With all of the buzz surrounding cryptocurrencies like Bitcoin and Ethereum, a lot of people are considering jumping in and starting mining. There’s a lot more to it than meets the eye. Mining cryptocurrencies involves striking a delicate balance between the costs of running your mining operation and the ever-fluctuating market.
If you’ve ever thought of joining the world of cryptocurrency mining, you need to know the specifics, and you need to understand everything that’s involved in getting your operation up and running. Cryptocurrency mining is a business, and you need to view it as one.
Bitcoin was the first breakout success, but there are other currencies that you should know about, like Ethereum, which experienced a meteoric rise over the last year or so.
Each cryptocurrency has it’s own blockchain, difficulty level, and mining software. All of that helps to contribute to that currency’s exchange rate. Other than that, cryptocurrencies behave somewhat like stocks. Their value is determined by demand and exchange.
Demand and valuation of currencies shifts like stocks. Newer currencies tend to have a lower value and a lower difficulty level, making them easier to mine. Miners employ different strategies to maximize their earnings, including diversifying their currency portfolios.
You can mine on just about any computer that can complete the cryptographic algorithm used to generate the coins. The question really becomes; is it efficient. In most cases, it isn’t. That’s why cryptocurrency mining is done in three main ways.
Cryptocurrencies that haven’t reached extreme levels of difficulty, like Bitcoin has, can be mined using GPUs. GPUs are more specialized and have loads more computing power than CPUs. They are capable of completing the calculations required in much less time as well.
GPUs can also be used in large numbers. A single mining computer can have many GPUs all running together to mine at dramatically increased speeds.
Graphics cards can use a lot of energy, though, so they become increasingly inefficient as the difficulty of the hash algorithm used to mine increases.
Coins, like Bitcoin, that have become exceedingly difficult to mine pose a unique challenge to miners. As a result, specialized mining hardware has been developed for the sole purpose of mining these coins.
The hardware is purpose-built to run the hash algorithms of a single coin and do nothing else. These devices are called ASICs, and they can come with a weighty price tag, especially since they become obsolete and effectively worthless as the difficulty increases.
There are cloud mining services that use cloud computing hardware to mine for coins. Cloud compute has become a popular service in and of itself, but virtually the same hardware can be applied to mining.
Cloud compute hardware consists of a large battery of dozens of the most powerful GPUs available. These GPU collections span across multiple servers and ultimately behave and appear as one server and service.
These services eliminate the setup time and cost as well as the cost of hardware. You also don’t need to worry about the hardware becoming obsolete. On the other hand, you do have to forfeit some of our profits for the cost of the service.
Every currency has its own software tools, but there are a couple of basic components that every setup requires.
First, you need an operating system to run your mining machine with. Keep in mind that it’s usually not a good idea to run your regular computer as a miner. Doing so is inefficient and will decrease your profits. Because efficiency is key, a minimal Linux installation is usually best for mining.
Next, you’re going to need a wallet to store your currency. That wallet can be either stored locally or on a service. Either way, you’ll need one for your coins.
Last, you’ll need a client and mining software. Sometimes these are the same program. Other times, they are two separate things. These are the programs that actually handle mining the currency.
None of this software costs anything. All of these programs are free and usually open source. That means that you’re free to install them wherever you need them as many times as you want.
There are two basic costs associated with cryptocurrency mining, hardware and electricity. In order to mine, you need to assemble a purpose-built mining computer or purchase an ASIC. Neither is inexpensive, so you will always start out your mining endeavor behind.
The other cost shouldn’t ever be discounted. Electricity is not inexpensive. Mining hardware draws a ton of power, probably more than any appliance in your house, and it’s running all the time. The only way mining can ever be worthwhile is if it mines the currency at a higher rate than it draws power.
You absolutely need to calculate these costs before purchasing any equipment. Mining is a delicate balance, and you need to make sure that it swings in your favor.
Setting Up Your Mining Machine
So, you’ve decided to plan out your own mining machine, and you want to go deeper into the specifics. Some things are very specific to the currency, others are universal. This section will focus most on the universal aspects.
Choose an Operating System
Linux is the best option for mining. It has easier access to many of the common mining tools, it’s generally more secure, and it’s more efficient with hardware resources.
If you are familiar with Linux, pick your favorite distro, and have fun. If not, using the latest long term support(LTS) release of Ubuntu will be your easiest and most reliable option. As of right now, that release is 16.04.
