Bitcoin is likely here to stay. Its value remains volatile and unpredictable, but it has come a long way from the bitcoin of four or five years ago — left for dead and dismissed as a fad. Bitcoins are still around, and people are interested in learning what bitcoin is, how to get them, whether as a currency or an investment.
The bitcoin industry has advanced so much that owning bitcoin is now as simple as downloading a bitcoin wallet and making a purchase. That works well for small investments. But not everyone is content with buying a little bit of bitcoin. For those interested in the actual process of finding bitcoins, there is bitcoin mining.
Bitcoin mining isn’t easy, and it’s not for everyone. It is expensive, so you will need to make sure you have the necessary funds before you give it a shot. In February 2018, EliteFixtures published the findings of a study determining the cost to mine 1 BTC in different countries. To mine just one bitcoin in the United States, it costs $4,758. Hardware, software, electricity and maintenance add up awfully fast in the mining world.
It’s costly, and making money off of it can take years, if it happens at all, but it’s still possible to break even or potentially make a profit (bitcoin value as of this writing is hovering near $7,000). Most of all, you’ll need patience. You’re not the only one who has decided to get into mining, and so many different miners and pools means this will take some time.
So if you have the funds, space, time, electrical capacity and drive required to mine bitcoins, we’ll help you learn a little more to see if it’s right for you.
What Is Bitcoin Mining?
You may have heard about people getting rich quick through mining, but the intended purpose of it isn’t just acquiring bitcoins. Bitcoin mining is the process of validating transactions on the blockchain. For a block to be added to the blockchain, a computer currently mining bitcoin (a “node”) has to successfully solve math puzzles known as a proof-of-work system. Once it’s successfully solved, the block and its hash can be added to the blockchain, and the node that solved it is rewarded with bitcoins.
So the goal of mining is actually to take part in the verification and make sure transactions run smoothly. But that reward is an incredible incentive and in large part why people choose to give mining a try. In 2018, the reward for successfully mining a block is 12.5 bitcoins. As of this writing, that translates to $92,292. That’s pretty good walking-around money.
If you’re looking to get in, though, get in while the reward is still 12.5 BTC. There are supposedly 21 million bitcoins, and after every 210,000 blocks mined, the number of bitcoins released is halved. It happens roughly every four years, and that means in the next few years, it’ll go down to 6.25 BTC.
With the potential for a payday so tempting, more and more people every day decide to start mining. That has made it more difficult to actually mine bitcoins, but it has also meant that there are more ways than ever to break into mining.
Cloud Mining vs. Personal Mining
If you’re looking to do your own bitcoin mining, the ways you can do it are generally broken up into two categories: Personal mining and cloud mining.
Personal mining is pretty much what it sounds like: Bitcoin mining using your own personal computer and equipment, oftentimes right in your own home. Though it’s possible to attempt mining on a laptop or home PC, it takes up quite a lot of energy and space on the computer, and it won’t be powerful enough to bring in bitcoins anytime soon. GPUs (graphics processing unit) and ASIC miners are often used in cases like these, as well as the necessary software.
What keeps some people from doing this, though, is the running cost of maintaining your own equipment — not to mention the absurd electricity bill mining can cause. For people who don’t want all that hassle, cloud mining has become a popular alternative.
What is cloud mining? It’s bitcoin mining via rented equipment, often stored at a database. The cloud mining providers get paid for their assistance, and you potentially get bitcoins.
Cloud mining comes with pros and cons. The pros — not having to worry about electricity costs and maintenance — are solid. But the biggest negative is a real killer: It’s very easy to scam people via cloud mining. If you’re interested in it, do as much research as is humanly possible to know that you will be working with a reputable cloud mining service, and that you are not being defrauded. TechRadar listed some of the more popular, respected outlets for cloud mining; if you can’t find something similarly reputable about the cloud mining service you’re researching, run.
Growth of Bitcoin Mining
Mining isn’t what it was in the late 2000’s, when the mysterious bitcoin founder known as “Satoshi Nakamoto” mined the first 50 bitcoins. Now, enough people are mining and the hardware has developed at such a rapid pace that bitcoin mining as an industry takes up an entire country’s worth of electricity.
It was simple enough back then, with a CPU sufficing to mine. But as more people got involved, the calculations got more difficult to solve and added more competition, and more firepower was required for miners to realistically compete. Quickly this shifted to aforementioned GPUs, and mining was suddenly something that could bring in other businesses; the need for powerful GPUs set large companies like Nvidia to developing them, turning them into intriguing investment options.
