If you are wondering how to be a bitcoin miner, or how expand your mining fleet, this article is for you.
With the right equipment and electricity price bitcoin mining can be very profitable. If a miner successfully ROIs on a mining rig or on a cloud contract, earnings become a steady income. But it is not uncommon for miners to experience mistrust, scandal, or heartache. Here we discuss how to be a bitcoin miner and what you need to watch out for from our years of experience.
Bitcoin Miner Terms
Bitcoin miners participate in validating and securing the network, for their services they receive financial rewards. But to find out how to be a bitcoin miner you need to understand some basic terms.
- Bitcoin mining ASICs are specialized hardware which run a double SHA-256 algorithm. Different models have different terahash and electricity consumption specs. These specs help to gauge profitability.
- Miner earnings are the dollar or satoshi amount earned per terahash ($/TH) over 24 hours. The $/TH earnings vary day-to-day.
- The base cost to run a miner is the product of how much you pay for electricity per kilowatt-hour (kWh), and how much energy your machine consumes over 24 hours. (Read about miner equations here.)
- The bitcoin network is the total hash rate of all machines currently running. At the moment there are over two-million active ASICs.
What is Cloud Mining and Joint Mining?
The first way you can mine bitcoin is by purchasing hash power from a mining company. Such plans provide a lower entry fee into bitcoin mining. However, it is important to understand the contractual risks and terms when renting hash.
Companies use different names for their mining contracts, but in general cloud mining means that you rent hash for a set amount of time and do not own the ASIC. Hash rate share plans or joint mining means that you purchase or lease a part of an ASIC for a set amount of time.
How does Cloud Mining Work?
When you rent hash power it works out that the longer the contract period, the larger your profit margin. So, for example, a month-long contract may have a 10% profit margin, whereas a year-long contract has a 50% profit margin. But beware that some companies increase their management fees after your plan ROIs.
If the BTC price remains stable or increases cloud and joint miners can pull in good earnings. But if the BTC price drops you could earn less per day than your running costs. In the case where your earnings become negative for some time, cloud contracts could be terminated by the provider. So, because the BTC price is volatile it is best practice to not invest more than you can lose.
Other downsides are that cloud companies may custody your earnings and charge fees for services or withdraws. Contracts can also end prematurely due to force majeure and some cloud companies misuse this power. Force majeure is when a provider stops a contract without liability due to unforeseen circumstances. You can protect yourself from surprises by taking the time to read the small print, search for customer reviews online, and go with a reputable company.
How to be a Bitcoin Miner: Hardware
The second and third way of how to be a bitcoin miner is by purchasing an ASIC and running it at home or at a data center. But, it is vital that you buy the right mining rig.
In this section we discuss ASIC efficiency advancements, bull and bear markets, and buying and maintaining a bitcoin mining machine.
Over the years the mass production of ASICs and microprocessor advances have caused older generation machines to become redundant. New hardware is over 600 times more profitable than the first ASICs introduced in 2013. For example, Bitmain’s S1 model would make only 6¢ today, whereas an S19 would make $20.
However, regardless of efficiency advances newer ASICs consume nearly 10x more electricity than a decade ago. This is because more terahashing capability is packed into one unit.
Thus, home miners might prefer to run older generation models which put less strain on a household’s electricity supply. On the flip-side, data centers may not accept older generation machines as they are not as profitable.
Purchasing an ASIC
How much does it cost to start bitcoin mining? Well the base price is the cost of a mining rig. Bitcoin mining machines cost anywhere from a few hundred bucks to over ten thousand dollars, depending on the model.
An ASIC’s value is relative to its cumulative $/TH earnings over 10-12 months. But this value changes over time because miner earnings rely heavily on the BTC price. For example, a top quality machine was $2K in June 2020, then was $20K in April 2021, and is around $10k today. The BTC price was $9k, $65k, and $47k respectively. Read more about miner trends here.
Therefore, it is important to research machine models before making your purchase. Bitcoin miners often use profitability calculators which are available online, these help to gauge a model’s daily earnings versus power costs. Nonetheless each model still has its quirks, some breakdown more often … Stay tuned for our upcoming article where we compare ASIC models and manufacturers!
Bulls and Bears
Miners who buy expensive ASICs during BTC price spikes may face trouble covering costs or loans if a bear market comes. On the other hand, miners may reap the benefits of purchasing lower priced machines during a bear market.
So, if you want to grow your mining fleet try adding a few ASICs at a time with good efficiency profiles. This will help to balance out your ROI period and provide better protection against the volatile BTC prices, miner earnings, and ASIC values.
