How to profit from mining Bitcoin

So you understand the concept of Proof of Work and how Bitcoin mining works, and you want to get started on mining. There are basically four ways to mine Bitcoin profitably these days:

Set it up yourself (with an ASIC)

Step 1: Buy an ASIC miner. Mining Bitcoin is no longer realistic using GPUs and CPUs. You want to compare different ASIC models in the market on three basic characteristics. You need to check the hash rate (also called hash power) of the ASIC miner, power consumption and price. Do some sums on which ASIC provides you with the best return, given your cost of electricity and cooling. You can set up your own Excel or use online calculators like Nice HashCoinwarz, or What to mine.

ASIC supply is also very difficult to crack. Supplies are very limited and you need to be quite lucky to even get your hands on one as a small buyer. Even if you have done your math, the ASIC you prefer may not be available for purchase.

Step 2: Set up your mining wallet. Bitcoin Core is the original Bitcoin wallet developed for storing Bitcoin. It is a full wallet and takes up a lot of space on the computer running it because it acts as a node for the Bitcoin Network. You will also need to make a backup of your Bitcoin Core wallet in case of hardware failure.

Alternatively, you can use a “light wallet” to store your Bitcoin. Electrum is one of the more popular wallets that offer a light version.

Step 3: Join a mining pool. Unless you’ve spent several hundred thousand dollars to set up a tiny mining farm with 50 ASIC miners, you’re not likely to see a single Bitcoin from mining unless you join a mining pool. Mining pools pay out more frequently in smaller amounts, reward miners based on the proportion of their hash rate contribution to the pool, and charge a small fee, usually less than 2%.

The top 5 mining pools on are Huobi Pool, ViaBTC, F2Pool, AntPool, and Poolin.

Step 4: Install mining software. Mining software connects the ASIC to the Bitcoin network and manages the flow of work coming from the network. It also delivers the work done by the miner to the Bitcoin network and manages the collection of rewards. Most mining software keeps a record of the user’s activity and monitors the performance of the ASIC miner including temperature, cooling, hash rate, and average mining speed.

Some mining pools will require specific software, but you can try programs like Nice Hash Miner.

Cloud Mining

If you don’t want to deal with the hassle of setting up your own system, you might want to look into leasing cloud mining power. Cloud mining is the practice of renting computing power from cloud computing platforms for mining, was a common retail solution. Many smaller players in this industry found it difficult to gain users’ trust and many people fled to larger brand names for security. Cloud mining is best played as a long-term game: profits may not be high all the time, but miners can plan to hold their Bitcoin over a long term to make up for the initial cost.

Owned-and-Serviced solutions

Leading mining pools sometimes offer serviced solutions as well. This means that the mining pool already runs a data center (also known as a mining farm) and allows clients to house their ASIC miners in their data center as a fully managed solution. The miner pays a management fee to get cooling and infrastructure, and usually a set rate for power that is lower than retail electricity rates because data centers have bulk deals with power companies.

Bulk buying also means that it is easier to buy an ASIC through a serviced solution, as ASIC manufacturers would rather pre-sell hundreds of units to an existing farm/pool client than sell individual units directly to retail customers.

Invest in Crypto Mining Stocks

Okay, you are not technically doing any of the mining here. Investing in crypto mining company stocks can strike a good balance between risk and technological knowhow. Growth of the crypto mining market is expected to be positive in the next five years.

Key stocks in the industry are American corporations Riot Blockchain (NASDAQ:RIOT) and Marathon Patent Group (NASDAQ:MARA), China-based Canaan (NASDAQ:CAN), and Canadian HIVE Blockchain Technologies (OTC:HVBTF). Of these three, only HIVE is making operational profits, but all four have seen explosive stock price growth because of the rising market value of Bitcoin.

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