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Mining bitcoin is a smart way to participate in the Bitcoin network and secure some valuable rewards.
Bitcoin miners serve a vital role in the network as they validate transactions and eliminate the need for a centralized organization such as a bank. They are also tasked with validating the entire state of the blockchain. For their efforts, they receive a reward in the form of bitcoin.
The first person to mine bitcoin was Satoshi Nakamoto.
As Bitcoin's anonymous creator, he mined roughly around a million coins before he disappeared from the online chat rooms where he openly discussed the project during development.
In those early days of Bitcoin, you could mine bitcoin using a regular home PC, and you still can today. One of the core fundamentals of Bitcoin is to retain a 1MB block size so, in theory, any CPU can join the network.
While this strategy makes sense on paper, mining with a CPU today isn’t a great option because the chances of securing rewards is substantially lowered due to the increased network hash rate.
Simplified, bitcoin mining is a process in which network participants called nodes compete against each other to validate blocks of transactions. These nodes compete by attempting to complete a complex mathematical equation. The first node to get the answer correctly gets to add the next block of transactions to the chain. They are rewarded in Bitcoin as compensation for their work.
In the early days of Bitcoin, mining rewards were set at 50 BTC.
Interestingly, Nakamoto integrated a reward adjustment policy into the Bitcoin network.
This protocol halves the BTC rewards roughly every 210,000 blocks mined. Given that Bitcoin adds new blocks in ten-minute intervals, this format averages out to every four years.
That’s just math.
Nakamoto realized early on that his invention would see an increasing rise in value as more people became aware of its existence, and profound features. He wanted to integrate this appreciation into the network reward structure.
For example, in 2009, miners earned 50 BTC when they added a block to the network. In 2012, these rewards were halved to 25 BTC. In 2016, the rewards were halved again to 12.5 BTC. The most recent Bitcoin halving occurred on May 11, 2020. This event brought the network’s rewards down to 6.25 BTC.
It’s easy to see that the mining rewards are designed to incentivize users to do their part to secure the network.
Even though today’s mining rewards are down to 6.5 BTC, in terms of value, this is much more than earlier miners who acquired BTC when its value was under $100.
This strategy continues to make mining profitable for those who have the initiative and access to low-enough-cost energy.
Notably, Bitcoin's mining rewards also play a vital role in currency issuance. It’s no accident that the network takes 10 minutes to add another block and issue new tokens. These rewards also represent the only time new Bitcoin is ever minted. This strategy creates a predictive monetary issuance policy that helps to maintain stability and long-term value.
It’s also another reason why Bitcoin provides a fairer financial system than the current centralized fiat alternatives. Governments can’t print more Bitcoin like fiat to fund wars and other forms of oppression. In this way, Bitcoin provides a more democratic option to the world.
Bitcoin introduced the world to a decentralized alternative to the centralized financial system. As such, there is always value for humanity in keeping this project alive. While much has changed in the mining sector over the last 11-years, the answer to this question is a bit more complicated than a simple yes or no. If you meet certain criteria, the answer is a definite yes.
Financially speaking, this question is a bit more complicated. There are multiple factors that can determine if mining Bitcoin is the right decision for you, or if you should consider another token.
The first thing to understand is that the process of mining Bitcoin requires an investment in both learning and equipment. Here are some things to think about before you jump into the Bitcoin Mining arena.
In the early days of Bitcoin, mining didn’t require any special tools. There were no such things as high-powered Bitcoin mining rigs. Most early users simply mined Bitcoin using their CPU. However, nowadays, the mining sector is very competitive. There are a variety of different types of mining rigs and pools that have kicked up the network’s hash rate to new levels.
Consequently, mining Bitcoin from a CPU is the least effective way to earn rewards.
The first thing to consider is your technical skill level.
If you are the type of person who is very computer savvy, you may find it better to build your Bitcoin mining rig from scratch.
But for most people, the better option is to purchase an already built miner and join a large mining pool.
