We have a lot of challenges in our global economy. Some are related to safety, some make us question the validity of the whole monetary system. One of the solutions to the issue of governmental control over finances was proposed more than two decades ago. At the beginning of the 2000s, it evolved into a new concept of digital money which we call cryptocurrencies.
What is bitcoin?
When it all started, bitcoin was nothing more than a hot new toy for techno-geeks. The general population did not understand the value of having fully digital payment options governed by an unbiased algorithm. Fiat money remained the only understood concept in the world of finances but a change was coming.
When the explosion of bitcoin’s popularity started, some daring investors jumped on the hype train bringing value to the BTC ecosystem. Simultaneously, new crypto projects started popping up here and there. One of the biggest new networks was Ethereum which is considered a better blockchain infrastructure by many developers. Nevertheless, Bitcoin became the new flagship behind which the whole crypto armada was steadily moving towards higher and higher market caps.
Now, both experts and laymen grasp at least the surface-level concepts behind cryptocurrencies. We know that they are:
· Independently governed using a consensus mechanism;
· Using blockchain technology to verify any transaction;
· Have intrinsic value due to proof-of-work or another consensus mechanism;
· Can be used as a financial asset or substitute for fiat money in case of global adoption.
Also, we know that bitcoin costs a lot of US dollars. News anchors tirelessly talk about it on various news channels. We know that there is value yet some still don’t know how this value is generated. So, before we learn how to start mining crypto using your PC or an advanced ASIC unit, let’s shortly discuss the history of Bitcoin, the starter of everything.
A short story about BTC
Long ago, in a galaxy far away… Satoshi Nakamoto, a developer or a group of developers under a shared pseudonym, decided to unleash their new vision of economy on the real world. A new algorithm called Bitcoin promised to change how we view money in general.
The creators of the new algorithm claimed that our current economic system based on fiat money controlled by governments is doomed and we need to alter it by using something called a consensus mechanism which is a method of verifying every single transaction that happens within the network. Such an approach makes additional supervising unnecessary.
To make sure that the premise works, computers participating in the network not only have access to the whole history of transactions but also have to perform computational operations to create new blocks of data that are added to the history or ledger. Since the whole archive of operations consists of such additions of blocks, we call it blockchain.
The process of “mining” refers to conducting computation to create new blocks of information every 10 or so minutes. The time between the creation of blocks is automatically adjusted by increasing or decreasing the difficulty of computational tasks according to the total amount of computational power available to the network.
It is an elegant solution that works well and provides one possible solution to inflation. Yet, some criticisms exist. For example, the deflationary nature of many cryptocurrencies makes it quite hard to imagine them as money in the sense that we know and accept. If your main currency gains value over time, there is no incentive to spend money thus freezing the capital flow.
What is crypto mining for beginners?
As mentioned above, crypto mining is a process of adding new blocks of data to the chain of information. It was a simple task just a decade ago. Back then, a beginner’s guide to mining cryptocurrency contained a couple of instructions:
· Install the Bitcoin algorithm on your PC.
· Start mining.
· Profit.
Nowadays, the situation is slightly more complicated. If you want to know how to start mining cryptocurrency, you have to go through lengthy guides such as this one. While setting up your mining rig is not as hard as some make it seem, at least some technical know-how is required. Initial investments also increased. You need a good machine to get a chance of receiving money.
A beginner crypto mining rig may cost upwards of $900 depending on a variety of factors including the cost of materials, shipping, and initial maintenance. This is the very low end of the spectrum. A Bitmain Antminer L7 costs up to $27,000 and even it is considered a modest choice.
How to start mining crypto in 2022: two choices
Currently, the community is buzzing with two particular ways of mining:
1. Independent, solo mining using your machinery;
2. Shared mining in pools is comprised of multiple machines owned by pool members.
Solo mining is the traditional method with roots going back to the dawn of Bitcoin. Single individuals interested in this concept started running crypto algorithms on their home personal computers adding new blocks and earning pennies. Some believed in the future of the concept and held on to what they’d earned while others decided to spend 10,000 BTC on a single pizza.
