In brief

  • Bitcoin mining helps to go on the Bitcoin network secure against attacks.
  • With the right combination of equipment, electricity costs, and a few other considerations, Bitcoin mining can exist profitable.
  • Bitcoin mining profitability has increased as a result of the 2020-21 bull run—just in that location are shortages of mining hardware.

Bitcoin mining is the process of participating in Bitcoin's proof-of-work (Pw) consensus mechanism to discover new blocks and assist with transaction validation. The combined efforts of all the Bitcoin miners is responsible for the integrity of the blockchain, and ensures that transactions remain essentially irreversible.

Each fourth dimension a new block is discovered, the miner receives a reward, known as the Bitcoin block reward. Post-obit the 2020 halving, this is currently set up at 6.25 BTC per block, but most miners more often than not receive much less due to working together as part of a mining pool.

Rather than buying or trading Bitcoin, many individuals cull to only mine their own, since information technology often costs less to mine Bitcoin than it does to purchase it on the open marketplace. Every bit a result, mining and selling Bitcoin can be a assisting business endeavour, under the right conditions .

Here's how to get involved.

What you need to mine Bitcoin

If yous're looking to get involved in Bitcoin mining, so you're going to demand to get to grips with a few things first.

First and foremost, you will need a Bitcoin wallet. The exact type of wallet you use doesn't really matter, and then long as it's secure. This will be used to receive your mining proceeds, which, depending on your mining setup, could be substantial. Hardware wallets are widely considered to be the gilt standard in security, but they're more cumbersome to use. Many miners instead utilise software wallets similar Electrum , due to their convenience.

Next up, yous're going to need your mining hardware. We'll cover this in greater depth in the next section, but this is the machine you volition use to really participate in the Bitcoin mining process. In full general, the more than powerful your automobile (in terms of hash rate), the greater your rewards—merely there are other considerations besides (more than on this later).

Lastly, there's the mining software. This is software that yous run on your computer which tells your mining hardware how to perform, such equally which mining algorithm information technology should piece of work on, when it should operate, and which Bitcoin address mining rewards should be sent to. This can impact your mining yields, so information technology'south wise to choose carefully.

Types of mining hardware

Miners earn Bitcoin by verifying blocks using dedicated reckoner hardware (Prototype: Shutterstock)

When Bitcoin mining first began in 2009, the difficulty was and so depression that low-power devices could participate in the mining process using their CPU resources. At the time, even individual miners using their regular calculator could detect blocks—earning 50 BTC apiece past doing and so.

However, as the popularity of Bitcoin mining grew, miners began looking for means to go an border on the competition—and thus GPU mining was born. In 2010, people began hooking up large arrays of graphics processing units (GPUs) to mine Bitcoin—which, according to mining consultancy firm Navier, yields a six-times efficiency improvement over CPU mining.

Merely the era of GPU mining was short-lived. In 2011, information technology was found that a specialized type of hardware known as field programmable gate arrays (FPGAs) could exist designed to mine Bitcoin with even greater efficiency. This type of hardware ran the Bitcoin mining roost until 2013, when it was usurped past application-specific integrated circuit (ASIC) miners—which notwithstanding dominate to this day.

Present, unless you plan to mine Bitcoin from a supercomputer with tens of thousands of CPU or GPU cores, you are unlikely to be competitive as a Bitcoin miner—and nigh invariably won't turn a profit. You will virtually certainly need an ASIC miner, unless your acquisition and electricity costs are negligible.

As of writing, Bitmain's AntMiner S19 Pro, S19, and T19 are arguably the most efficient Bitcoin miners available—only getting concur of stock is challenging.

How profitable is Bitcoin mining?

Bitcoin mining can be profitable, just it'southward not guaranteed. (Epitome: Pexels)

Though Bitcoin mining profitability has improved in contempo months—largely due to Bitcoin's rapidly increasing market value, the corporeality of money you can earn can vary considerably based on several parameters.

The most important of these is your hardware . More powerful hardware tin crisis the calculations required to discover Bitcoin blocks much faster—thereby earning you more rewards. Only it'due south also generally more expensive.

The next most important consideration is your electricity costs . Inexpensive, reliable electricity tin assist to maximize your mining yield, since electricity costs will be your primary expense. Moreover, you lot will demand to factor in your maintenance costs, such as cooling, modifications, installation costs etc., and if you utilize a pool, consider how the puddle fee volition affect your yield.

Find out more near the profitability of Bitcoin mining .

How to choose mining software

Before you become your Bitcoin mining hardware up and running, you are going to need to choose the mining software for your computer. This is used to command which mining algorithm you want to work with, which pool you will employ, and acts equally the hub for controlling your miner.

Though these all offer the same basic utility, they can vary considerably in both their efficiency and the additional features they offer. Moreover, choosing the correct mining software can impact the efficiency of your Bitcoin mining operation, so information technology'south oft a practiced thought to attempt out a few before committing long-term.