This approach will provide you with steady rewards as mining pools split the rewards from each block based on the amount of hash you provide to the network.
It’s no secret that the cost of validating the Bitcoin network is high energy consumption. Just like mining for gold, you will need to put forth considerable resources in the form of electricity to become a Bitcoin miner. You will want to check your local electricity rates as the first step in your mining journey.
The lower the cost of electricity the better because you don’t want to invest a bunch of money into a high-powered mining rig to only have your profits slashed due to high operating costs.
Expert miners understand that using cheap, renewable and green energy sources is the future for Bitcoin.
Studies have revealed that over half of Bitcoin’s network now relies on clean renewable energy to power their rigs. Some of the largest Bitcoin mining farms in the world today are using 100% green energy to drive profits skyward at this moment.
If you have the option to use renewable energy for your mining operation, you should.
Another major issue to consider is connectivity.
Mining Bitcoin requires your rig to be in constant contact with the network. You will need a reliable data connection to ensure that there are no delays and that your rig remains actively protecting the network. Notably, there are a couple of ways to stay connected to the Bitcoin network. While using your local internet is a great option, there are also satellite options available from Blockstream that provide you with connectivity without the internet.
Today’s Bitcoin hash rate is around 139m terra hashes per second.
The hash rate is the total computational power of the network.
The higher this number, the more difficult it is to mine Bitcoin.
This scenario is due to the technical structure of the network. Bitcoin was designed to increase in difficulty based on the ‘hash rate’.
The more people using the Bitcoin network, the more difficult it becomes to mine the coin. A modern marvel,, the network adjusts the difficulty through a unique approach. Specifically, it increases the difficulty of a mathematical equation that all miners compete to answer called the SHA-256 algorithm.
The SHA equations originated as a military coding process but soon found a home in the commercial sector. The prefix SHA stands for secure hashing algorithm.
The SHA-256 mathematical equation is so difficult that your computer is unable to just answer it. Instead, the computer realizes that the equation is so complex that it would be faster to make millions of random guesses than actually compute the equation directly. Part of what makes this equation so difficult is that it has an answer with a prefix of zeros.
To increase the mining difficulty, the network simply requires miners to provide answers with more zeros in the front of their answers.
The normal difficulty level requires the answer to have a prefix of four zeros. Every zero increases the overall mining difficulty significantly.
This strategy enables Bitcoin to retain a predictive 10-minute block schedule as the network expands.
It’s also important to consider the difficulty level of Bitcoin because it will dictate how powerful a mining rig you need to purchase. Today there are a variety of different types of Bitcoin miners commercially available.
The earliest forms of custom-built Bitcoin miners were GPU mining rigs.
GPUs (graphic processing units) leverage powerful graphics cards to mine Bitcoin faster. GPUs are hundreds of times faster at discovering the SHA-256 equation’s answer than your normal PC. This added speed is due to GPU’s technical makeup.
Your CPU is good at doing a bunch of tasks but not excellent at anyone in particular. GPUs operate in the opposite manner. GPUs are designed to handle very specific tasks.
As such, they are better suited for the repetitive guessing that PoW networks require.
[Application Specific Integrated Circuit]
Nowadays, those seeking to mine Bitcoin should consider purchasing an ASIC mining rig.
ASIC rigs changed the game when Bitmain, the world's largest mining rig manufacturer, introduced them to the market. These purpose-built machines are thousands of times more efficient at mining Bitcoin than GPU rigs.
As the name implies, ASIC rigs are perfect for completing specific redundant tasks such as figuring out the SHA-256 equation. You guessed it, ASIC miners are custom-built to handle only one task.
That is why you can't purchase an ASIC miner for Bitcoin and use it on other networks that leverage other types of consensus mechanisms.
Each unit is set up to handle the SHA-256 algorithm exclusively.
ASIC mining rigs are far more expensive than GPUs or other options in the market. On average, you will pay over $2000 for a reliable ASIC mining rig from the manufacturer. Bitmain currently offers an excellent selection of mining rigs.
