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What You Need to Mine Cryptocurrency
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The current “crypto winter” has dragged on and this increases the relevance of the issue of mining profitability. On YouTube, specialized forums and social networks, people constantly talk about how they are mining cryptocurrencies and how much money it brings.
Let’s evaluate how relevant mining is in 2023. Is it worth it to start doing it now? Let’s not disregard another interesting question: are there enough prospects for PoW mining in the near future?
Crypto mining business – the process of making certain cryptocurrency networks work, which requires significant resources in the form of computing power.
Miners – users who ensure the passage of transactions, decentralization of the network and its protection against unauthorized access and changes. They receive remuneration in cryptocurrency for the work of their equipment.
Cryptocurrency Wallet
To make a profit, you will need a crypto wallet that will allow you to accept earned coins. This is a special address that is protected by a password and a secret phrase, which will be your crypto piggy bank.
Mining Software
The mining software is mostly free, so you just need to download and install it if you are good at it. If not, then you can hire a consultant to help you with this.
Mining Hardware
Today, the main share of mining devices are video cards (GPU) or ASICs (equipment designed exclusively for mining cryptocurrencies). Each option has advantages and disadvantages:
ASICs have calculation power hundreds of times higher than video cards. But they also cost several times more. They are noisier and consume more electricity. Moreover, they quickly become outdated, their relevance is counted in a year or two. In addition, due to the narrow specialization, this equipment is not needed on the secondary market.
Video Cards are less powerful, less noisy and energy consuming. The effective lifespan is up to 5 years, and they are always in demand on the secondary market of PC components. They can compete with ASICs on some (not the most popular) algorithms.
Today, institutional miners, who are ready to finance the creation of farms on an industrial scale, buy ASICs in order to make money. They buy bulk quantities of devices worth hundreds of thousands and millions of dollars. Video Cards remain for a lot of small entrepreneurs to set up small farms at home or in the back room.
How Much Does It Cost to Build a Crypto Mining Rig?
The costs are highly dependent on the type of mining and the hardware used. But there are also common costs. For example, a place for mining, cooling, security, maintenance. These costs can be different for everyone and difficult to estimate.
Application Specific Integrated Circuit (ASIC)
If you decide to become a professional miner, you should pay attention to ASICs if you are ready to invest from $20 000 because you will need at least 5 ASICs.
Home Computers
For mining at home, you will need at least $5,000 for several video cards and additional equipment for them.
What is a Crypto Hash?
To complete transactions in a block, you need to find a hash. Each block has a unique hash associated with it. This is always a 64-digit number, regardless of the transaction data.
Any change to one transaction will result in another hash being created. Thus, transactions, once recorded, are protected from tampering.
In addition, the hash of each block is linked to the hash of the predecessor block. This further enhances the immutability of the blockchain.
How do Crypto miners find the target hash?
Miners find the hash using computer calculations. The mining process is nothing more than running algorithms to hash block headers to a value below a given value. And whoever does it first gets the block reward. It’s like winning the lottery.
Types of Mining
There are several types of mining and you can choose the one that suits you and your tasks.
Solo Mining
Solo mining refers to the independent extraction of bitcoins, most often at home on their own equipment. Now this method brings practically no income, only if you do not have almost free electricity.
CPU and GPU Mining
CPU mining is also almost non-existent, and GPU mining has taken a big hit since Ethereum switched to the new algorithm. But miners continue to use video cards to mine other coins.
Cloud Mining
Cloud mining is the rental of computing power. This type of mining allows you not to buy and maintain equipment for a small commission.
Mining Pool
A mining pool is not exactly a type of mining, as it is the pooling of the capacities of different miners. A mining pool can have solo miners, ASICs, and cloud mining data centers. This is a way to more efficiently mine cryptocurrencies.
Weigh the Return on Investment
The most profitable ASIC for bitcoin mining is Bitmain Antminer S19Pro+Hyd. It is equipped with a liquid cooling system. The device came out in 2022, and its price hovered around $15,000.
