Complex Made Simple

Crypto Mining your own business: is it for you?

We deciphered crypto mining. Is it for you to print and mint cryptos? How much does it cost? Where is the best location to do that? And much much more...

Each and every day, miners worldwide unlock as much as 1,800 BTCs per day You could essentially rent an entire mining operation, including machine maintenance, or even outsource everything Bitcoin is programmed to become more difficult to mine over time but will remain profitable until 2140

People will attempt to make crypto money any way they can. Crypto Mining, for many, is a mysterious activity that involves mathematics and then you have Minting which is also part of mining, when a new block is hashed for the first time in the crypto network triggers a minting of new coins.  

The hard part is mining and it takes a lot of energy to do it. But if there is money to be made, then there is a will.

How does mining work? 

One Bitcoin (BTC) is currently worth around $10,300, 50% off its all time high of nearly $20,000 in late 2017 but still much higher than 2016 when it traded as low as $300. So this makes mining less profitable, because you earn less money for the same work.

Under Bitcoin’s mining system, miners compete to win an award distributed every ten minutes or so. Currently, the reward is 12.5 Bitcoins ($125,000), a figure that will halve to 6.25 next May (Around $63,000 for same Bitcoin prices). 

Miners are tasked with verifying transactions made by people who send or receive Bitcoin. This process involves solving random math puzzles.

Let’s say Person X walks into a restaurant and pays in Bitcoin.  Miners need to check the validity of the transaction, which is tied to other ongoing transactions gathered into virtual boxes (blockchains), all having virtual deadbolts on them. Miners ask their mining computers to find the lock’s combination key. Once the box is opened and all the transactions in the block are verified, 12.5 Bitoins then flow into a specified digital wallet.  

Each and every day, miners worldwide unlock as much as 1,800 BTCs per day – into the circulating supply of the cryptocurrency. 

Last October 18, 2019, the 18 millionth Bitcoin was mined, leaving only 3 million BTCs remaining out of the hard-capped 21 million BTC supply. 

Read: Bitcoin as a global currency? Likely never, but neither is the mighty Dollar

Who are the mining champs?

It pays to know who you are competing against. China has dominated the Bitcoin mining industry, with estimates saying it accounts for around 60%-70% of production, mostly because its government has provided miners with cheap access to electricity. The Sichuan province, is considered to be the Bitcoin mining capital of China.

The leading company has been Beijing-based Bitmain, which runs two massive mining pools and is also the leading seller of the specialized chips now needed to mine Bitcoin. Other players include Canaan and Ebang.

And this was happening under the threat of banning mining. But lately, the green light was given, more than six months after the China National Development and Reform Commission proposed to phase out Bitcoin mining. 

Energy needed 

Switzerland, Sri Lanka, and Jordan each produce as much or less electricity per year than Bitcoin mining. If Bitcoin was a country, it would be the 41st most-energy-demanding nation on earth, says Statista.com.

Read more: McAfee Labs: Cryptocurrency mining surge continues in Q2

Read: 4 more Blockchain-related projects you should know about

Is mining for you? Look at your options

‘Cloud mining’ is more profitable than buying cryptocurrency, according to reports. Cloud mining refers to the system where miners rent mining hardware or a portion of the hash power to mine cryptocurrencies. It is also the system where miners hire other people to mint the cryptocurrencies on their behalf.

Cloud mining makes sense because you don’t want to bear the full cost of a very volatile market caused by fluctuation of hardware prices, lack of guaranteed payout, and the constant changes in Bitcoin prices.

You could essentially rent an entire mining operation, including machine maintenance, or even outsource everything, including logistics services, electricity supply and membership of a mining pool and simply collect the profit.

Mining is all about deployment speed and this means working with independent power producers like solar farms, wind farms, or anywhere this mobile infrastructure can be built in a modular fashion like a series of empty warehouses. So you’re not building one giant 150 MW superstructure, but rather a dozen smaller 5-10 MW buildings.