These devices include everything you need to mine Bitcoin straight out of the box.
Now that you have a firm understanding of the purpose and goal of Bitcoin mining, you are ready to set up your first AISC mining rig.
Setting up a Bitcoin ASIC mining rig starts with meeting a few basic requirements.
Make a mining checklist to ensure you don’t miss any of these vital steps.
Good planning will save you thousands of dollars in headaches and more.
As such, it’s recommended that you take some time to plan out the details of your mining foray.
⚠️ Be noted: This step includes things like reviewing the electricity costs and renewable energy options available to you. You will want to contact your local electricity provider and note the price per kWh.
Once you have this information, you will want to input it into a Bitcoin mining profitability calculator.
Make sure you can earn profits running a mining rig from your location.
If you run the mining profitability calculator and you realize that there are no profits to be made due to high electricity costs, it doesn't necessarily mean that you can’t mine Bitcoin.
However, it can mean that you need to explore green energy options or other locations first.
Another vital thing to consider is the electrical hardware needed.
Most ASIC mining rigs today operate using a 220v outlet. These outlets provide more voltage than your average 110v outlets and use different plugs.
When deciding where to place your mining rig, you may need to speak with a certified electrician to install a 220v direct line from your breaker box to the area where your rig will reside.
It may not seem like it at the moment, but your PC is constantly emitting hot air.
This hot air distribution is minimal for CPUs conducting normal activities but can become a major issue for ASIC mining rig operators. These machines are computing on a much higher level and, therefore, they need to dissipate more heat.
This heat means that you will need to consider some form of ventilation for your mining rig.
Heat is your mining rig’s worst enemy.
When a mining rig gets hot, its performance degrades.
This means that you will be paying more for lower performance from your rig.
Additionally, this heat can become very uncomfortable for anyone in the direct area. If you intend to have your mining rig located in an area you also use as a living space, you will definitely need some additional way to remove the hot air from the room.
Interesting Fact: These requirements have caused many large mining farms to migrate to colder environments. This strategy enables them to save on ventilation as the rigs keep the area at a comfortable temperature and prevent the hardware from freezing.
This approach also offsets the cost of heating these large facilities.
Experienced miners also know that the noise your mining rig makes can be a nuisance.
Today's high-powered mining rigs sound like your average desktop computer running at full strength. The fan is constantly blowing and the devices put off a slight hum.
Some people can easily ignore it, but if you are the type of person who needs silence, you will want to be sure you install your mining rig away from where you spend daily life.
There are a couple of reputable ASIC Bitcoin mining rig manufacturers available to the public today.
The top ASIC rig provider is Bitmain.
Notably, Bitmain has dominated the ASIC mining rig sector since it first introduced the world to these powerful crypto tools.
Today, there are some other competitors that offer efficient ASIC mining rig options including EBANG and INNOCSILICON.
There are a couple of reasons you shouldn't buy a used mining rig.
For one, used mining rigs are often overpriced to reflect growing demand. Additionally, they don't come with any warranty.
Most ASIC rigs come with a 6-month factory warranty. When you consider that the average rig can cost thousands of dollars, a 6-month guarantee can save you from wasting dollars on subpar equipment.
The biggest reason to buy your ASIC mining rig from manufacturers is to avoid scams. The mining sector has been invaded by scamsters, spammers, and no-gooders.
People have lost thousands from sending funds to made-up companies, hacked accounts, and more.
Sticking with reputable providers like Bitmain ensures your mining equipment isn't a Trojan horse. The internet is filled with horror stories of people who lost big-time buying used rigs.
Don’t Forget: There are no refunds on the blockchain, if you send Bitcoin to a person for a mining rig and they never send your product.. you have no legal recourse.
The good news about ASIC mining rigs is they are far easier to set up than the custom-made GPU miners of the past. These devices come fully assembled and ready to go. Plug and mine. Popular models only require you to plug them into a 220v electrical circuit and a high-speed internet connection.
