Despite its fascination, cryptocurrency can be a bit puzzling. However, it doesn’t end there. Cryptocurrency mining has done more to make people scratch their heads. Having just entered the mainstream with a bang, more and more people are interested in it. The cryptos attract them because of the possibility of starting a mining business. You should have a basic knowledge of crypto before reading this article. You can click here for more info on crypto.
However, starting it can become a challenge for many. If you’re one, you’re lucky because this post is for you. It’ll begin by covering the term itself. It’ll then provide a checklist to follow before starting your mining business. So, let’s begin.
What Is Cryptocurrency Mining?
Several cryptocurrencies, including Bitcoin, use mining to create new coins and verify transactions. The concept involves massive, decentralized networks of computers worldwide that verify and secure blockchains — the virtual ledgers for documenting cryptocurrency transactions.
In return, the network’s computers receive coins by contributing to the network’s processing power. There is a virtuous circle in the process: miners maintain and secure the blockchain, the blockchain awards coins to the miners, and the coins give the miners an incentive to keep the blockchain.
Checklist To Follow Before Starting a Mining Business
Here’s the checklist to follow before you start a mining business:
It would help to determine whether you have the proper environment to run a mining operation before purchasing an ASIC miner. It would be best to consider these:
- Power Capacity: Modern miners require a 220V outlet. However, many residential homes and apartments have standard 110V outlets, though there are exceptions for appliances like air conditioners. Getting an electrician to install a 220V outlet is one workaround if you don’t have any 220V outlets available. Besides, you may also need a nema 6-50 plug, power cable, and heavy-duty GPUs for mining.
- Air Flow/Cooling: ASIC miners produce a lot of heat. It would also be nice if you could repurpose the heat to keep your garage or basement warm during the winter, achieving two goals simultaneously.
- Noise Reduction: Miners also produce great heat and are very loud. Noise levels can reach 70-80 decibels (dB) from a single machine. It would help if you kept your ASICs in an insulated container to prevent the noise from bothering you or your neighbors.
Assess Your Location
The key to cryptocurrency mining is location because of electricity. The average price of electricity varies from place to place. Electricity costs often range between $0.15 and $0.25 per kilowatt-hour, making mining in residential areas unprofitable.
Super-organized, professional miners will often set up their operations in places with very cheap electricity. Examples include the Sichuan region of China, Irkutsk in Russia, the United States, and Canada. There are usually hydroelectric dams or other renewable energy sources available in these regions.
Though, you won’t lose if your garden doesn’t have a hydroelectric dam. You can still succeed as an amateur miner, but it would help ensure your electric bills won’t drown your profits.
Purchase Computer Hardware
Mining cryptocurrency requires specialized hardware, commonly referred to as a cryptocurrency mining rig. At the beginning of the Bitcoin era, ordinary household computers could mine bitcoins. Even savvy teenagers were mining bitcoins on their school laptops.
Nevertheless, the algorithm’s complexity increased because of Bitcoin’s popularity. More computational power was required. Unless your laptop has a ludicrous amount of processing power and a formidable rig, you can no longer snag BTC on your computer.
ASIC — application-specific integrated circuit chips are the specialized hardware that most miners use. It’s a powerful machine designed for solving complex proof-of-work algorithms. Several calculators are available online to determine a mining device’s profitability. You can also estimate profitability using a formula:
You earn this by dividing your share of the network’s total issuance by your percentage of the overall hash rate. The input parameters are fixed or available on data websites like Blockchain.com.
Create a Crypto Wallet
Once you have mined your first bit of crypto, you’ll need a safe place to send it. It is important to note that some wallets warn their users against directing mining payouts to their wallets. Wallets that don’t support frequent tiny transactions produced by mining efforts can’t receive these. When mining rewards frequently, there will be a lot of micro-transactions that will have queries when spending your balance.
Consider using a hardware wallet. It’ll store the user’s private keys — a piece of information crucial to authorization of outgoing transactions on the blockchain network — in a super-secure physical device.
Download Crypto Mining Software
Mining software connects solo miners to the blockchain and their mining hardware, allowing them to mine cryptocurrency with their computing power. Having technical skills to use most of these software programs is unnecessary.
It assigns ‘work’ to miners and creates new blocks to the blockchain. With a detailed report, you can see if you are still profitable after considering electricity bills and other expenses.
This checklist provides you with the key things to follow before starting your mining business. The mining process will provide security for Bitcoin and many other cryptocurrencies, besides releasing new coins into circulation.
The blockchain verifies and secures cryptocurrencies, making them a peer-to-peer decentralized network that is safe and secure without relying on a third party. As a result, it encourages miners to share their computing power with the network.