How do you mine Bitcoin?
We’ve seen how mining works before. There we learned what the process is all about and the different aspects to take into account before embarking on the adventure.
In this new article, we will see together how to take part in the mining process. We will explain everything you need to carry out this process and the cryptocurrencies that should be favored.
Participate in the bitcoin mining process
Bitcoin is by far the cryptocurrency with the highest capitalization. This implies that it is also the most difficult to mine since the difficulty of mining generally increases with the popularity of a cryptocurrency (depending on the algorithms used).
At the risk of disappointing you, it is no longer possible in practice to become a bitcoin miner for an individual. The computing power needed to solve equations requires a colossal structure. This power can only be provided by mining farms.
To give you an idea, the smallest mining farms are composed of a hundred high-powered machines worth at least 2,000€ each. Larger farms have thousands of computers that can be worth even more.
Investing such an amount of money to be able to do mining is totally absurd for a beginner. It is just as absurd for experienced individuals. We can therefore only advise you to mine another cryptocurrency.
What other cryptocurrencies can I mine?
The choice of the cryptocurrencies to be mined is in fact extremely simple for the moment: all those which have a structure allowing the mining, with the exception of the BTC, are interesting for private individuals.
It is not impossible that in the future some cryptocurrencies may not be mined by private individuals as is the case with the BTC, but for the time being Bitcoin is the only one that really suffers from such a restriction.
So that leaves us quite a wide choice. We will now have to be able to choose the most interesting cryptocurrency to be mined.
How to choose the cryptocurrencies to mine?
The choice of which crypto-active to mine is up to you. However, it is important to follow a certain logic in making your decision. There are different schools for choosing which cryptocurrency to mine:
- The one you like the most because you decided so. We might as well tell you that we absolutely advise you not to do so. It is always necessary to make at least a preliminary analysis by checking the profitability.
- The one offering the best return at the time of mining. You should choose this option if your goal is to immediately resell the crypto-actives you have earned to cash in your profits.
- The one you wish to keep for a certain period of time. Instead of buying cryptocurrency with a promising project, some people prefer to mine them.
It is, of course, entirely possible to combine these different points. For example, you can mine some cryptocurrencies to resell them to pay your electricity costs and keep the others as a longer-term investment until the prices go up.
Whattomine is a site that allows you to compare the most interesting crypto-currencies to be mined at a given moment T. This site will give you indications on what is the most profitable according to your configuration.
The site’s operation can be complex for a beginner, but this tool is practically indispensable if you want to make the most of your mining. It is therefore advisable to spend some time on it to understand how it works.
What hardware do you need to mine a crypto?
The investment required to qualify as a miner is different depending on the equipment you use. Here are a few ideas because it is impossible to put a precise figure on the investment required:
- Mining farm. This is composed of several mining platforms (50, 100, 1000, and sometimes much more). It is necessary to provide a huge storage room and an efficient cooling system. Sometimes these infrastructures are located in places where the temperature is low to limit cooling costs, as in Iceland or Canada. Besides, this type of infrastructure also tends to be found in countries where the price of electricity is low and where the components needed to manufacture the mining platforms are easy to find, such as China. The cost of such infrastructure is well over $200,000 for the smallest of them and can reach several tens of millions for the largest.
- Mining platform. These are usually composed of 4 to 6 graphics cards. Each of these cards costs several hundred euros. If you add the other components, a low-end platform costs a minimum of $2.000.
- Your computer. Whether it is to run a mining program or your web browser, your computer’s price will be the same. Here, you can go from an entry-level computer at $500 to a PC gamer at several thousand dollars. A PC gamer that would have the same price as a mining platform will be less powerful than the latter because the PC gamer has other components that are not necessary for the mining platform’s operation.
So you are all theoretically able to mine if you own a computer. Unfortunately, this type of mining is not the most cost-effective. The cost of the electricity used may even be higher than the value of the cryptocurrency generated during the operation.
Therefore, you should be looking to buy a platform dedicated to mining if you want to become a profitable miner.
How to build a mining platform?
Here are the different components required to build a mining platform:
- The framework, which replaces the conventional casings, being more ventilated. You can either buy it prefabricated or create it from scratch. This support will be used to fix your components.
- A sufficient power supply. For smaller platforms, a single power supply will suffice. For those with many graphics cards, you will usually need two power supplies, sometimes more. Always allow 15% more than the theoretical power requirements.
- An extension cable for each graphics card called a “riser“. This is an essential component that allows you to connect your graphics card to another location than directly to your motherboard. This is essential if you take powerful graphics cards, because they take up too much space and tend to prevent other cards from cooling down properly if they are too close together. The quality of the extension cables is also important, since low-end cables usually have a much lower data transfer rate than a direct connection to the motherboard. So you will have to find the best cables to avoid losing money stupidly. Finally, note that these cables come in different formats: PCI express x1, x4, or x16, as we will see below.
- A motherboard with at least 6 PCI Express ports (remember to check the version of these ports, the port must be compatible with the chosen graphics cards). It is essential to have a motherboard with at least 6 PCI Express ports, so that you can build a platform that contains at least 6 graphics cards. Although you can obviously start with fewer graphics cards at first, you should always keep this option open in order to increase your production capacity in the future. Also note that commercially available graphics cards are only compatible with PCI Express x16 ports. The PCI x4 and x1 ports, which are much smaller than their x16 counterparts, can only be connected to a graphics card via a specially designed riser. However, the use of a PCI x1 or x4 port remains interesting, as the speed loss caused by its use is only 2 to 4% if the extension cable is of good quality, which avoids having to buy another set of components to go with your additional graphics cards. PCI express x1 and x4 ports are completely useless for gaming, however, so riser cables in this format remain components that are difficult to find outside of specialized stores.
