It seems like a scene out of a late night infomercial. A man steps out of a fancy car, or off of a big expensive yacht, and starts his sales speech. “Make thousands, tens of thousands, or hundreds of thousands of dollars all from the comfort of your own home. How?! By mining for bitcoin!” Dropping into everyone’s lexicon late last year, bitcoin boomed in 2013, going from $13 to $900 on a roller coaster of a ride. Other cryptocurrencies called alt coins, like litecoin and peercoin, gained exposure through bitcoin’s fame. Mining these coins can provide a significant income to anyone willing to spend the time and money. Here are five steps to take to start a cryptocurrency mining career.
Choosing a Type of Coin
With over 90 different cryptocurrencies on the market, alt coin miners have a plethora of options to choose from. And just like stocks, there are blue chip coins and penny share coins. Blue chip cryptocurrencies like bitcoin and litecoin are considered safer coins to mine, offering more reliable payouts, as investors are actively looking to buy these digital coins. However, the hash rate, or the processing time and power it takes to mine a bitcoin, is much higher than on some of the penny-stock currencies.
Pink sheet alt coins, like the meme-based dogecoin or the darknet-intended anoncoin, give miners better net-gain potential. For example, dogecoin is valued at $0.0004 per coin, or four hundredths of a cent. If that coin rockets up to a whopping whole cent per coin, people stand to make a lot of money; a $100 investment could potentially become $2,500. While alternate currencies are not a guaranteed investment, with the right coin, a properly done return on investment (ROI) report, and time they can be a great way to earn money.
Here’s where the rubber meets the road: hardware. Building a computer, whether for home use or alt coin mining, is a complicated undertaking mired in a myriad of choices that even the most tech-savvy person might find confusing. There are many different factors one has to consider, but in the case of cryptomining, luckily some of those factors are simplified.
In the early days of mining, CPU processing power was the most important factor to consider. But as mining algorithms became harder to hash, graphics cards (GPUs) became the heavy lifter, all but eliminating the CPU from the equation. Simple, low power and traditionally slower CPUs are the best to go with as these specialty computers will only be performing one task. Couple that with a simple motherboard (no built-in video or sound necessary) and two to four gigs of RAM and the basics are covered. The hard drive doesn’t need to be fancy or fast, instead reliability is key. Since the HDD will store the mined currency, it needs to last a long time and have a low failure rate. Seagate and Western Digital are among the highest rated HDDs around.
Power-supply units and GPUs have a reciprocal relationship. Most high-end GPUs, like the Radeon HD 7950 and Radeon 290x, are very power demanding. And to get the most out their mining rigs, cryptominers will have multiple graphics cards running at the same time, hashing faster and completing coin blocks in less time, earning money as fast as they can. So the right power supply will completely depend on the amount of GPUs that will be running.
Once the hardware is assembled, software will need to be addressed. First an operating system will need to be installed onto that super reliable hard drive we talked about earlier. While Microsoft Windows is the industry leader in operating systems and mining software is developed for this OS, it’s probably not best suited for a cryptocurrency mining rig. Instead, consider the open sourced OS Linux, as many different mining frontends are written with it in mind. If terms like OS, frontend and GUI are confusing, try the all in one solution BAM-T for litecoin mining. It limits the choice on currency, but it simplifies the experience. And considering litecoin has quite a high ROI, it might be the best choice anyway.
The second piece of software, and probably the most important, is a digital wallet. Bitcoin, litecoin and all other currencies need to be stored somewhere, whether it is locally on a hard drive or remotely in an online wallet. Each alternate currency has a coin-specific wallet, so choose appropriately. For example, locally stored bitcoin wallets include Bitcoin-Qt, Armory and Multibit are more secure since they are stored on that aforementioned hard drive, while online wallets like Blockchain and Coinbase offer users remote access to their coins via mobile apps and QR codes. Bitcoin ATMs, a new venture that allows individuals the ability to exchange their coin to local currency, use virtual wallets.
Once the computer is built and software is installed, mining can commence! Venturing out into the quagmires of cryptocurrency quickly reveals how hard it is to strike out alone. But fear not, mining pools exist for this and other reasons. Mining pools are groups of people who all agree to donate their hash power, their computers, to mine coins faster. When a miner tries to go it alone, they reap the benefits of anything mined; if the rig is powerful enough it can earn 25 bitcoins in just 10 minutes, but that is highly unlikely. So instead these pools work in congruence to earn those same 25 bitcoins and divvy up the spoils.
Consider this to be the best way to earn money. Sites like Multipool and Middlecoin offer some great options for the pool miner. Multipool is very cheap to join and only takes a 1.5 percent rake. If coin-specific mining isn’t a big concern, consider Middlecoin, which mines the most profitable alt coins and automatically exchanges them to bitcoin, depositing dividends into an online wallet. Understand though, that like all things, this is a business and it may take some time to join a mining pool and see results.
The currency is decided, the parts are purchased, the computer built and software is installed. You have decided on a mining pool and the group has accepted you. Now you are ready to begin mining for coin. Go for it! After all is said and done, an investment of anywhere from $2,000 to $20,000 isn’t unheard of. However expensive that may seem, remember this is a way to make money. Any investment, however large, has the opportunity to break even and start posting profits.