the light sand would fall through a mesh, and yet another man would sort out the leftover large rocks from any gold nuggets.
Similarly, members of a crypto mining pool join forces so they have more computer power than they would individually. Together, their computers can solve more problems more quickly, just like gold prospectors could mine more gold together than they could on their own.
The second part of this series gets into the tools needed to mine and more!