It is also important to understand your breakeven. Your breakeven is how low the miner earnings can go before your running costs exceed your profits, here we show you how to calculate this. Keep in mind that today’s miner earnings are around 30¢/TH, but just a year ago they were down to 6¢/TH.
Moreover, we advise bitcoin miners stack sats and/or pay for power in advance. This should give you a financial buffer in order to keep your operation afloat during periods of low earnings.
Bitcoin mining machines run hot and have several cooling fans. These fans draw air through the machine in order to dissipate heat which would otherwise damage components. However, this continual air flow causes a build-up of dust and ASICs will need periodic cleaning. If not clean, hashing speed drops.
Mining farms will dust ASICs for you, home miners can use compressed air systems or pressurized air in cans. We do not recommend using a vacuum as components could become damaged. For more information on dusting see Bitmain’s guide.
An ASIC’s lifetime is about 4-5 years, yet they will occasionally breakdown. For example, a cooling fan, a power supply unit (PSU), or a hahsboard may need replacing or repair.
New ASICs come with a manufacturer warranty up to 18-months. After a warranty period ends you can send your broken machine to an Antminer, WhatsMiner, or AvalonMiner service center. Data farms may have on-site repairs. Also, miners often refer independent hashboard specialists to each other.
Alternatively, home miners can benefit from learning how to undertake basic maintenance like interpreting a kernel log or changing a cooling fan. Forums and manufacturer guidelines are a good place to start. Advanced ASIC maintenance and soldering courses are also available online and/or in person from ASIC manufacturers or private educators.
By learning how to troubleshoot your ASIC you will increase your revenue. This is because you do not have send your machine to a repair center every time it acts up and lose money on downtime, freight, and repair fees.
Home miners have the benefit of maintaining full control over their machine compared to miners who host at data centers. Alas, home mining does not come without risks.
Household electricity prices can be as high as 30¢/kWh which can make it difficult to turn a profit. Home miners also need to think about heat dissipation, noise, and the heavy electrical draw when considering how to be a bitcoin miner.
Here we briefly discuss some common issues that home miners face.
Heat and Humidity
ASICs run hot. The room they are placed in needs ventilation and/or cooling, and good airflow around the machine. Dehumidifiers may also be required as moisture can cause metal corrosion and short-circuits. In some cases heating may also be necessary before booting up a machine to prevent cold-start damage. Read more about ambient running temperatures here.
Environmental factors are important because if incorrect your machine can break. In fact manufacturers like WhatsMiner will not honor machine warranties if there is evidence of damage due to excess heat, humidity, dust, or an unstable electricity supply.
ASICs are very noisy and run at about 80 decibels. Proper ear protection equipment should always be used to prevent hearing loss.
To dampen the noise home miners can place their machines away from their living quarters, for example in garages, basements, or metal containers. Home miners can also create silencer boxes with fire retardant and humidity resistant rock-wool or foam. But make sure to research about silencer boxes because if incorrectly designed they could trap heat and moisture and damage components.
Immersion cooling setups can also be used to dampen noise, heat, and dust build-up. However, advanced dielectric liquid cooling systems can be costly and time consuming.
Lastly, home miners need to seriously consider their electrical setup. ASICs require a constant load of electricity, whereas normal home appliances consume electricity intermittently.
For example, an electric oven set to 400˚F (205˚C) is considered a ‘heavy draw’ appliance and uses around 3 kW per hour. But the power consumption of an oven goes up and down as it adjusts its internal temperature. ASICs on the other hand never run in standby mode, they only run at full speed.
So even if a household’s total load is 10,000 W, and a machine takes 3,000 W, the ASIC’s continual electricity draw could overload your system. This could lead to machine damage, melted cables, fire, or neighborhood blackouts. If your energy company finds out that you were mining, you may be liable for damages incurred to electricity boxes or transmission lines.
Therefore we strongly advise that home miners consult a qualified electrician rather than do a DIY job on their electricity box or power outlets. You may also consider contacting your energy provider to upgrade to a higher amp plan where possible.
Running one or two mining rigs at home is usually not a problem, but the large energy requirements of ASICs can be a hindrance for home miners who want to scale-up their operations. Thus some choose to place ASICs in data centers or rent out a location with industrial power. Let’s discuss data center mining…
Bitcoin Mining at a Data Center
The main benefits of running ASICs at a data center are that the electricity is cheaper than household rates, and management staff are on duty to keep machines running 24/7. These two factors maximize a miner’s profit margin.
Additionally, data centers tend to be located in cooler regions with low humidity, and/or have advanced cooling systems in place. As previously mentioned, optimal environmental factors help to prolong an ASIC’s lifetime.