Typically, people just mine whatever the most profitable coin is at the time, such as Ether, and leave the machine running. But “that’s not the most intelligent way,” Joshua Riddett, managing director at Easy Crypto Hunter told Decrypt. “wily miners target the smaller coins that can be mined…where the profit is.”

 New coins present new challenges.

“The risk is always much greater with a new coin because of new, untrusted people running pools, but also because the coin’s software is new and that can cause unforeseen problems,” advises Pete Hill from GPU software specialist, Cudo Miner. A graphics processing unit (GPU) is a computer chip that performs rapid mathematical calculations.

Find new coins in places like Bitcointalk, and seek Coinwarz or WhattoMine for crytptos with best long-term value.

Preferable is to choose big mining pools that have big computing power  

Machinery needed

Investing in the companies that manufacture those GPUS, like AMD and Nvidia, and that focus on mining software, could also be really lucrative.

You need either an application-specific integrated circuit (ASIC) miner or a GPU  miner. One machine can cost anywhere between $500 to $10,000 or more, depending on quality of mining. 

But according to JP Baric, founder and CEO of MiningStore, GPUs will die off in the next few years to be replaced by FPGAs or Fueled Processing Graphics Accelerators, as they are seeing more than 10x increase in hash rates compared to GPUs.

And who is investing in these FPGAs? Banks, and cash rich companies like  Netflix, Amazon, and others. They simply have or can get loans for $500 million or the amount needed to buy 70% of Ethereum.

Read: Energy Alarm: Bitcoin mining consuming more power than individual countries do

Mining is here to stay 

Bitcoin is programmed to become more difficult to mine over time but will remain profitable until 2140 when mining will simply end. 20 more years is along time, in business terms. At that time, when the block reward would drop below 1 satoshi (the smallest denomination of BTC).

Hackers know this and so they are scrambling to reap illicit returns while the picking is ripe. Crypto mining malware or ‘cryptojacking’ samples grew a stunning 629% to more than 2.9 million samples in Q1 2018 and continued in Q2 as total samples grew by 86% with more than 2.5 million new samples, according to McAfee Labs. Criminals made a staggering 52.7 million cryptojacking hits during the first six months of 2019.

Malware targeted PCs but also smart devices like Android phones, while victims remained unaware of their plight, as processor cycles and electricity were stolen from them.

Keep an eye out on Halving 

How Halving applies to Bitcoin protocols is that the number of Bitcoin awarded for solving a block cuts in half every four years. At the end of November in 2012, 50 Bitcoin were awarded per block chain. This fell to around 25 Bitcoin for each added block and today it’s 12.5. In 2021, it is estimated that Bitcoin miners will be rewarded 6.25 Bitcoin per block.

Automatic mining on your smartphone 

The first smartphone in the world that produces up to 2 Ethereum per month is the MinePhone Wings WX.

Ether is at $248 so that’s a cool $496 monthly.

If you carry it with you, your phone generates Ethereum while the energy consumption is close to zero. Just keep it switched “ON” to generate Ethereum.

No particular expertise or specialized machinery is needed. The company guarantees that “If during the 3 years of the mining contract the Eth Difficulty increases so as to considerably reduce the original monthly profit, it will be possible to extract an alternative cryptocurrency”. 

“If during the 3 years of the mining contract the Ethereum Mining Rules should prevent, for block validation protocols changes, the original monthly profit, it will be possible to extract an alternative cryptocurrency,” the site added.  

GCC miming activity?

We are aware of only rare instances of mining in the GCC or the region, as temperatures are not really ideal for crypto mining which requires cold climates and lack thereof would necessitate huge investments in cooling equipment.  

Sydney Ifergan is the CEO of The Currency Analytics, a news publication as well as a dedicated cryptocurrency information network with thousands of members all striving towards bringing new and innovative projects to the cryptocurrency and blockchain scene.

“During the last 2 years over 1000 bitcoin miners have been sold in Qatar, they managed to reach the 2.9 Petra hash,” Sydney said.

“Electricity is free for local Qataris, so you can imagine the profitability of the mining in that country.”