Solo mining was possible. While rewards seemed minuscule, the same could be said about the costs of mining. Computational tasks were very simple. You could make a couple of BTCs every day with a single machine running 24/7.
Today, some soloists manage to earn a BTC here and there but it looks more like a lottery rather than a business enterprise where one could reliably make money. With the increased difficulty of cryptographic riddles, one can only hope to outpace competition once in a while if luck deems it so. The mining equipment is also quite expensive as well as electricity. All of the above led to the inevitable creation of the second approach.
Mining pools are organizations of miners who combine their computational resources and share the profits according to their contribution. For example, a pool could contain 20 machines. Some of these machines are powerful rigs. Other machines are simple home computers. The contribution of the latter will be small yet noticeable. They will receive a smaller portion of the reward but consistently.
Those who can afford to invest in powerful mining devices usually lean towards the solo method while those who want to participate but cannot spare several thousand dollars to put in their machinery usually defend the merits of pools.
Mining bitcoin for beginners: Solo Approach
Let’s talk about soloists. You have to use a professional ASIC unit (Application-Specific Integrated Circuit). It is a machine designed for a single purpose: to mine cryptocurrency using the full potential of computational equipment on board. An ASIC can hold several GPUs (Graphical Processing Unit) and often does not hold much of anything else.
ASIC units come in all shapes and colours. The price range is quite wide with some models selling for less than a grand and some priced at hundreds of thousands of dollars. It depends on the power, circuitry, efficiency, and many other aspects.
However, you could forgo all this techno-babble and concentrate on one thing that matters: how much can you earn using a guide to bitcoin mining for single beginners? Potential profitability depends on several factors:
· The price of BTC at the moment of selling;
· Hashing power of the mining machine (TH/s);
· Price of a kWh of energy.
For example, imagine that you live in Texas where residents pay about $0.12 per KWh and you use a relatively powerful ASIC Antminer S19 Pro with 110 TH/s hashing speed and 3250W wattage. Assuming you run it 24/7, the total expected yield will be about 0.0137 Bitcoin mined per month which translates to about $176 net profit with BTC selling for $29,000 (the price at the time of writing). It takes into account a $280 electricity bill.
With initial investments close to $7,500, the recoupment period is over 42 months. However, if the price of BTC was to improve to, let’s say, $50,000, the net profit would go up to $312 per month and the recoupment time would reduce to 24 months. However, with bad fortune, you could end up not earning anything as these numbers are average ballpark estimates.
Beginner’s guide to bitcoin mining: Pools
When entering a pool, several factors must be accounted for in your calculations of possible returns:
· The pool mining fee;
· The number of machines already in the pool;
· Potential returns when taking fees into account.
These pools are not charities meaning that you have to pay for their services. Organizers provide technology and connect machines in a single network to use their combined computational force. You pay for joining the pool. The fee can be quite high. Some pools take about 5% of anything you get while participating in the pool.
Additionally, all pools slash your profit ratio according to the computational power you provide. Some pools have fixed ratios, others will calculate it for each machine. Let’s say that in our example the ratio is 40%.
Using the same specs as in the part above, we come to an average of $98 per month and a recoupment period of 76 months. It is a much longer time to make back what you have spent on your rig but it is also a safer, more reliable method of mining. Since the solo approach is considered unviable, we will focus on mining in pools only.
Crypto mining for beginners in 2022: setting up your rig
Any modern prebuilt ASIC unit comes with a special USB device that contains everything you need to connect it to the network. ASIC units need more technical know-how but each comes with a detailed instruction following which is quite hard to fail. If you want to turn your PC into a mining machine, make sure to follow these simple steps:
1. Get yourself a bitcoin wallet;
2. Use the address from the BTC wallet to configure the rig (if you bought one);
3. Download an application for Windows from the pool you are planning to join;
4. Use the address to configure the app (some have a dedicated part of the UI, some require editing config files);
5. Launch the mining process.
In most cases, you won’t need to perform any tinkering. The vast majority of modern rigs have preset while pools try their hardest to make the process of joining as painless as possible. You will be provided with tons of easy step-by-step instructions on both how to set up a rig and how to connect to a mining pool.