The LTS releases tend to be more stable than the more current ones. They also have support from the AMDGPU-PRO drivers, which will save you some headaches in configuring your hardware.
Set Up Your Hardware
For most of the coins that are worth mining, you’re going to be using GPUs. GPU mining setups are all very similar, regardless of the currency.
The Core System
There are a couple of schools of thought here. For years, miners were throwing low-powered Intel CPUs in high end motherboards to support the amount of GPUs needed. The CPU didn’t matter as much, so they would save money that way.
Now, multicore chips like the AMD Ryzen 7 series are adding another option. No, a CPU is never going to mine as well as a GPU, but those extra cores can mine, and the increased cost might be worthwhile. Plus, Ryzen is actually very energy efficient for its size.
The official recommendation here is to shell out a bit more, and build the machine around a Ryzen 7 CPU. Pick any of the three CPUs and an X370 motherboard that has 6 PCI-E sockets. You might not have the cash for 6 GPUs now, but the potential is good to have. Pick up 8-16GB of RAM for the system. 16 would be better, if you can.
Mining relies on OpenCL. AMD graphics cards have always been better at running OpenCL, so go with AMD graphics cards. Currently, the best cards are the RX470, RX480, RX570, and RX580. AMD’s recent Vega release is still under debate. It may turn out to be the best option for mining after more testing.
The goal is to get as many cards as you can. Six is the max for most desktop motherboards. You’re going to need extension cables to plug them all in.
Mining requires power and a lot of it. You’re going to need enough power supplies to cover that. First, always buy the highest efficiency power supplies you can. That means platinum or, preferably, titanium efficiency ratings.
To calculate your system’s power needs, use the OuterVision calculator. It’s one of the most accurate and least biased ones out there.
You’ll probably need more than one PSU. There are available adapters that make running more than one power supply easier.
You can’t fit a full mining machine into a regular computer case. It physically won’t fit, and would probably overheat if you managed it any way. Most miners either use custom mining cases or a regular case and a specially designed GPU rack.
There are a few options when it comes to wallets. You can have a local software wallet, a cloud hosted wallet, or a hardware wallet. Which you choose is a matter of preference.
Coinbase is a popular service for buying and selling Bitcoin, Litecoin, and Ethereum. It has an integrated wallet that you can use to directly trade the coins that you mine.
Mobile wallets are also very popular. Coinomi is a great open source option there.
If you’d prefer a physical wallet, the Ledger Nano S is a great option.
If you want a desktop wallet, currency-specific options are best if you want open source. Otherwise, check out Exodus.
Thankfully, you really don’t need to do all of the math yourself. You can calculate your profitability with any number of tools online. Here are a couple that you can use to figure out if mining is right for you. Always make sure to include a proper estimate of your entire computer’s power consumption and the actual cost of electricity in your area.
Using And Investing
Cryptocurrencies really are a lot like stocks. There’s an entire market for trading coins, and there’s plenty of money to be made in it, if you’re savvy. If mining isn’t for you, or it sounds too risky, you can simply buy the cryptocurrency of your choosing in the hopes that its value increases.
Just like stocks, this can go either way. There are no guarantees, but like the stock market, many crypto coin investors believe that the key is to buy a currency when it’s low and sell as it’s approaching its peak. Of course, no one knows exactly when that is. If you told someone only a couple of years ago that Bitcoin would hit $4000, they’d probably call you crazy, and yet, here we are.
Is It Worth It?
The real question on everyone’s mind is whether or not mining is worth it. The answer to that question comes down to another question; is it profitable? If you can configure a system, calculate the cost of your hardware and electricity, and turn up with a reasonable profit, it might a good idea to get into mining.
You should also do a bit of research about the climate surrounding the currency that you’re looking to mine. Getting into Ethereum right now is probably a bad idea. It’s switching to a Percent of Stake model soon, and that will change the game when it comes to mining, if not making it entirely impossible.
Mining probably shouldn’t be about one currency. Instead, it should be about the idea of cryptocurrency as a whole. If you enjoy mining and the idea of doing it, you can set up a powerful mining machine and shift between profitable coins, converting them to Bitcoin as you go. This way, you always have a bank of the most widely accepted currency, while still capitalizing on up-and-coming ones.
Cryptocurrency mining is a mix between running a business and the stock market. There are risks, and it’s pretty easy to lose big, but if you plan carefully, you can just end up turning a sizable profit.