Mining is the process by which new cryptocurrency tokens or coins are generated. It bears little resemblance to the work done by those who physically mine for precious metals like gold. However, the comparison does hold; digital currency miners use computers to solve cryptographic problems and receive a reward in the form of cryptocurrency.
Learn how to get started mining your favorite cryptocurrency and how to determine the costs you'll incur to do so.
- Becoming familiar with the mining process is a key factor when you're starting out.
- You'll need a cryptocurrency wallet, mining software, and mining hardware to begin mining cryptocurrency.
- The equipment you need can be very expensive; however, the more you pay for equipment, the more profitable it can be.
- Mining pools can help increase your profitability because they share the workload and have faster combined hash rates.
- Before starting, ensure you compare the costs to the time it will take you to recoup your expenses. Mining might not be worth it in the end if you never make up the costs to get set up.
Bitcoin Mining Explained
Become Familiar With Mining Cryptocurrency
In cryptocurrency lingo, mining is the term for work done to open a new block on certain blockchains. The first miner to solve the cryptographic puzzle called the hash receives a cryptocurrency reward.
With that in mind, one of the first steps to take if you're interested in being a cryptocurrency miner is to learn which cryptocurrencies can be mined. Bitcoin (BTC), ether (ETH), Monero (XMR), and Litecoin (LTC) are examples of coins that can be mined.
The most profitable cryptocurrencies have become much more difficult to mine than in the past. Most have a mining difficulty that increases over time, and the number of miners with large-scale mining operations has taken over most of the hashing power of each cryptocurrency's network. Hashing power is how many calculations per second a network can complete.
Not every cryptocurrency can be mined because not all use a competitive reward system.
Some cryptocurrencies require expensive hardware to mine, and overwhelming demand for this equipment has caused the cost and effort associated with setting up a rig to skyrocket. Others may be more accessible in terms of the equipment that you need. The costs alone make it worth your while to take the time to plan how and what you'll mine.
What You Need to Mine Cryptocurrency
There are generally three basic components to a mining operation: the wallet, the mining software, and the mining hardware.
You'll need a wallet for your cryptocurrency to store the keys for any tokens or coins your mining efforts yield. Wallets have a unique address allowing you to send and receive tokens securely. There are many types of online wallets, and there are even "cold storage" wallets that don't operate online. Decide which one is best for your needs before you start mining.
Most mining software is free to download and use and is also available for various operating systems. For popular cryptocurrencies like Bitcoin, you'll find that multiple types of software can be used. While many of these options will be effective, slight differences could impact your mining operation.
Mining hardware may be the most expensive component of a mining rig setup. You'll need a powerful computer, perhaps even one specifically designed for mining.
How Much Does It Cost to Build a Crypto Mining Rig?
It is possible to build a mining rig or purchase a prebuilt one with a much higher hash rate. The higher the hashrate, the more profitable mining can be.
Application Specific Integrated Circuit (ASIC)
An ASIC miner is a pre-built mining rig; these can be very expensive. For example, the Bitmain Decred Miner DR5 costs around $5,600. The DR5 has a much lower hashrate than many other miners—it mines at about 35 terahashes per second (TH/s). You can purchase higher-performing miners, but the price goes up significantly. The Bitcoin Miner S10 Pro mines at 110TH/s and costs about $5,900. From that point, miners are more than $10,000 with the Bitcoin Miner S19 XP Hyd. going for more than $19,800—but it has a hash rate of 255 TH/s.
You can build a computer capable of mining cryptocurrency, but you'll need specific hardware. Most graphics cards from Nvidia are capable of mining. However, some might not be fast enough to be worth buying for mining purposes.
The RTX 3090 Ti is one of the better graphics cards for mining. It costs about $1,700 and, depending on the mining algorithm, can hash up to 133 mega hashes per second (MH/s)—significantly less than one of the Bitcoin ASIC miners.
It is possible to build multi-GPU mining rigs, but it can still take years to recoup your expenses and begin making a profit. Keep in mind that you may still be unable to mine crypto profitably on your own with a multi-GPU rig.
You'll also need to purchase the additional hardware to build the computer, such as a power supply, motherboard, processor, memory, and drives. This might run you several thousand dollars, depending on the setup you choose.
It's important to note that one mining rig, even the S19 XP Hyd., cannot outmine the mining farms and pools. The mining pool FoundryUSA accounts for roughly 23% of the Bitcoin network's hash rate, about 47 EH/s—47 million TH/s. You'd need 183,313 S19 XPs to keep up with FoundryUSA.
Slushpool is one of the oldest pools in cryptocurrency. It hashes roughly 10 EH/s, significantly less than FoundryUSA, but still very fast. You'd need about 39,000 S19 XPs to compete with Slushpool's hash rate.
So, unless you have the means to invest tremendous amounts of capital, you'll likely need to join a mining pool to see any results.
Join a Mining Pool
Essentially, a mining pool is a group of miners who combine their computing power and work together to mine. They share the profits proportionally to the amount of work each address was able to contribute to the process. As you might expect, mining pools offer advantages and disadvantages.
On the one hand, the cost and effort associated with the initial setup are much lower than if you were buying an ASIC or building a multi-GPU mining rig. On the other hand, though, you're likely to earn much less money from the process, as you'll split any mining rewards with a group of people.
Weigh the Return on Investment
The process of mining remains an exciting and potentially profitable one. However, there are several pitfalls. For example, many miners have spent a lot of money setting up their rigs, only to find that they cannot recoup the costs with their mining efforts. Ensuring you are armed with as much of an understanding of the mining world as possible will help protect against this possibility.
There are websites created that can give you estimates of how much you'll be able to generate using specific hardware. The operators of the mining pool NiceHash have put together an informative website that allows you to input your mining hardware and receive return estimates based on the equipment of users in their pool. This tool can help you determine whether you'll generate enough from your hardware to pay for it and continue earning and how long it will take.
How Long Does It Take to Mine 1 Cryptocurrency?
It depends on many factors. On average, it takes 10 minutes for the network to create a new block and receive the reward of 6.25 BTC. The reward goes to the miner(s) that solved the block hash and is split up according to pool rules. Ethereum's blocks are mined in a matter of seconds, with fewer ETH rewarded and split up among mining pools. With pools splitting rewards, it can take a significant amount of time to mine one full cryptocurrency.
Is It Easy to Start Mining Crypto?
It is relatively easy to start mining, as most mining clients are installable and have graphic user interfaces. You can sign up at a mining pool, enter the mining address you're given in your mining client, and begin mining.
Can You Get Rich by Crypto Mining?
Mining crypto is very competitive due to cryptocurrency's values. It was possible in the early days of crypto to mine several coins per year, but mining difficulty and competitiveness have increased so much that it is profitable only for those that can afford large-scale mining operations. However, making a few hundred dollars per month mining cryptocurrency is possible.
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