Introduction to Bitcoin Mining
You can actually earn cryptocurrency by mining it. If you are a complete beginner, it is important to understand the concept of mining. Basically, Bitcoin mining presupposes adding a transaction to the blockchain by solving a complicated mathematical puzzle using the unique SHA-2 hashing algorithm. The speed of mining is measured in millions of hashes per second (Mhash/s). The profitability of mining greatly depends on the computing power of your hardware.
Miners (or “mining nodes”) are responsible for the confirmation of all transactions within the Bitcoin network. Bitcoin would cease to exist without miners. Mining nodes are rewarded with coins for contributing a certain amount of computational power to find a correct block hash. The principle of mining is simple – the more transactions you confirm, the more money you get.
The speed of Bitcoin transactions depends on the hash rate (HR) of the network. The block reward consists of new coins and transactions charges that Bitcoin users pay to transfer the currency. Bitcoin holders are free to pay bigger fees if they want to accelerate the confirmation speed.
3 Ways of Mining Bitcoin
The simplest way to start mining BTC is to download a special app (“Bitcoing Mining”) which is available for all current Windows platforms. You have to simply install it and enter your wallet’s address before pressing the “Start” button.
The results depend on how powerful your device is, so there is basically no point to mine Bitcoins on a smartphone. It was estimated that you need more than 10 million Android smartphones in order to mine a single Bitcoin in one day. Even an average gaming computer with a powerful GPU won’t bring you more than $2-3 dollars per day. That’s why mobile mining is definitely a foolish undertaking.
There are still some high-end smartphones that may bring you at least visible profit in the form of a few cents per month. That is why you may consider downloading a mining app for Android (DroidMine is the most popular one) but beware of malicious applications that can run in the background causing havoc with your system.
Another great option for beginners is to pay someone who can mine crypto instead of you. Basically, you pose like an investor who purchases hashing power and earns residual income. Despite the fact that many people criticize cloud mining by calling it inefficient, it requires less initial investments than setting up your own Bitcoin mining hardware. Moreover, you do not have to be an expert in mining in order to earn BTC. Here’s a step-by-step guide on how you can use cloud mining.
1. Choose a mining provider
There are tons of companies in the cloud mining business, but some of them, unfortunately, only aim at defrauding their clients. It is vital to choose a reputable and transparent mining provider. Do your own research in order to rule out the possibility of fraud. Genesis is an unquestionable leader in the cloud mining market. Its datacenters are situated in Ireland because of the low cost of electricity.
After creating an account you will be asked to sign a Bitcoin mining contract (numerous altcoins are also available for mining). Among other prominent mining providers, one can distinguish Hashnest, Hashflare, Eobot. Before picking a specific mining provider take into consideration such facts as longevity, maintenance fees and transparency.
2. Decide how much hashing power you need
You can choose a suitable package and sign a contract which may last from a single hour to a few years (depends on how much money you are willing to invest in a certain company). Of course, signing long-term contracts is risky because Bitcoin is a volatile currency that may, and it is extremely difficult to predict its value in a year.
3. Choose a mining pool
After picking a mining package, you will be asked to choose a mining pool. Mining pool is a large group of miners who cooperate together by means of sharing their CPU power over one network. It is a common practice for both cloud mining and personal mining. If you opt to work alone, there is a very slam change that you can find a new block and earn a reward. At the same time, you can contribute to solving the SHA-256 puzzles and earn your share which directly depends on your amount of hashing power. Ghash.io is one of the most prominent mining pools which has been around since 2013.
In 2014, it managed to accumulate so many hashing power that some miners started fearing the looming possibility of “51% attack” and promptly left the pool. It’s also worth mentioning Slush Pool, the oldest pool out there which appeared on the market back in 2010. Rather high fees (which are currently fixed at 2%) can be considered the only significant drawback of this pool. If you are looking for lower fees you may consider joining KanoPool or F2Pool.
4. Withdraw Bitcoins
Once you have chosen your mining provider and mining pool you can expect some coins to be deposited to your account in a few days or even a few weeks. Do not get involved in so-called “pre-sales” when you invest money in advance while your contract doesn’t enter into force till a specific date (some mining companies may not even indicate when the contract actually starts).
Personal mining is not really popular today because of the aforementioned high cost of initial investments. As of 2018, even a top-notch gaming PC won’t allow you to mine enough Bitcoins to even to cover the cost of electricity. The same goes for newfangled USB miners which can hardly earn you $1 per year. You will have to obtain expensive ASIC chips that were specifically created to mine Bitcoins at a mind-crushing speed.
ASIC chips consume plenty of energy (though they still use less energy than mining hardware like CPU or FPGA), so you may consider personal mining if you have access to cheap electricity. By the way, Bitcoin mining doesn't need much bandwidth, so even an average internet connection will be enough. Read the tips below if you are determined to mine Bitcoins on your own.
1. Decide what ASIC miner you want to buy
FPGA was the first hardware designed specifically for Bitcoin mining in 2011. The mining industry has significantly progressed since that time with the appearance of ASIC miners. It was estimated that ASIC chips are 100 times faster than its predecessor. Bitmain, Halong Mining and Canaan Creative are considered to be the biggest suppliers of mining chips.
