If you want to know how Bitcoin is mined, there are two different steps you can take: go through a cloud mining company or buy and use specially designed hardware. We'll look at both options and find out why cloud mining, although neither is cheap, is the safest investment for your money.
Remember research is important! Just like buying Bitcoin or Altcoins, you need to be aware that nothing is guaranteed in the world of cryptocurrencies. Any investment can be lost. So be sure to read before pulling out your credit card and have a secure Bitcoin wallet ready. As with all of our reporting on cryptocurrency here at Digital Trends, however, this shouldn't be considered financial advice.
Mining vs. investment
When Bitcoin hit the market in 2009, mining the world's first and leading cryptocurrency required little more than a home PC – and not even a fast one. Nowadays the barrier to entry is much higher if you want to make a profit with it. That doesn't mean it's impossible, but it's not the homebrew industry that it used to be.
Before we discuss how you can mine bitcoins yourself, it's important to note that while mining is the least secure in terms of cryptocurrency, it is arguably the most volatile. Hardware price fluctuations, changes in bitcoin mining difficulty, and even the lack of a payout guarantee at the end of all your hard work make it a riskier investment than buying bitcoins directly.
Because of this and general market volatility, it can be difficult to know how much profit you will make from mining. In 2018, the mining market plummeted in terms of profits and skyrocketed in terms of entry barriers. Unless Bitcoin's technology changes significantly, it will likely stay the same. A single bitcoin is currently worth around $ 8,900, but mining can cost about the same.
If you buy Bitcoin directly, you will get something for your money right away. Definitely worth thinking about before going along the mining route.
Step 1: Choose your mining company
Cloud mining is the practice of renting mining hardware (or part of its hashing services) and having someone else do the mining for you. You are usually "paid" for your investment in Bitcoin, even if the hardware is not used to mine Bitcoin. As with general investments, it is important that you do your research. There are many companies that pretend to be the best, and even the largest have their critics.
Over the years, several cloud mining companies have come and gone, including those with whom we have spoken and validated directly, such as HashFlare, who told Digital Trends in an interview that each of their customers has made a profit with their service. In late 2019, it will be far better for you to work with a company like Bitcoin Pool, the cloud mining arm of Bitcoin.com, an established and respected cloud mining company. Getting started is expensive, but one of the best options out there.
For a wider range of options, CryptoCompare maintains a list of mining companies with user ratings and reviews. Note, however, that many reviewers try to include their recommendation codes in the comments section.
Step 2: Choose a mining package
After selecting a cloud mining provider and signing in, you need to select a mining package. To do this, you usually need to choose a certain amount of hashing power and point out how much you can afford to pay. When you pay more, you usually get a better return, or you make a profit faster. However, this is not always the case.
Most cloud mining companies will help you make the decision by making a calculation based on Bitcoin's current market value, the difficulty of Bitcoin mining, and a cross-reference to the hashing performance you rented. However, it is important to note that these numbers can and must change. So it's important to look at market trends and assess where Bitcoin may go before choosing your contract. What may now be profitable may not be if Bitcoin's value crashes.
As much as companies like Bitcoin Pool offer their calculators, we recommend using an alternative third-party alternative to reduce the potential for bias that could creep into the calculation.
Some cloud mining companies sell you a contract before the sale. You are effectively asked to pay in advance for an agreement that will take weeks or months to start when new hardware becomes available. In most cases, this is not advisable because there is no way to guarantee that these contracts will be profitable in the beginning, and not even a concrete indication of when this will happen.
Step 3: choose a mining pool
After choosing your contract, most cloud mining companies will ask you to choose a mining pool. Here you select a global mining team that you want to join.
This is a method of increasing the chance of earning Bitcoin through mining, and it is standard practice in cloud and personal mining. There are advantages and disadvantages to different pools that go beyond the scope of this article. However, joining an established and proven low-fee pool is probably your best bet.
One of the most popular and reliable pools for new miners is Slush Pool, but you should always do some research. Like companies, many pools are not trustworthy.
Step 4: Choose a wallet
Once you've completed this step, your cloud mining can begin. Your cloud mining account should be filled with Bitcoin within a few days or weeks. It's a good plan to pull it back and put it in your own secure wallet once you have a small stake. However, some cloud miners allow you to reinvest your earnings for higher hashing performance.
Whatever you do, you have to decide what you want to do with your bitcoins in the long run. Although there are many products and services you can buy with bitcoins, prices can fluctuate and you may need to do more research to determine if you get a good deal. We can also help you exchange your Bitcoin for another cryptocurrency or sell it directly for cash.
"HODLing", which means holding your Bitcoin for the love of life, is also a viable strategy. Many people believe that their value will increase over time. We are not financial advisors and would not recommend you do anything special with your Bitcoin. However, if you want to keep it, consider a secure, possibly even hardware, wallet to keep it in.
What if I want to take mine down with my hardware?
Due to the high cost, it is only recommended to mine Bitcoin yourself if you have sufficient and above all cheap electricity and a powerful network connection. Before investing in hardware or mining setups, be sure to use a Bitcoin mining calculator to determine if you can actually make a profit with all of the costs considered.
If you can, you need to choose the right ASIC miner. The best method is to consult the profitability of the mining equipment to determine which miners are currently making a profit. The Asicminervalue.com website is particularly helpful here. It shows a constantly updated list of miners, how profitable they are and how many miners spend more than they earn. Note that the most profitable machines make between $ 6 and $ 15 a day in profit after the setup has cost thousands of dollars. The amortization of your costs is far from guaranteed. So be careful.