CPU vs. GPU: getting started with crypto mining
Central Processing Unit is a combination of words that invokes a sense of grandeur and many laymen believe that CPUs are the best at deciphering all sorts of complicated mathematical stuff. However, it is not true in the case of cryptocurrencies.
GPUs are considered the most powerful part of any mining rig since GPUs dedicate all their processing power to solving mathematical problems and allow ASIC units to work faster and have greater chances to complete any given task. Another important thing is that a single computer usually carries only one CPU but can have up to 8 GPUs depending on the motherboard type.
More often than not, you will find yourself in a situation where a GPU-centric PC outperforms any other PC with an overpriced CPU when it comes to mining crypto. With BTC and its strong competition, having even the tiniest edge is very important. If you want to start a cryptocurrency mining gig, you need to get a machine with several GPUs.
Beginner’s guide to cryptocurrency mining: using clouds
We discussed how to mine bitcoin for beginners. However, BTC is not the most solid choice. There are millions of machines working in the Bitcoin network. There is no way a single individual could outperform them. However, you can choose another network. ETC, DASH, and LTC are all better choices for newcomers.
So, the best cryptocurrency to mine for beginners is the one with the least competition. Emerging altcoins, new DApps, and other coins that have a mining mechanic are a good way to learn how to mine crypto.
If you are not interested in learning technical details of mining or want to invest without working on building your “farm”, it is a good idea to look into cloud mining. You rent a machine from a provider that hosts them in massive data centers. These machines are working for you while you pay a small fixed fee every month. Since yields and crypto prices change dramatically, you take all the risk while companies earn money by lending you equipment.
It is a win-win for all involved. Investors understand risks and can invest in the mining industry. Lenders of machinery enjoy a risk-free business model.
A typical cryptocurrency mining guide won’t tell you this, but you will be better off investing in “clouds” rather than buying, maintaining, and running your mining rig. However, those who would like to learn more about this industry should try out “real mining” using a laptop.
Understanding the risks
It is fun to discuss how to get started in cryptocurrency mining and become a millionaire overnight, but there are significant risks intrinsically tied to the volatile nature of the market. The financial efficiency of mining depends on several factors out of the miner’s control:
· The price of the asset on an exchange;
· The price of electricity sourced locally;
· The legal uncertainty of investments;
· The price of equipment.
The first one is quite obvious. BTC has seen incredible heights but also experienced dramatic dips. The price of the asset can be influenced by a plethora of factors including a tweet from Elon Musk which is most certainly something to think about when evaluating the prospects of long-term investments in mining. The volatility of the asset makes it impossible to correctly predict the outcome of a mining enterprise.
Electricity is another huge concern. When factored in, electricity affects your potential earnings to a point where less than a cent increase in the price of KWh may leave you without any net profit. Cryptocurrency mining for beginners is a complicated matter because many cannot realistically estimate their potential earnings and do not think that electricity bills will lead to bankruptcy.
The absence of regulations is a big deal. While many libertarians and techno-geeks are happy that BTC is still lurking outside of any true regulation imposed by governmental bodies, the situation can change quickly and leave you without any backup plan. New laws may forbid mining in your local area, ban cryptocurrency altogether or otherwise affect your enterprise.
The last thing is the price of equipment. Many people believe that they can recoup their investments and sell their equipment for at least half the price they paid when they are done with their mining business. However, used ASIC units are not in high demand, and some miners are left with unusable computer parts when they try to cash out.
Should you start mining?
Now, when you know how to get started in cryptocurrency mining, contemplate the risks and rewards. Starting any enterprise without fully understanding the industry is quite risky. The crypto industry is still in its early form, far from global adoption and predictability.
If you are interested in learning, sure, get yourself an inexpensive mining rig and join a pool to check the results without risking too much. There are used ASIC units on eBay that you can get for $200. If it works out for you, great! However, there are other ways to get into crypto without huge investments.
Cloud mining, trading crypto assets, playing P2E games like Axie Infinity or Plants vs. Undead — these are all ways to obtain some crypto and be a part of a growing community without risking your livelihood. Mining is a good idea only when you have some money to spare and want to dwell on something completely new!