- Hard disk, processor and RAM memory. The rest of the selected components will be of much less importance than graphics cards in general. However, at least aim for mid-range components to avoid technical problems due to the poor quality of low-end products.
- Graphics cards. These are usually the most important components. It is these graphics cards that will provide the computing power needed for mining. Two brands dominate the market among consumers such as you and me :
- Nvidia. Generally more expensive to buy than its competitor AMD but less energy consuming.
- AMD. Less expensive than Nvidia, but with a higher power consumption.
Buying Nvidia or AMD won’t change much for a minor of cryptocurrencies, the real differences between the two are when used for video games.
One will require a bigger investment at the beginning but a lower power consumption during the mining process. For the other it will be the other way around. If you have a rather tight budget to start with, buy AMD. If your budget is larger, buy Nvidia. Nvidia will start to be more profitable after a period of 2 to 3 years. However, this period is roughly equivalent to the lifetime of the equipment. So choosing one or the other is ultimately the same in most cases.
It is specified that some cryptocurrencies are designed to be mined only with processors. Others use more exotic mining methods, requiring for example large amounts of RAM, or high-performance SSDs. Graphics cards will allow the majority of crypto-actives to be mined in 2018, but if you want to mine a particular cryptocurrency, it is still better to find out about the specifics of the mining of this cryptocurrency before buying hardware.
What is a mining pool?
If anyone can mine certain crypto-actives by downloading a program or installing a plugin on their browser, to be able to mine certain cryptocurrencies, they will, however, have to join what is called a mining pool or, in simpler terms: a miners’ cooperative.
These miners’ cooperatives have several roles:
- Provide access to mining for individuals. Some crypto-actives are designed to be mined only by cooperatives. Others are requested by simple circumstances (such as Bitcoin).
- Increase the efficiency of mining. For some cryptocurrencies, the sum of several individuals’ rewards is less than the reward that could have been obtained if they had acted as a single person. For example, 5 individuals can each earn 1 ETH if they each mine in their own corner. By pooling their strengths, they could have gained 6, or 1.2 ETH each.
- Decrease volatility in earning rewards. Some cryptocurrencies offer rewards in proportion to the computing power provided. The rewards are fixed and given randomly to a person who has participated in the mining process for some cryptocurrencies. Therefore, in the latter case, it is possible not to receive rewards for a long period of time. The earnings will, therefore, be highly irregular. By joining a mining pool, the member obtaining the reward will share it with the other members, allowing them to receive the earnings in a slightly more regular way.
Should we prefer mining or buying?
Choosing to become a miner should be considered a financial investment. Therefore, a comparison should be made with the direct purchase of a cryptocurrency on an exchange to find out the most interesting from a financial point of view.
To know the most interesting between buying and producing a crypto-active, it will be necessary to analyze each activity’s strong and weak points.
We can start from the premise that mining cryptocurrency is a profitable activity. If it were not, then no one would be a miner. Therefore, we can deduce that the purchase price of a mining platform and the cost of its power consumption during its lifetime will be lower than the value of the crypto-assets generated.
When one buys a cryptocurrency directly, its value is equal to its purchase price. There is, therefore, no profit, except for the future speculative value. This speculative value is also present when one is a miner. Does this mean that mining is more interesting than buying?
If we limit ourselves to this simple fact, then yes. But if we push the reasoning a little further, it is not necessarily the case. Here are the disadvantages of mining compared to buying:
- Mining has the particularity of being a long process. The crypto-actives are generated little by little. You can’t get the desired amount of cryptocurrency instantly.
- You can usually only mine one cryptocurrency at a time. It will take time to reconfigure your mining settings if you want to change the cryptocurrency to be mined. And sometimes, buy new hardware.
- You have to invest a large amount of money initially, which will bring you between 3 and 10% profit per month. So it will take between 1 and 3 years before you start to be profitable.
- You have to keep a permanent eye on your mining platforms to ensure no technical problems.
To summarize, here are the situations in which it is more interesting to be a miner or to buy your cryptocurrencies directly:
- If you are in a logic of holding for the long term, of immediate resale to take your profits immediately, or in a mix of these two strategies, then practicing a miner’s activity is more interesting than buying your crypto-actives directly.
- If you are in a logic of trading, buying / reselling according to the news, buying directly is a better option.
However, being a trader requires being reactive, unlike mining. You will have to follow the news, read the forums, analyze curves, etc… It is much more relaxing to be a miner than to be a trader.
Mining Cryptocurrency: Conclusion
We hope you enjoyed this article and that you now have a better understanding of how to become a cryptocurrency miner.
This activity can make money, but it must be planned carefully. We, therefore, advise you to follow our step-by-step advice before embarking on the task of becoming a cryptocurrency miner.
We wish you good courage and good luck if you want to become a crypto miner. Thanks to your activity of mining, you will contribute to the ecosystem of cryptocurrencies by ensuring their functioning.