It was only a matter of time before hardware built specifically for mining was developed, and thus “application-specific integrated circuit” miners were born. The first successful ASIC miners, designed specifically to perform the calculations necessary for mining cryptocurrency, were released in 2013 and continue to be a mainstay.
These advances require more power, more electricity, more space to hold them. Additional expenses and competition made bitcoins harder to mine than ever, and not everyone has room in their home to run everything. For these reasons, many miners began combining their resources.
What Is a Mining Pool?
It has become increasingly common for miners to join mining pools, where resources are pooled together and the nodes are combined to try and successfully solve proof-of-work calculations. Many pools, as they’ve grown in size and power, require membership fees. When bitcoins have been successfully mined, the reward is spread out among pool members.
That does mean you won’t be getting the full 12.5 BTC, instead receiving a much smaller payout. You may not be thrilled with that.
Any miner would love to just mine by themselves and get that massive reward, but with the massively increased difficulty of successfully mining a block, many don’t see it as worth the effort to try this alone. Having one mining rig by yourself now could mean you go years without a single reward, and having multiple rigs is going to cost you tens of thousands of dollars, along with however much it costs to run your air conditioner 24/7.
Mining pools mean smaller rewards, but they also mean a far greater chance of a reward at all. And as electricity costs rise, many miners have sought pools in areas like eastern Washingtonthat have more power at an affordable rate.
You’ll still need high-quality mining hardware. Many of the ways rewards are divided — such as pay per share, or PPS — are gauged by proof that your rig is effectively contributing to the pool’s success in mining that block. And don’t forget to attach your bitcoin wallet, as it’s where your reward will go.
Like with cloud mining, do your due diligence with research to try to avoid scams. Larger pools may mean you’re getting a smaller payout, but it’s at least a legitimate operation. That’s the case with Antpool, one of the largest mining pools. The oldest pool, Slush Pool, is still around and has a trustworthy reputation, though some people are turned off by the 2% pool fee. KanoPool and F2Pool are also prominent worldwide mining pools.
What Bitcoin Mining Hardware Do I Need?
Before you even sign up for a pool, though, you need to have the equipment necessary to play a vital role in that pool as a miner. As I said earlier, a CPU is not going to be enough to mine blocks. Today ASIC miners are very much the standard for bitcoin mining, designed with mining as the expressed purpose.
The most notable ASIC miner on the market is the Antminer S9, the most recent Antminer model. Manufactured by Bitmain, it’s designed to have incredible mining power (hash rate ranging from 13-14 TH/s, meaning it can attempt up to 14 trillion guesses per second) while also being energy-efficient, a common concern in the mining world. Bitmain also offers a variety of other options for miners, such as the Antminer T9, a less efficient but more reliable option and the Antminer L3, which is designed for the cryptocurrency Litecoin.
Among the competitors to Bitmain for ASIC miners is Canaan, whose AvalonMiner is available both individually and in bulk. But like the Antminer, this will run you thousands of dollars alone. If you want to spend a little less, or just mine bitcoins more sparingly as a hobby, a GPU may be a better call for you. Though not as powerful as ASIC, a GPU can effectively mine coins at its own pace — and perhaps more importantly, can be used to mine other cryptocurrencies (like Ethereum) when ASIC miners can’t. Nvidia (NVDA) and AMD (AMD) are the primary companies that make GPUs that can mine.
You’ll also need to connect everything to mining software before you can start solving blocks and getting rewards. Most software works with both ASIC and GPUs, but some focus more on one than the other. BFGminer, for example, focuses on mining with ASIC. CGminer, arguably the most popular software, has multi-GPU support.
When researching, look at whether the software benefits ASIC or GPU and what else it offers. Some mining software allows for overclocking, and some for fan control. Bitminter is a software exclusively for the Bitminter mining pool, a 2-in-1 for anyone seeking convenience.
Bitcoin Mining Costs
If it isn’t already clear, the biggest roadblock many people have with mining is the costs. Whether GPU or ASIC, it’ll cost you. And that’s assuming you’re just getting that and not also getting or building a new computer capable of handling such an intense workload.
The attempts to solve the puzzle and mine a block take up an absurd amount of processing power and heat, so in addition to the power running up your electric bill, the air conditioning you’ll be running to keep the house temperate is there to rub salt in the wound. By the time you’ve finally managed to mine an entire bitcoin, will you have broken even? It’s far from a guarantee.
Besides the financial issues, there’s also the general inconvenience of it. Heating your home to such an extent for an investment that might not even work out can wear on you. That’s why, despite the potential that comes with mining, it isn’t for everyone.
Have the money and patience (plus the knowledge that this could be a losing investment)? You may think about giving it a shot. Other people, though, are more content to simply purchase bitcoin through other, quicker ways.