How to Mine Bitcoins: Everything About Mining

Date:

June 6, 2018

How to Mine Bitcoins

As Bitcoin value exploded recently and remained attractive despite all ups and downs, mining turned into a reputable business from a weird hobby. To mine Bitcoin is essential to keep the entire blockchain running. Miners are assembling transactions to be added to the global network of blockchains. On Bitcoin blockchain, it takes about 8-10 minutes to create a new block. During this process, new Bitcoins are “minted” bu the miners. A miner succeeds in validating transactions by Proof of Work, a complicated computational process of solving a math problem.

For some people, the word “mining” is confusing, but there’s no actual digging involved. Your computer “digs” for digital gold as it solves math problems and verifies transactions in the blockchain. This is a difficult task even for the most advanced computers, and for a good reason. The whole cryptocurrency ecosystem depends on problem-solving becoming more difficult over time. In this article, we will explore if it’s possible to start a mining enterprise solo by building a rig at home.

Building an own Bitcoin mining rig is not considered to be the most profitable option because of the huge competition in the market. For the sake of fair comparison, existing 21 largest Bitcoin mining companies control around 92% of the mining market, with the largest mining farm owning 18% market share.

Mining Expenses

Mining is not a cheap hobby, and it’s not the quickest way to earn passive income. Taking into account the current Bitcoin hash rate difficulty and the electricity consumption volumes — 215kW required for one Bitcoin “minting” equates to the weekly electricity consumption of an average European household — an initial investment of at least USD 10,000 is needed to be able to survive in such tough environment. A rig with at least 6 GH power costing anywhere from $3,000 to $6,000 is required to successfully continue to mine Bitcoins in a way such that the initial costs are covered within 15-20 years.

Mining altcoins such as Ether, Litecoin, XRP, Monero, which have a relatively friendlier market competition, lower transaction fees, and lower network hash rates is a more viable option for the beginner.

If you are determined to start Bitcoin mining, you can choose a cloud mining option which allows skipping purchasing the hardware. The costs of cloud contracts are still lower than building a rig, but the earnings are lower, too. You also could lose money since the cloud farms are unregulated and the unsuccessful contributor would be left on its own in case of a hacker attack or a glitch in the system.

How to Choose a Pool

Starting with a pool is a good option for a beginner. Some people prefer smaller pools that give them better control over the process, while others prefer large pools for their reliability and the steady payouts. Make sure to check online reviews to see if the pool is not exceeding its fees, payments are made on time, the actual hash rate is accurate, and more. Try avoiding the 0% pools, as they are not large enough and experienced enough to ensure a sufficient income.

Connecting Your Wallet

To keep your earnings safe you should pay close attention to your wallet. Since there are numerous virtual crypto storage options at the moment, we suggest that you use the most popular (e.g. TREZOR, Ledger Nano S, Ethereum Wallet) and trusted wallets to avoid possible fraud, scams, and double spending. It is recommended that you avoid generating the public and private keys by yourself, let the wallet do it.

Electricity Costs

The costs of energy consumption differ from one hardware to another, so it’s important to understand how much power you can afford to buy and how the equipment that you choose are going to fir your household electricity bills. Energy-efficient rigs will always outperform the powerful ones when you calculate the profit. An advanced AI-based GPU hardware would cost around $600 with a network power around 25-30 Mhash. The profitability of such a device depends on the coins chosen for mining, but its costs might not be justified if the wrong currency has been selected. The miner should also keep track of crypto price updates and currency trading ups and downs to decide which digital coin to start working with. Just keeping track of social media channels or a crypto forum would not be sufficient.

The issue of physical space and electricity are also important factors that need to consider carefully before setting up your rig. While the industrial-level mining farms occupy a space of a supermarket, so a bedroom, a garage or even a basement might not allow enough space to install all the equipment required for profitable operations.

Speaking of the electricity costs, the power required for Bitcoin generation easily doubles electricity costs for the average American household, reaching extra $120-$200 in the best-case scenario. It has been estimated that to mine Bitcoin cloud companies consume the same amounts of electricity as an average European country, for example, Denmark. Therefore, you should always check your local electricity price rates before proceeding.

