One of the biggest challenges Bitcoin miners face when investing in mining hardware is finding quality information. The Internet is full of reviews about mining machines and software but very few articles about the challenges in the business. Do you want to get into the crypto mining business? Learn these 10 facts about the industry.
- 1 Take Hash Rates Seriously
- 2 Mining Machines are Highly Energy Consuming
- 3 A Good Mining Pool Can Increase your Earnings
- 4 Consider Mining Altcoins
- 5 Think of Cloud Mining
- 6 Some ASICs can Mine Multiple Coins
- 7 A Secure Wallet is Important
- 8 Mining Software Can Improve Efficiency
- 9 Crypto Volatility Will Affect your Earnings
- 10 It’s More Profitable to Buy and Hold Coins
- 11 In Conclusion
Take Hash Rates Seriously
Mining hardware is expensive, but that does not mean every expensive mining machine is worth buying. Mining works in a way that energy consuming ASIC miners solve complex algorithms. The ASICs have extremely powerful and specialized processors that mine cryptocurrencies based on hash rates per second.
With Bitcoin and all other cryptocurrencies mined using hardware, a code is used to determine the required mining difficulty at a given time. Think of the code as a math puzzle. You can have two math problems, one simple and one difficult. Both problems have the same answer, but the more difficult question requires more effort.
The code with all cryptocurrency networks increases or decreases depending on the number of miners performing the same tasks. When purchasing mining hardware, purchase an ASIC with hash rates powerful enough to remain profitable for more than one year.
Mining Machines are Highly Energy Consuming
You may have read it somewhere, and it’s true. A typical Bitcoin mining machine consumes approximately 850 watts to mine one Bitcoin. Ethereum mining and altcoin miners consume less energy, but it’s still high compared to an average home’s energy consumption rates.
If you are serious about mining, evaluate your energy expenses. Statistics show that Bitcoin mining is mainly profitable to users who spend $0.1 or less on a Kilowatt of power. The average crypto mining machine consumes 400 KWh. If you live in an area where electricity is not cheap, you probably shouldn’t mine.
A Good Mining Pool Can Increase your Earnings
Unless you want to spend ages before you ever mine a single block, you must join a mining pool.
The problem with many mining pools is that they have hidden charges. Some refuse to payout while others have high charges. On the other hand, great mining pools have low fees and pay transaction fees as well. Select a mining pool carefully as it can make a huge difference in how much you earn.
Think about this. You earn $100 after energy costs with your miner. Pool ‘A’ charges 1% in fees and does not payout transaction fees. You also pay $10 extra if you make a withdrawal of less than $50. Mining Pool ‘B’ charges 2% in fees and also pays transaction fees. Pool ‘B’ does not charge anything extra.
On the surface, Pool ‘A’ may lure you with the 1% fees, but you end up earning less.
Consider Mining Altcoins
Bitcoin mining machines are expensive, and quite frankly, very few of them are profitable. The Antminer S9 costs about $1,200, and it may take up to 15 months for you to break even. On the other hand, you don’t need special mining hardware to mine Monero.
To keep energy costs low, many altcoin networks are using mining algorithms with low energy consumption. Monero, for example, was developed in such a way that using either CPU or ASIC machines wouldn’t make a difference.
Think of Cloud Mining
Before you purchase expensive hardware to mine, keep in mind that you can invest in crypto mining without purchasing the hardware. Through cloud mining services, you can buy a contract that assures you of daily payouts for a year or more.
There are 5 legitimate companies that offer Bitcoin and altcoin mining contracts. A couple of years ago, cloud mining was quite profitable, and it offered affordable contracts. In 2018, Bitcoin cloud mining is honestly not very profitable, but you can try your luck with altcoin mining.
Some ASICs can Mine Multiple Coins
There are two main types of ASIC cryptocurrency miners. One type of ASICs mines cryptos with the SHA256 mining algorithm while type two depends on the scripting language. Bitcoin is the most popular coin mined with SHA256 ASICs while Litecoin leads coins mined using a scripting language.
There are more than 10 coins based on SHA256 mining algorithm. All these coins can be mined using ASICs. If you can’t afford a new Bitcoin ASIC, therefore, you could purchase a cheap ASIC that can no longer mine Bitcoins but can still mine other SHA256 altcoins. All the same, there are Bitcoin several miners: https://www.abitgreedy.com/bitcoin-mining-hardware/.
A Secure Wallet is Important
Mining equipment is expensive. The last thing you want is to lose is your Bitcoins because you don’t have a safe Bitcoin wallet. Finding a secure Bitcoin wallet is, in fact, one of the first things you should do before purchasing any mining equipment.
There are four types of wallets: mobile, web, desktop and hard wallets. Mobile and web wallets are the least secure types of wallets, but they are also easier to access. Hardware wallets provide the best security and are recommended for miners.
Mining Software Can Improve Efficiency
Every cryptocurrency miner requires mining software that links the mining hardware to the blockchain where data from users’ transactions is sent. Mining software programs are also needed to link the miner to the mining pools.
If you have a good mining pool, it could help you reduce energy consumption, keep temperatures at your home low and help you track your miner’s profess easily.
Crypto Volatility Will Affect your Earnings
Cryptocurrencies are known to fluctuate in value. Bitcoin, for example, was valued at $19,000 in late December 2017 but it is now valued at $7,600. At one time, Ethereum was valued at more than $1400. Today, the crypto is valued at slightly above $590.
Before you invest in a coin’s mining hardware, keep in mind that cryptos fluctuate and it may take longer to break even if the coin you are mining keeps losing value.
It’s More Profitable to Buy and Hold Coins
A profitable Bitcoin miner like the Antminer S9 costs $1273 as at the time of writing. A Power Supply Unit costs $200, and it may cost an extra $50 to ship and set up the machine. Based on Nicehash mining profitability calculator, you will have an average of $92 every month as profits.
It will take approximately 16 months to break even with the Antminer S9. And based on recent trends, the machine might not remain profitable long after that. Bitcoin prices, on the other hand, keep on fluctuating. Bitcoin grew by more than 1000% in 2017, and even if it doesn’t record the same growth, it may be much more valuable 16 months from now.
If you have to invest in mining hardware, consider the above the 10 facts carefully. Select your coins and mining equipment accordingly and mine coins with the highest profitability.