Notably, ASIC mining rigs require CAT5 or CAT6 cabling.
It’s completely possible to mine using a WiFi connection.
However, there are some additional risks that make it not ideal.
For one, WiFi doesn’t provide the stability required to ensure a smooth mining experience. Additionally, it’s less secure anytime you broadcast data over a WiFi network versus a hardline cable.
Every Bitcoin miner has a specific IP address.
If you purchased your mining rig new, the manufacturer will include an IP address in the setup documentation.
If not, it’s not a huge problem as you can access your router to find out the mining rig’s details. Once you have the ASIC rig’s IP address, you can paste that into your internet address bar.
This action will open up the rig’s log-in screen.
The first time you access your mining rig you will need to use the default password.
This information is provided by the rig’s manufacturer with the purchase and setup documentation.
For example, Bitmain uses "root" as its default mining rig login password. Once you are inside the mining rig setup, you will want to set up your unique wallet and mining pool information.
You get to decide what Bitcoin wallet to use for your mining rewards.
This can be an already in use wallet or you can set up one specifically for your mining purposes. The main thing to understand is that you want the wallet to be non-custodial, meaning that you are the only one who has access to your private keys.
You should never use a mining rig that has a wallet address already inputted. This will result in your mining rewards being sent to whoever put the address in the device and not your personal wallet.
It’s also recommended that miners make an extra investment into a hardware wallet to keep their holding safe. Hardware wallets enable you to have your crypto safely stored offline and away from online threats.
Regardless of what type of wallet you decide on, it’s vital that you keep your private keys safe.
If you lose your keys, you lose access to your crypto. Also, never send your wallet keys to anyone.
Anyone with your private keys has full access to your crypto stash.
Nowadays, it’s recommended that miners combine efforts using mining pools.
These unique online communities combine all the hash power of the entire pool to mine Bitcoin more efficiently.
The rewards earned by the pool are then split based on how much hash power you contributed to the network.
Each mining pool has a slightly different setup but they all will provide you with a pool address to place in your mining rigs setup page.
The top Bitcoin mining pools in operation today include:
Once you have your mining pool data inputted, you need to enter a password for your device and save it.
Prior to hitting the save button, it’s recommended that you make a copy of all the data you entered for your records and to ensure you don’t forget your login credentials or wallet information.
Write it all down on paper.
Secure it somewhere.
You’re now an official Bitcoin miner.
Now that you have your ASIC mining rig operational there are a few frequently asked questions that are worth checking out, to help remove any confusion.
Remember, there is no one size fits all when it comes to mining cryptocurrencies, It’s all the preparation and research you do beforehand that determines your true profitability.
Don’t Forget: homemade miners can require you to download the Bitcoin blockchain and mining software.
There are a lot of factors to include when you want to figure out the true cost of mining a single Bitcoin in your area. Notably, a Bitcoin mining calculator can help with this process as well. You will need to enter the electricity costs, your hardware, and the network difficulty into the system. The system then takes the number of days it takes to mine a complete coin and multiplies by your estimated daily operating costs to determine the true costs.
To see an estimate of how long it will take you to accumulate a whole Bitcoin, you will again need to refer to a mining profitability calculator. You will want to enter your mining rig stats, the network difficulty rating, and your mining pool details into the calculator to find this information. This data can then be calculated to determine how long it will take to reach your goal.
Interestingly, Bitcoin isn’t the only cryptocurrency you can mine using an ASIC miner. For example, Bitcoin Cash provides a less competitive option that uses the same SHA-256 PoW algorithm as Bitcoin. The main difference when mining other coins are the pool and wallet address inputs are different.
Mining Bitcoin in 2021 can still be profitable.
However, it takes some research and prep work to ensure that you don’t end up just paying for electricity rather than stacking Sats.
Stick to the tips in this guide and you are sure to save yourself a ton of troubles; avoiding the most common pitfalls new miners make. Additionally, always stick to reputable mining rig manufacturers to avoid scams and low-performance rigs.
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