Calculate Mining Efficiency

When Bitcoin was first invented, the whole process was done on good old-fashioned computers. But as the complexity of calculations has gone up, miners figured out that graphics cards, or GPUs, were more efficient at the calculations required for solving a block. In the past few years, the complexity of blocks has gone up even more, and now cryptocurrency generation is now done by Application Specific Integrated Circuits (ASICs) that are built for the specific purpose of generating Bitcoins as efficiently as possible.

Since prices change daily, it’s impossible to recommend one “best” GPU for mining. You’ll have to do your calculations. To do so, you will need these pieces of information:

  • The expected hash rate of your system
  • Amount of power needed to run the rig
  • Cost per kWh of electricity in your area (check if your household power consumption is not limited by any contract)
  • Combined expenses to buy GPUs and other equipment to build the rig

You can then head over to any of the mining calculators online to determine your profitability, based on which cryptocurrency you prefer. In order to determine when you break even, simply divide the total cost of your rig by your expected profit per day. The resulting number is the amount of days it will take before you pay for your rig. Remember that a mining rig is a long term investment.

The type of GPU you’ll use and crypto coins of your choice determine what kind of motherboard, RAM, power supply, and other components of the rig that you need to buy. All of the parts have to integrate with one another, so always exercise caution when purchasing to make sure the components are compatible with the system you’re planning.

Choosing the Hardware

The decisive factor when you are starting to mine is the computational power of the mining machines. Since the speed of block solving is increasing along with a number of the miners growing, the system is generating more complicated puzzles to keep the balance of verifications and cryptocurrency distribution. That is why miners are developing more sophisticated and powerful machines to increase their computational speed and solve the blocks faster.

Initially, PCs were able to solve the blocks and bring the rewards. With the introduction of the advanced computational blockchain technologies have made it extremely hard to continue using PCs, so GPUs and application specific integrated circuits (ASIC) are becoming a norm. There are ASICs designed to work with specific currencies, for example, Monero and Ether, but not all blockchains are permitting their use because they create an uneven playing field for miners.

The most popular graphic cards are Radeon (R9 280x, R9 390, R9 Fury, RX 470, RX 480, RX 570) and GeForce (GTX 750 Ti, GTX 1060 6GB, GTX 1070, GTX 1080, GTX 1080 Ti) Remember, a GPU is only good if it is energy-efficient. Compare the expected output of the GPU and deduce the cost of electricity to keep it running. Then compare that to the price you have to pay to buy it. If you want to build a powerful mining rig you will need to purchase 4-6 graphics cards. Then you fit them into slots on the motherboard.

The biggest things to consider about your motherboard purchase is the CPU that’s included and the number of graphics card slots available. You should aim for six.

Any hard drive with enough capacity to store your operating system and mining software should suffice. 250 GB drive should be enough. Don’t spend too much on this because blockchain is memory-efficient by its nature, so 4GB of RAM should be a plenty.

To protect your motherboard, you should connect graphics cards directly to the power supply. Powered risers don’t require you to fit the card directly into the motherboard and they also help cool down the equipment.

Power supply units operate best when not used to their maximum capacity. If your graphic cards use 900 watts of power in total, you should buy a power supply of at least 1200 watts.

Assembling your rig should be easy if you have technical skills. Be careful and double-check online before you hammer something into the slot. The Antminer is a complete mining installment in case you would want to cut some corners.

Mining Software

Bitcoin and each alt-currency have their software to run. Research the right mining programs and install them on your newly assembled rig, making sure that the system was connected with your wallet and the blockchain.

To install the software on your newly built rig you first have to install Windows 10 64-bit that costs around $30 for the initial license or a free Linux system such as Ubuntu. The latter is a bit more complicated because you need to key in all the commands. But then again, it’s free. A special operating system such as EthOS would be the best option because it eases up the setup of all mining software on your rig.

Mining is a time-consuming process when many things can go wrong. But if you have a passion for new technology in addition to patience and the right skill set, it can prove to be a reliable source of passive income and a satisfying hobby in one.