When selecting your mining software, these are some of the bones considerations you will want to make:

  • 🖥️ Operating system support: Cheque that the software works with your operating organization—due east.g. Windows, macOS, Raspberry Pi Bone, Linux, etc.
  • 🧮 Algorithm back up: Bitcoin uses the SHA256 mining algorithm, the software volition need to back up this to successfully mine Bitcoin.
  • 🧰 Hardware support: Some programs support CPU, GPU, FPGA, and ASIC mining, whereas others volition but support specific hardware.
  • 🏋️‍♂️ Efficiency: Low resource miners are generally more efficient, only they are ofttimes more difficult to use.
  • 💱 Additional functionality: Automated coin switching, remote access, mining scheduling are amidst some of the most popular additional features.

Oft, Bitcoin mining software can be downloaded and used free of charge. Even so, you will often find that these software programs offer additional features for a fee (or donation), while those that are the simplest to use and setup come up at a cost.

Discover out more than about the best Bitcoin mining software available in 2021.

What are Bitcoin mining pools?

A listing of Bitcoin mining pools past hash rate share (every bit of February 2021). Image: BTC.com

A Bitcoin mining pool is a coordinated group of Bitcoin miners that piece of work together to ameliorate their odds of successfully mining BTC. The combined efforts of a large number of Bitcoin miners ensures that they are able to discover more blocks than when working alone and hence generate a more stable income. While it is possible to mine Bitcoin solo, doing and then is unlikely to ever yield any rewards—unless yous are packaging some serious hardware. Instead, with Bitcoin mining pools, everybody aligns their mining power to the same purpose for the common good of the pool.

When mining Bitcoin as part of a puddle, yous volition share in the rewards generated by that mining pool in proportion to your fraction of the hash charge per unit controlled by the pool. As such, if you lot contribute 1% of the hash rate, you volition go 1% of the rewards—regardless of which miner in the pool actually discovers the blocks.

Choosing which pool works all-time for you will mostly come downwardly to personal preference. Merely in general, the larger the puddle the more consistent your income will be. On top of this, you may want to consider pools based on their task assignment mechanism, minimum payout threshold, fee schedule, and transparency, among other parameters.

"A adept pool must have a adept reputation, technology and know-how. Additionally, it is important you consider pools that are attempting to help the ecosystem abound. A puddle that wants the all-time for Bitcoin is a puddle you should e'er go for," Alejandro De La Torre, VP at Poolin, told Decrypt .

What is cloud mining?

More expensive cloud mining plans are generally more toll-efficient. (Prototype: Genesis Mining)

Although most Bitcoin miners tend to set upwardly their ain hardware and work together with a mining pool, it's not the only manner to get involved.

Deject mining is rapidly gaining popularity as a simpler alternative. Deject mining providers are online platforms that let yous to rent computing power used for cryptocurrency mining. This allows you to get started with Bitcoin mining with essentially cypher barriers to entry. Y'all merely create an account, cull a mining plan, brand your payment, and earn your Bitcoin—completely eliminating the efforts and costs involved in purchasing your ain hardware and setting information technology up.

These platforms either pool mining power from their users, or take their own massive mining operations—leveraging the economies of calibration to offer mining power to users at near cost rates. But though these platforms are cheaper to start with, in that location is no guarantee that they are profitable, and they oftentimes require lengthy contracts to get the all-time rates.

When choosing a cloud mining provider, information technology'southward important to read into the specifics of your contract and use one of the numerous Bitcoin mining profitability calculators to estimate if your plan will be profitable over its lifetime.

Bitcoin Mining in 2021

Starting in July 2020, Bitcoin mining profitability began surging in line with Bitcoin's increasing value. Since and then, the estimated yield per hash charge per unit has multiplied fivefold, climbing from $0.065/Th/s in July 2020 to $0.32/TH/due south in February 2021—its highest value since July 2019.

Equally a event, many long-term Bitcoin miners are making 5 times more profit than they were half dozen months ago.

Despite the dramatic increase in profitability, the overall Bitcoin mining network hasn't grown quite so fast. In fact, over the last half dozen months, the hash charge per unit has only increased from around 116 EH/s to but shy of 160 EH/due south—equivalent to around a 38% increase.

Bitcoin hash rate betwixt Baronial 2020 and Feb 2021. Epitome: BitInfoCharts

This may be partly due to a major shortage of new ASICs, thanks to a confluence of supply constraints, overdemand, and major mining operations buying up supplies right out of the gate. As a result, nigh major ASIC manufacturers and distributors are sold out until mid-2021—including both Bitmain and Ebang, who are sold out until August and May 2021 respectively.

Assuming the difficulty increases past a further 38% between at present and August, those buying now may notice they're earning less than expected—unless Bitcoin'due south value continues growing to make upwards for the departure (as it has in previous months).

On the other hand, this shortage has led to a revival of the ASIC secondary market, with prices for mining hardware soaring on eBay—and some units selling for more than than triple their usual toll.

Antminer S19 Pros are selling for double their RRP on eBay. Image: eBay

Unfortunately, with Bitcoin recently touching its highest-ever value, institutional adoption rising, and search involvement through the roof, it's unlikely the ASIC situation is probable to ameliorate any fourth dimension soon.

Disclaimer

The views and opinions expressed by the writer are for informational purposes merely and exercise non constitute fiscal, investment, or other communication.

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