While choosing your mining hardware, you have to take into considerations such factors as hush rate, efficiency and the cost. If you want to reach the maximum level of efficiency (that means that the majority of used energy is converted into Bitcoins) you may consider purchasing DragonMint 16T, the flagship product of Halong Mining. DragonMint 16T manages to mine Bitcoins at an astronomic speed of 16 TH/s. Furthermore, it is considered to be the most electrically-efficient chip on the market surpassing Bitmain’s AntMiner S9. In all fairness, it’s worth mentioning that these advantages come with a price – DragonMint 16T will set you back around $2,730 while AntMiner S9 costs $2,320. Not everyone can afford high-priced mining hardware, so you can look for alternative options.
It is not advisable to buy used mining hardware since it may die out even before you even start making any profit. As mention above, your ordinary GPU hardware is too dated to efficiently mine Bitcoins and earn more than a couple of bucks per month. The bottom line is that you either invest money in expensive ASIC hardware after calculating the potential profit or choose other ways of mining BTC.
2. Decide whether you want to mine alone or join a mining pool
Solo mining can bring you the whole block reward that is currently fixed at 12.5 BTC. Moreover, you also get a transaction fee along with the block reward. Be prepared for completely randomized mining experience if you want to mine crypto by yourself – you can solve a couple of blocks per day or spend weeks without getting a single Bitcoin. Joining a mining pool means significantly smaller (but stable) rewards.
However, mining pools frequently become the target of DDoS attacks, so one can righteously question their stability. It is important to find a reputable pool with low fees and resilience to DDoS attacks. You can actually start your own pool using P2Pool, but you will need a lot of bandwidth for that.
3. Download any suitable software
Now that you have chosen your hardware and decided how you want to mine Bitcoin, it is time to install mining software that is compatible with your ASIC hardware. There are a lot of apps for Windows out there, but the majority of them are dated. The best option is probably CGminer which is the most popular mining application available for numerous platforms. CGminer is also compatible with FPGA and GPU hardware.
After installing your hardware you will be able to monitor the mining process while remotely controlling the fans and detecting new blocks. Although, some beginners may find it hard to work with CGminer (especially, when it comes to installing the Windows version). If you are looking for user-friendly apps, EasyMiner or MultiMiner will be a good option. In order to start mining Bitcoins, you have to simply connect your chip to a computer via USB, login to your account (if you joined a mining pool) and open a mining app.
4. Calculate your profit
It is more difficult to earn Bitcoins with every passing day, so do not forget to regularly calculate your earnings to make sure that they at least exceed your electricity expenses. Remember that you can save your crypto and invest this money in something else before it’s too late.
5. Take into account all the technical issues
Constantly monitor the miner’s temperature to make sure that it is not overheating. Arrange a proper ventilation system (direct air flow is preferable) and buy an open mining rag. Lowering voltage is one more possible measure when it comes to decreasing the miner’s temperature.
If you take Bitcoin mining seriously and this is your major source of income, you may consider moving to a place with consistently cold climate to eliminate any overheating issues. Immersion cooling is a nice solution for those who are forced to stay in hot or humid regions. It is a common practice for big mining companies to use a two-phase liquid cooling system that prevents overheating and at the same time consumes the minimum amount of energy.
Mining rigs also tend to be pretty loud, so try not to get under your neighbors’ skin by placing them in your garage or any other place where the noise won’t be heard.
Bitcoin Mining Profitability in 2018
Plenty of investors feel like they are missing out on Bitcoin in 2018 because it seems like the currency has already reached its peak. As a result, they are looking for altcoins hoping to jump on the bandwagon before a new huge cryptocurrency appears on the market. Unfortunately, it is not a really good idea since cryptocurrencies aren’t subjected to any regulation. Therefore, they can swiftly appear and disappear at any time. Once the creator of a new cryptocurrency grows a fan base, he can actually sell his creation to someone else and completely abandon the project. That is why it is not advisable to invest in unknown currencies.
However, there are still some alternative cryptocurrencies like Ethereum and Litecoin which, as many pundits speculate, have the potential to overtake Bitcoin in the nearest future (although, this scenario is still hardly possible). While many investors are turning to Ethereum in 2018, is this still profitable to mine Bitcoin? Let’s find out.
During the pre-ASIC era users were able to mine BTC on their own computers and get visible profit due to low mining difficulty, but now it is hard to be competitive with large mining centers. It is hard to say whether personal Bitcoin mining is still relevant today since it depends on plenty of factors such as hash rate, difficulty, the cost of electricity, hardware efficiency and the current conversion rate. In order to find out how much you money can make by mining Bitcoin in 2018, you can use any online profitability calculator to adjust the numbers and find the break-even point when the mining starts bringing you a desirable income.
The cost of mining one Bitcoin significantly differs from country to country because of the electricity prices. Venezuela is considered to be the cheapest country for mining BTC (only $530) while a single coin mined in South Korea will set you back more than $26,000. However, the legitimacy of Bitcoin in such countries like Vietnam, Iceland and Russia (where mining is also relatively cheap) remains questionable. However, the status of crypto in Iceland doesn’t make this country less attractive for miners – Bitcoin mining is expected to overtake its domestic power usage in 2018.
As for the US, it is only the 41st country in the rating of mining profitability. The average residential cost of electricity will hardly allow you to cover the cost of your hardware in a year. Plus, you have to take into account the consistently rising mining difficulty.
Individual miners will definitely struggle to profit from mining Bitcoin in 2018. The only possible solution is to invest money in top-notch ASIC hardware and set long-term financial goals.