Here we discuss the pecking order at data centers, hash rate politics, and things to keep in mind when looking for a place to host your ASICs.
Data Center Hierarchy
Industrial miners run thousands of machines and usually invest millions of dollars into building their own data centers. Some make direct deals with energy providers, others own their own power sources. Big miners usually pay less than 6¢/kWh.
Large- and medium-scale miners colocate. Colocation is when a miner leases space at an established data center which serves as a shared facility for several companies. Bitcoin miners who colocate may be responsible for providing their own management and repair services, and may be liable for infrastructure costs. Sometimes data centers also have minimum ASIC quantity requirements.
Smaller miners often use managed hosting. Hosting companies colocate or own a data center and provide turn-key solutions to smaller miners. They normally charge between 6¢-12¢/kWh. However, the trade-off is that they may require that you purchase ASICs through them at a mark-up, or increase their maintenance fees once your machine has ROIed.
When buying rigs through a hosting company we recommend purchasing what is available now and running with it. Buying machines with long lead times puts you at risk of financial loss if for example manufacturer orders become delayed or the BTC price falls.
Hash Rate Politics
On a side note large miners often brag about their ‘thousands of machines’ in order to draw in new investments and stay competitive. Also, some are listed on a stock exchange and are obligated to disclose their total EH/s to shareholders.
Contrarily, independent miners and mining pools prefer to hold true to the anonymity principles of Bitcoin. They do not discuss the amount of hash they run or its whereabouts. This is in order to keep competition at bay, and also to prevent drawing negative attention from media and policy makers. Moreover, ASICs are expensive, and miners who disclose too much information risk being robbed.
Hosting ASICs: What to Consider
The obvious downside to hosting your machine at a data center is that it requires a lot of trust. Data center staff have been known to steal hash, and overclock or mismanage machines. These problems are often dealt with quickly but miners are not always compensated for losses or downtime.
If you decide that you want to start mining at a data center take the time to research different options and reach out for price quotes. Several different hosting companies are available worldwide, including in Russia, Venezuela, Kazakhstan, Ukraine, Netherlands, Poland, USA, Canada, etc. Also, see if there are customer reviews, and examine farm photos. ASICs operate best in clean and well ventilated areas, and electricity cables should be tidy.
Lastly, hosting companies with the cheapest kWh prices may not provide 100% uptime. They may pack too many ASICs into one space which leads to electrical faults and excess heat. They may also have subpar maintenance and/or administration. Thus paying a little more per kWh may be worth it in the long-run.
Managing Your ASICs
Often farm staff have sophisticated ASIC management software but these systems do not catch everything. Therefore running ASICs at a data center is not a set and forget situation.
We recommend that miners check their ASIC’s hashing performance on a daily basis through their mining pool data. Then report low 24h hash rates to data center staff. Push notifications can also be enabled on mining pool apps which notify you of low hash rates.
Keep in mind that it is normal for ASIC speeds to vary in Real time, especially when first firing up the machine. So Daily hash rates are more telling of faults.
Sometimes customers can access their machines remotely to restart them and restore low hash power. Other times a technician needs to perform a hard reset, dusting, machine repositioning, or eventual repair. See an example of when to report a fault below.
How to be a Bitcoin Miner: Getting Paid
In our last chapter of how to be a bitcoin miner we discuss how miners choose the right mining pool and payout method.
Choosing a Mining Pool
A Cambridge study found that nearly half of all bitcoin miners use a mining pool. Mining pools provide you with a steady income opposed to solo mining. Miners prefer FPPS or PPS+ payout plans which include transaction fees.
Bitcoin miners choose a mining pool based on one or more of the following criteria:
- highest earnings per TH
- lowest mining pool fee
- large pool size to ensure many blocks are found
- low latency to ensure a fast connection (aka pool’s server location)
- good Dashboard with miner information
- pool’s reputation
- personal ideology or recommendation
ASIC Set-Up and Wallet
A mining pool’s stratum address and your payout wallet address are entered into your ASIC’s client software before you start mining. So you will need to set up a mining pool account and wallet first thing.
But don’t fret if it is hard to decide on a mining pool or wallet. Miners can easily switch pools or payout wallets over time and compare them to see which ones best suits their needs and preferences.
And we leave you with one last note: protect your bitcoins. Keep you wallet seed phrase in a safe place as a backup, and never hodl your earnings on an exchange as they sometimes get hacked.
How to be a Bitcoin Miner: Top Tips
We leave you with our top tips on how to be a bitcoin miner. We wish you good luck mining!
Check out this article for more about how bitcoin is mined.
Stay tuned for our honest review of ASIC models and manufacturers.