This ASIC mines 0.0006692 BTS per day, i.e. it provides about $11 net. The payback period for users who have already got their equipment is about seven years.
As a reminder, all calculations are relevant only at the current price of cryptocurrency and the current level of mining complexity. In the summer, the payback period was slightly less, only five years. That is why it is advisable to invest in bitcoin mining and the purchase of ASICs only for the future. If you are not confident in the future growth of crypto, you should not start investing in the purchase of expensive ASICs.
Such investment payback periods are considered acceptable for a regular business, especially during a recession. But many market participants are susceptible to panic caused by the crisis in the market.
Thus, according to Forklog, in mid-summer 2022 the number of ads for the sale of ASICs increased by 16%, while demand for them decreased by 26%. At the same time, long-term investors can take advantage of the market situation to maximize returns through the purchase of quality equipment at reasonable prices.
Things are even worse with video cards. According to CoinTelegraph, after Ethereum switched to the PoS algorithm, prices for popular GPUs have slipped sharply. The Nvidia RTX 3080 card is now priced around $700, though it was previously over $1,000. But many are confident that the demand for graphics adapters will still remain at a high level.
Cloud mining has a much lower entry threshold and is more suitable for newcomers to the market. Just $50 is enough and you have already started mining your cryptocurrency. And you can start making a profit in six months or even less.
Miners receive about $123,125 for mining a cryptocurrency block. Many of them today are balancing on the verge of self-sufficiency, but the long-term growth potential remains significant.
How Long Does It Take to Mine 1 Cryptocurrency?
On average, it takes about 10 minutes to mine one bitcoin. But this applies to the entire blockchain network. How much you personally need to mine a whole bitcoin depends on the power of your equipment.
Is It Easy to Start Mining Crypto?
If you have chosen cloud mining, then it will be very easy to start. And it doesn’t take a lot of money. Owning a farm is quite difficult and requires initial capital. Therefore, ECOS cloud mining is a good option to start.
Can You Get Rich by Crypto Mining?
Before entering the market from scratch, you need to ask yourself the question – for what purpose are you going to mine cryptocurrencies? If you are counting on the opportunity to earn a tidy sum in a few months, you definitely should not start now.
Today, the value of the crypto is falling, and no one can predict how long this stage will drag on. Maybe for a month, maybe for six months. As can be seen from the above calculations, the payback of equipment exceeds these terms.
Of course, if the rate grows by 2 times, you can have time to return the investment and earn. But relying only on this would be the height of naivety. In addition, there is now uncertainty on the market regarding the pace of economic growth and the policy of the Fed.
If crypto mining business is a long-term investment, then you can try. This will require a willingness to hold the cryptocurrency for a long time, without selling on the market to cover current costs. Even if the market collapses, as happened in 2018, sooner or later the value of the crypto will return to its previous level and even exceed it. Then it will be possible to sell the accumulated coins.
Considering the situation in the cryptocurrency mining industry as a whole, it should be noted that today the break-even threshold for mining (the profit from the sale of BTC covers the cost of electricity consumed) on ASICs is about $11,000–$12,000 per bitcoin.
Miners’ profits depend on three components:
- The number of coins they receive. This important indicator of a miner’s earnings is based on the power of the equipment, the difficulty of mining and the value of the reward.
- The value of the cryptocurrency. Prices of digital currencies are formed by the market. And there is no way miners can influence them. Unless, of course, the miner of digital assets is the owner of a large number of coins, wishing to sell them all at once.
- The cost of equipment and related costs (electricity, equipment maintenance, Internet fees, etc.).
It is possible to determine how profitable crypto mining business is only in the short term: today, this week, this month. The longer the analysis period, the harder it is to make reliable profitability predictions. This is due to the factors on which cryptocurrency miners’ profits depend. They are volatile and change dynamically over time.
Conclusion
As you can see, there are a huge number of types of mining and equipment for this. It is a difficult period on the market now, but in the long run this is the best time to start. The equipment is now cheap, the competition is not strong, so the growth of coins in the near future will be able to make x2 to your capital.
