A Complete Beginner’s Guide to Cryptocurrency Mining
Bitcoin in 2017 went from under $1000 all the way to over $14,500 for a Bitcoin, signifying its rising appeal for mainstream investors. Early investors in Bitcoin and Bitcoin miners were able to make large profits since they were able to access Bitcoin more cheaply in prior years.
If you’re only now getting started with cryptocurrency mining, you might feel you have missed the train, but fear not. New miners are getting in still and there are significant opportunities for the serious cryptocurrency miner. Below, we show you everything you need in order to get started mining Bitcoins.
Master Cryptocurrency Like a Blockchain Developer
You might be curious what cryptocurrency is and how the technology works. To a blockchain developer, cryptocurrency is the logical end result of digitizing money.
What is Bitcoin?
Bitcoin (BTC) is the original decentralized cryptocurrency, a digital form of currency that uses blockchain and cryptography to validate itself. — TechRepublic
Bitcoin is just like digital money on your bank debit card, except there is no central issuing authority. The money is mined by computers everywhere around the world, and anyone can mine it.
Setting up a Bitcoin Wallet
Bitcoins are encoded in a digital format with public and private keys. Since Bitcoins are a digital token, anyone who knows the private keys of a Bitcoin can spend them. This makes keeping your Bitcoins secure critical to avoid theft. In order to store Bitcoins securely, you will need a wallet.
The first step to setting up a wallet is to get one from a wallet provider. You can download an offline wallet such as Electrum, Exodus, or Jaxx. Alternatively, you can store your public and private keys on a piece of paper. Online wallets are also an option for storing cryptocurrency. To create an online wallet, you can try Coinbase and Xapo. Online wallets are the least secure since someone else holds your private keys and could spend the Bitcoin if they wanted.
Understanding How Bitcoin Mining Works
Bitcoin mining is the process of creating new Bitcoins. How it works is that computer processing power has to be applied to solving a cryptographic puzzle. Only correct solutions result in a Bitcoin being produced.
From its inception, Bitcoin has a set limit on the total number of Bitcoins that will ever be mined. This makes it progressively harder to mine a Bitcoin over time, raising the cost of producing a Bitcoin. Due to the limit on the eventual supply of Bitcoin, the price is presumed to also rise over time, stabilizing at somewhere near its maximum level when the last Bitcoin has been mined.
Because cryptocurrency production depends on computing power, it requires technology investment as well as electricity supply.
In addition, cooling costs are a factor, as cryptocurrency hashing machines get hot after running continuously and have to be cooled. Due to these factors, the costs of mining Bitcoin vary greatly between different countries.
Cryptocurrency miners generally prefer to operate in countries with cheap electricity, low cooling costs, and where the law has not banned the production of cryptocurrency.
The following chart, based on data from Steemit, shows the five leading nations when it comes to Bitcoin production.
Buying Your First Bitcoins
To buy Bitcoin for the first time, you will need to visit a cryptocurrency exchange. These are online exchanges where you can buy or sell Bitcoins. Some of the biggest exchanges around the world are BitStamp, Coinbase, Local Bitcoins, and Bitfinex.
You can pay for cryptocurrency using a mix of credit cards, debit cards, bank accounts and other payment methods.
How to Mine Bitcoin and Make Money
It used to be possible to mine blocks on your PC and do so profitably. As the algorithmic difficulty of producing a Bitcoin has increased, however, it’s no longer highly profitable to mine on normal hardware. Your options are to buy cloud processing hash rate or set up your own rig.
Buying Cloud Mining Contracts
There are companies that procure the hardware required to mine cryptocurrency and make it available to rent. When the hardware successfully solves Bitcoin cryptography computations, you will get a share of the reward.
This is one of the low-cost methods for getting into cryptocurrency production. Some cloud mining platforms to check out include:
- Genesis Mining – one of the largest cloud cryptocurrency production companies, lets you pay for hash rate and start hashing for cryptocurrency instantly
- Hashing24 – a miner with cryptocurrency production data centers in Georgia
- Hashnest – a mining farm operated by Bitmain, the manufacturer of specialty cryptocurrency hashing ASIC computers
- Eobot – a cryptocurrency exchange with cryptocurrency cloud mining facilities that allow customers to rent ASIC processing power
Setting up Your Own Mining Rig
If you’d prefer to control your own hardware, setting up your own cryptocurrency mining rig is the way to go. While experts are able to build their own custom computers with powerful specs to mine Bitcoin, the best path for a beginner is to purchase ready-made Bitcoin-mining hardware.
Major manufacturers like Bitmain are now producing specialty Bitcoin mining machines known as ASICs (application-specific integrated circuits). ASICs can end up costing a lot of money, especially if you go for the higher-end models. However, high-end ASICs will be more powerful, and ultimately offer the highest chances of making money from your mining activities.
You can buy ASICs from brand-name suppliers such as Bitmain, BitFury, and Avalon. You will also need a case for the ASIC, as well as mining software. Bitcoin mining software options include GUIMiner, BFGMiner and EasyMiner.
Joining a Mining Pool
Once you have your mining rig set up, you should join a Bitcoin mining pool. A pool is a network-connected group of miners all working on the same Bitcoin blocks.
Mining pools make it possible for you to participate in solving big cryptographic blocks without investing upfront in all the hardware that would require. Rather, your ASICs share the work, and the reward, with ASICs from thousands of other miners.
Some cryptocurrency pools you can join are SlushPool, BitMinter, and Antpool, which happens to be among the largest pools on the planet.
Once you’ve signed up at the pool, configure your mining software to connect and begin processing units of work from the pool. You will then start receiving your share of the reward to your Bitcoin wallet.
Cryptocurrency Mining Gear Comparison
There are many moving parts in mining Bitcoin that will determine your ability to profit from your cryptocurrency production.
Some of these include the price of Bitcoin itself, the availability of liquidity on the exchanges, and the actions of regulators. The key factor you control, however, is the choice of gear you access for mining.
Buying Better Hardware for Mining
Better hardware will require higher outlays of money, but also comes with the fastest rate of earning cryptocurrency and potentially recouping your initial equipment investment.
Below, we chart the average customer rating of five of the best Bitcoin mining rigs based on Amazon consumer ratings.
Keeping Energy Costs Down While Bitcoin Mining
To stretch your mining budget as far as possible, you will want to find ways to minimize your energy costs.
One way is to shop around for the cheapest electricity supplier. If you have access to alternative sources of power such as solar, wind or hydroelectric, that can also save you money on energy.
Many large cryptocurrency miners have found the best option is to relocate operations to a location with lower energy costs.
Cooling costs are another important cost factor. Locating mining rigs and mining farms in cold climates can reduce cooling costs.
The profitability of your mining activities will hinge on how much processing power you are able to deploy, as well as your energy and other operating costs.
Is Bitcoin Mining Worth It?
Cryptocurrency mining is more difficult now for the user on a consumer-grade personal computer. It is really important to use ASICs specially created for this purpose in order to see a positive return on investment.
You can use this Bitcoin mining profitability calculator by 99Bitcoins to calculate your likely profits from cryptocurrency mining.
Looking to the future, Bitcoin mining is here to stay. As cryptocurrency usage rises in the years ahead, miners will continue making good profits. Now is a great time to begin setting up your mining farms.