Crypto mining is one of the most popular ways to make money in the cryptocurrency market. Simply stated, mining is the process of earning cryptocurrency by solving cryptographic equations. Powerful computers validate blocks of data and add a transaction record to a ledger known as a blockchain. Miner receives the reward in a particular coin as soon as the math problem is solved.
In 2009, when Bitcoin first appeared, the mining process was simpler. As the network develops, the difficulty of mining is constantly increasing. As a result, the requirements for the mining hardware and the amount of electricity consumed have grown significantly.
Due to the constant increase in mining complexity and the emergence of professional mining centers with enormous computing power, the question arises – is mining still profitable for individual players? In this guide, I will share with you how to choose and setup mining equipment to start earning income.
What types of mining exist?
Depending on the mining method, individual and collective types of mining are distinguished.
- Individual or solo mining means using your equipment to mine cryptocurrency. In this case, you will receive all the rewards you have earned. The power of the equipment is essential since a high hashing speed is required. Individual mining is more profitable for mining emerging cryptocurrencies.
- Collective mining involves participation in a pool – a server that combines computing power. In this case, you will receive rewards according to your share in the pool. These days, pool mining is most popular for coins with high mining difficulty, such as Bitcoin.
What coins can you mine?
Typically, the digital asset should be built on a blockchain architecture that supports the Proof of Work (PoW) mining algorithm. Examples of such coins include Bitcoin (BTC), Ethereum (ETH), Monero (XMR), Litecoin (LTC), Dogecoin (DOGE), and others.
Cryptocurrencies use various algorithms called hashing algorithms. Usually, these algorithms are very complex cryptographic hash functions that adjust the difficulty of mining. Different cryptocurrencies use different hashing algorithms.
Below you can find a table with the main hashing algorithms and the coins in which they are used. Consider the coins’ algorithms as some of them are resistant to particular hardware.
|Scrypt||Litecoin and Dogecoin|
It is difficult to answer which coin is better to mine. You should choose a project that you believe in the long term. It is worth notice that younger coins are easier to mine, but they can be also riskier.
Mining equipment overview
From the technical point of view, mining equipment can be divided into four types:
GPU mining involves the use of GPUs – video cards – to validate transactions on the blockchain.
CPU mining means using the central processors to perform the necessary computations. The CPU is the part of the computer responsible for the processing power to carry out the operations performed by the software.
ASIC-based mining involves the use of microprocessors designed to work on specific algorithms. For example, Bitcoin ASIC miners can only mine Bitcoins. Since ASICs are explicitly optimized to solve a particular algorithm, they often do their job better than less powerful computers.
New hotspot miners are gaining traction. Miners are earning cryptocurrency, such as Helium (HNT) by joining the network and providing peer-to-peer wireless coverage. The user keeps a physical device at home that can connect with others to create a reliable network.
Unlike Bitcoin, Helium blockchain is based on a Proof-of-Coverage consensus algorithm. Hotspot miners earn more HNT when they are located closer to other miners.
What are the pros and cons of different mining equipment?
There is no correct answer to this question as all of the listed above machines have their pros and cons. ASICs outperform CPU and GPU mining when it comes to mining a particular coin. However, they also require significant investment.
Hotspot miners consume less energy and cost less than other hardware types. Nevertheless, miners do not receive a constant amount of HNT per day due to the differences in settings and regions.
Mining hardware profitability
I’ve picked up different mining hardware and compared their price vs. profitability:
|Name||Average price||Coin||Profitability ($/day)*|
|Bitmain Antminer S19 Pro||$12,999.95||Bitcoin (BTC) and Bitcoin Cash (BCH)||$27.51|
|GoldShell KD5 – KADENA MINER||$14,999.95||Kadena (KDA)||$67.61|
|Innosilicon A10 PRO+ 7GB||$17,999.95||Ethereum (ETH)||$61.40|
|ASUS GeForce RTX TUF 3080 10GB Graphics Card||$1,959.95||Any||$7.36|
|MSI GeForce GTX 1660 Super Ventus XS OC 6GB Graphics Card||$497.95||Any||$2.24|
The price of the equipment correlates with the potential daily income. It is also essential to understand that profitability is highly dependent on the cost of electricity in your area.
The average price for hotspot miners, such as Bobcat 300 Helium Miner or Nebra Helium Hotspot Miner, is around $530+. They all have ultra-low power consumption (5-15W), and the signal range covers up to 10 miles. It is hard to estimate the potential profit from hotspot miners as it depends on the region of residence. You can check the map to estimate how much other miners are earning in your location.
How to start mining
The initial process of selecting, buying, and installing mining equipment can be time-consuming. However, the steps below will help you in your initial setup process.
- Estimate how much you are willing to invest in mining equipment. Powerful ASICs will cost you several thousand dollars compared to several hundred for hotspot miners.
- Choose the place where you will put your mining equipment. You need to think about room cooling, power supply stability as well as high-quality wiring. It is also essential to consider the noise level associated with ASICs and GPUs operations. For this reason, solo miners usually place mining equipment in garages or basements.
- Choose the best equipment in terms of pricing, possible return on investment, and efficiency. Hotspot miners can be the most profitable if you are located in a region with high potential income. However, if you live in an area where there are no other hotspot miners, this should decrease your profit.
- Monitor prices in different stores to find the best deal. Sometimes it is more profitable to purchase used equipment of good quality. This will allow you to save funds and reduce the payback period.
- Be careful when choosing a vendor. Many stores cannot cope with the buyers’ demand during a bull market, so you will have to wait several months for ordered hardware. Furthermore, it is better to choose a seller that provides you with a warranty on the purchased equipment.
Let’s summarize: to start mining, you need to determine how much you are willing to invest in equipment and whether you have a place to locate it. You should also calculate the profitability of a particular mining machine based on the cost of electricity in your area.
It should be noted that mining equipment has its lifetime. Typically, the average machine lifetime is three to five years. However, optimizing an ASIC to its maximum performance limit results in a shorter lifespan. Moreover, unfavorable conditions such as poor ventilation, high humidity, irregular maintenance can hinder equipment longevity.
The miners’ profit also depends on the current state of the market. Usually, the highest earnings are generated during the bullish market. As a general rule, equipment should be purchased if the coin price is likely to remain optimal for at least 6-12 months. This will shorten the payback period of the equipment.
Mining can be seen as a seasonal business that generates significant returns during bull market periods. You can still profit during the bear seasons, but it may take longer if you still haven’t paid off your original hardware purchase. Ultimately, the market has historically shown recovery, generating significant profits for the patient miners.