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Are you interested in mining for bitcoin. Do you want to learn how to mine for cryptocurrenies like bitcoin, ethereum, dash, monero, and many other altcoins? Do you want to learn about equipment, and software that you will need to get started? Do you also want to learn if it will be profitable in your area to mine for cryptocurrency because of your power grid? Below is a beginners guide on how to mine for cryptocurrency.
According to Coinmarketcap.com there are 1,442 cryptocurrencies (as of January 2018) with a total market cap of $467 billion. Out of the 1,442 cryptocurrencies, 608 cryptocurrencies are mined. Unlike fiat money which must be printed by the government, cryptocurrencies such Bitcoin and Bitcoin Cash, need to be mined.
Every newly mined block is added to a public ledger known as blockchain. The miners are rewarded with a certain number of cryptocoins which you will learn later. They (miners) are also rewarded with transaction fees.
In the early days of cryptocurrencies, altcoin mining was easy, and many people only required a simple set up – laptop or PC with a powerful graphics chip and CPU. Today, you have to invest a lot amount of money in the equipment and electricity in order to get started.
The best thing about cryptocurrency mining is that you don’t have to quit your day job. Furthermore, it does not interfere with your day job either.
Cryptocurrency mining terms you ought to know
Cryptocurrency mining – this is a decentralized computing process where new cryptocurrency blocks are created and added to the blockchain. Its purpose is to create a decentralized time stamping system that prevents double spending. The biggest thing here is How to Trade Cryptocurrency!
Hashrate – a hash refers to the output of the hash function. The Hashrate is the speed used to compute or solve complex mathematical equations when mining cryptocurrencies. A higher hash rate means increased mining power and higher rewards.
Proof of Work– This refers to a piece of data that is difficult to produce but easier for others to verify. Basically, it is a way of making the process of mining or the recording of transactions, difficult. It is a random process with low probability which means a lot of trial and error will occur.
Mining difficulty – this refers to a measure of how difficult it is to find a hash that is below the target value which is usually a 256-bit number. Increased mining difficult results in decreased target value and vice versa.
Blockchain – as the underlying technology for cryptocurrencies, it is a decentralized ledger system that records all digital currency transactions carried out between digital wallets. As a public ledger, it is decentralized across private nodes globally. The blockchain cannot be corrupted. As a result, it helps to prevent double spending. Here is more information on blockchain.
Cloud mining –also referred to as cloud hashing, this is a concept whereby users purchase hardware mining capacities from established data centers. As a result, cloud miners can earn altcoins without managing hardware and software. Furthermore, they don’t have to incur other costs such as electricity, bandwidth and network downtime. Here is more information on Cloud mining.
Want to learn more about cryptocurrency mining?
The core of cryptocurrency mining is the block rewards. What is a block? This is the smallest unit of a cryptocurrency. Think of it as cryptographic signatures which can be transacted between two or more wallets. To better explain what altcoin mining is, I am going to use Bitcoin mining since it’s the pioneer cryptocurrency that basically started the cryptocurrency mining revolution.
One thing you need to know is that cryptocurrency mining is a decentralized computational process with two goals:
l Helps to confirm transactions in the right manner
l Helps in the creation of new cryptocoins in each block.
In 2009 when cryptocurrency mining started, PCs with standard CPUs were used. At the time, the processing power required to solve the Hashrate was minimal. As time progressed and cryptocurrency mining started to gain traction, more powerful processing power was needed.
This led to miners researching for new crypto mining equipment alternatives which they found – single GPUs. Graphic processing units (GPUs) were found to consume less power and solve complex mathematical problems much faster than CPUs. The single GPUs were quickly phased out after miners discovered that hashrates were key to income.
This resulted in the use of multiple GPUs thus creating a mini cryptocurrency mining farm. The use of multiple GPUs increased power consumption resulting in miners looking for a new solution which they found – Field program gate array (FPGAs). This did not last long either because the Application Specific Integrated Circuits or ASICs were introduced back in 2012. Since then, the ASICs have become the preferred hardware for mining cryptocurrencies even today.
Back then, when ASICs miners solved complex mathematical problems, the miners were rewarded with a new block which amounted to 25 Bitcoins before it was halved to 12.5 Bitcoins. The new block is added to the blockchain while miners are rewarded with transaction fees.
After a new block has been mined, mining difficulty increases, and the block creation rate goes down.
And that is how cryptocurrency mining works.
Which altcoins should be mined?
Although cryptocurrency mining is a lucrative venture that does not interfere with your day job, not all cryptocoins offer the highest of rewards. For instance, if you are planning to mine Bitcoin on a small scale, it would be too costly. For starters, the investment for the equipment alone could cost you over $10,000. Why? A single ASIC miner costs over $2,000 and you will require several units in order to gain any meaningful rewards. If you factor in the amount of power (electricity) consumed plus time, the venture becomes expensive.
The good news is that there are over 608 cryptocoins which can be mined. To profit, all you need is to find the right cryptocurrency. Mining calculators will help you check how profitable it is to mine selected altcoins on your power grid. I worked with developers and I currently have 16 different calculators. Just follow the links to see the different coins and calculators. Have your power bill ready, your mining equipment specs, and the altcoin you want to compare profit margins. I have worked with developers and you can follow the links to my mining calculators.
Is It Worth It to Mine Cryptocoins?
Well, Bitcoin is out of the question. It is more affordable to transact the cryptocurrency or buy it using fiat money than mine it in a small-scale operation. Furthermore, cloud mining is more of a scam than a reality. According to my research, Ethereum, Bitcoin Gold, Bitcoin Cash (BCH), Zcash (ZEC), Joulecoin (XJO) and Ethereum Classic (ETH) are some of the profitable altcoins to mine. Here is a full list from Coinwarz.
If you are venturing into cryptocurrency mining as a hobby, you will get to generate a good income and even recoup your hardware mining equipment costs in less than a year. What you ought to know is that cryptocurrency mining cannot be relied on as a second income. For starters, the upfront hardware costs are too high. Secondly, the rewards from popular cryptocurrencies are hard to come by. This can be attributed to increased mining difficulty. Lastly, other costs like power are too high for small scale miners.
According to my research, Ethereum is the most profitable altcoin to mine. Here are my reasons. If you check the revenue/profit for Ethereum per day, it is $11.83/$10.39 against the cost of electricity of $1.44. Furthermore, it takes 15 seconds for a new block to be mined on Ethereum compared to 10 minutes for Bitcoin and other cryptocurrencies. When it comes to the profit ratio vs. BTC, Ethereum has 192.38%/112.10%.
What You Need to Mine Cryptocoins
- Hardware – Graphic processing units, Central Processing Units (Miners have moved away from but ok to start with), Field Programmable gate Array and Application Specific Integrated Circuits.
- Cryptocurrency mining software – CGMiner is an all round cryptocurrency mining software that is rated highly by industry experts.
- Coin wallet – a free private database that is password protected and stores your earnings. It also helps to maintain a network wide ledger of transactions
- Setup location for the hardware – storage unit or your basement
- Cooling systems – invest in air conditioning and special cooling systems to prevent mining hardware from overheating.
- Reliable power – majority of large cryptocurrency mining operations are located close to power generating dams. For small scale operators, setting up the mining rig at home is ok.
Getting To Know Bitcoin Hardware Companies
Bitcoin mining started it all. Back then CPU miners were popularly used before evolving to single and multiple GPUs. This was followed by FPGAs and now, ASICs. Thanks to the popularity of cryptocurrency mining, hardware mining companies were founded. They followed industry best practices to provide the market with the best equipment.
Headquartered in Beijing, China, Bitmain has offices in the following cities – Amsterdam, Hong Kong, Tel Aviv, Chengdu, Shenzhen, Shanghai and Qingdao. The company was founded in 2013, 4 years after Bitcoin was created. Today, it is the most recognized Bitcoin hardware mining company. Bitmain was established to manufacture and sell the world’s leading cryptocurrency miners that use ASIC chip technology.
The first product was the Antminer S1 which was followed by the Antminer S3, S5, S7 and now the S9. Bitmain followed Moore’s Law in revolutionizing the development of the ASIC chip design. Today, the Antminer S9 is renowned as the world’s first consumer grade Bitcoin miner that is based on the 16nm process ASIC chip. It is also the most power efficient when compared to the Antminer S7.
Here is a full list of products offered by Bitman.
Getting to Know Cloud Mining Companies
Cloud Mining Companies is popular for hobbyist and mom and pop miners who are breaking into crypto mining. But to be honest I would venture away from cloud mining, and hash your own coins. But if you are still interested below is a list of cloud miners. I just strongly oppose of cloud miners.
Cryptocurrency mining remains one of the best methods for interested parties to be introduced to altcoins, blockchain and its ecosystem. In 2017, Bitcoin surged in price from $1,000 in January 2017 to $16,000 in December 2017. As the pioneer cryptocurrency, the surge in price helped to increase the price for other cryptocurrencies. This has led many people to get started in cryptocurrency mining and cloud mining
As you have read earlier, setting up a cryptocurrency mining operation is not cheap. While majority of the mining softwares are free (open source) together with digital wallets and mining pools, miners have to incur hefty hardware and electricity costs. On a small scale, it is very expensive but on a large scale, the costs can be distributed.
When it comes to cloud mining, it is wise to avoid it just like you should avoid visiting certain websites that inject Trojan miners into your web browser to mine cryptocurrencies.
All in all, cryptocurrency mining is here to stay. You can shop for hardware mining gear from eBay and other major online retail stores. I will also suggest that even though you use cryptocurrency calculators you are still at the mercey of supply and demand. While you are mining for cryptocurrency the currency can drop and you wont make what the calculator suggests, or might not even break even. The cryptocurrency can go sideways in which you make what the calculator suggested, and it can go up making you more money. Understand just like trading cryptocurrency there are risks involved with mining. Trading using cryptocurrency is not an easy procedure to follow. Using bitcoins is one of the easiest form of trade that can be carried on because of the cryptocurrencies. There are other form too to chose from.