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Cryptocurrency Mining Guide 2022

Here is a complete guide to crypto mining and how to get started.

By
&
Tom Blackstone
Gabe TurnerChief Editor
Last Updated on Oct 21, 2022
By Tom Blackstone & Gabe Turner on Oct 21, 2022
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If you’ve been reading about cryptocurrency, you may have heard of cryptocurrency mining. But you might be wondering what exactly cryptocurrency mining is and whether it’s worth getting into.

Is crypto mining profitable? And how can a person get started mining crypto? Both good questions, but it’s also important to consider the digital security threats of crypto mining. Do you know how to keep the crypto you mine safe? Will you keep it in a wallet? How will you prevent hackers from accessing it? All important considerations.

We’re going to touch on a lot of these topics in this article, and we’re going to focus on how to mine Bitcoin (BTC). But this also applies to other proof-of-work (PoW) cryptos like Litecoin (LTC) or Dogecoin (DOGE).

Let’s start with a simple definition.

What Is Crypto Mining?

Crypto mining is the process of validating transactions on a PoW crypto network.

On any payment network, there has to be some group of people that work as validators. For example, Visa and Mastercard have servers that confirm whether a particular cardholder is allowed to spend money. These servers are the “validators” of the credit card and debit card system.

But these servers are controlled by Visa and Mastercard. Crypto networks like Bitcoin and Ethereum are a little different because there is no company that controls them. Instead, any person can volunteer to become a Bitcoin or Ethereum validator.

But the basic idea is still the same. Just as Visa and Mastercard get paid to process transactions for the Visa and Mastercard networks, you can get paid to process transactions for Bitcoin or other PoW cryptos.

In this case, most of the payment will be in the form of newly minted coins. So new coins are created each time a validator processes transactions. Because many people compare this process to gold or silver mining, this process has come to be called “crypto mining.”

The bottom line is this: Crypto mining is the business of processing transactions on a PoW crypto network in exchange for newly minted coin rewards.

Pro Tip: If you’re going to mine crypto, you’ll need an exchange to sell your rewards to. To help with this search, we’ve published a guide on how to find a legitimate crypto exchange.

Now let’s talk about what PoW is.

What Is Proof of Work?

PoW is a process that some crypto networks use to prevent fraud.

On a PoW network, validators are required to solve a complicated math problem called a “hash problem.” This problem can only be solved by guessing random numbers thousands of times per second, which costs a lot of electricity.

The purpose of this problem is to make it so expensive to add spam transactions to the ledger that no one will try to do it.

FYI: If a validator successfully adds a bunch of spam transactions to a blockchain database, it can do a “double-spend attack” that will allow it to spend the same coin twice. I won’t get into how this works, but if you’re curious, you can read about it in Section 11 of the Bitcoin whitepaper1.

Providing the answer to the hash problem is called submitting “proof of work,” because you are showing that your computer did work to solve the problem.

Not all crypto networks use PoW. Some use a newer system called proof of stake (PoS). But PoS cryptocurrencies can’t be mined, so I won’t discuss them here. But these networks do exist.

If you’re a miner on a PoW network, your largest expense will be solving the hash problem and submitting proof of this work.

Now let’s talk about how to tell if your Bitcoin mining will be profitable.

Bitcoin Mining Profitability

To be profitable at Bitcoin mining, you need to spend less money on electricity than you get from selling the bitcoins you receive as a reward. This depends on seven factors:

  1. The hash rate of your mining computer
  2. The total hash rate of the network
  3. The Bitcoin block reward
  4. Your mining PC’s power consumption
  5. Your cost of electricity per kWh
  6. The fee that your mining pool charges
  7. The price of Bitcoin

Let’s break this down further.

Bitcoin miner hash rate

If you’re just starting off as a Bitcoin miner, you’ll probably begin with a cloud mining service. The service will offer you a variety of computer models at different hash rates. You might see a rate like “23,585 GH/s” or “104 TH/s” advertised.

In this case, “GH/s” means “Gigahashes per second” and “TH/s” means “Terahashes per second.” You can compare gigahashes, terahashes, and other hash power metrics using a mining conversion calculator2. The higher the number, the faster this computer can guess answers to the hash problem.

In general, higher hash rates are better than lower hash rates, as long as this doesn’t cause the PC to use too much extra electricity. Higher-hash rate PCs are also more expensive to buy or rent than lower-hash rate ones.

Pro Tip: You may wonder if you should sell your mining rewards now or wait until later. If so, you may want to read my analysis of what makes a crypto coin go up in value.

Hash rate of the network

You can look up the hash rate of the network at blockchain.com3. You want this to be as low as possible so that your personal hash rate is a greater percentage of the total.

Block reward

The Bitcoin block reward is 6.25 as I’m writing this. This means that each time a mining pool solves the hash problem, it is rewarded with 6.25 bitcoins. In 2024, the block reward will fall to 3.125. The higher this number is, the better.

Power consumption (wattage)

Bitcoin mining computers usually advertise a wattage rate, which may look something like “3100W.” The lower this number is, the better.

Cost of electricity

If you’re going to be mining on your own, check with your electric company to find out how much it charges per kWh. If you’re using a cloud mining app, it should tell you on its website how much it charges for electricity.

Mining pool fee

Unless you are running a giant mining farm in a warehouse somewhere, you’re probably going to need to connect to either a mining pool or a cloud mining service. And this service will charge a percentage fee that will come out of your profit. So don’t forget to subtract this number from your total profit.

The price of Bitcoin

This is the easiest piece of information to get. Just type “price of Bitcoin” in a search engine. Obviously, you want this to be as high as possible.

Bitcoin mining profitability calculators

Once you’ve got all of this information, you can enter it all into a Bitcoin mining profitability calculator to get a basic idea of what your profit rate will be per day.

CryptoCompare, CoinWarz, and NiceHash all have great calculators that work well for this purpose. But if you’re really looking to get into crypto mining, and you would rather do the calculation by hand, here are the steps to calculate mining profitability:

  1. Divide your hash rate by the total hash rate.
  2. Multiply the block reward by 144 (the number of Bitcoin blocks in a day).
  3. Multiply the result from step 1 by the result from step 2.
  4. Multiply the result from step 3 by the price of Bitcoin. This is your revenue.
  5. Divide the power consumption by 1,000 (to convert watts to kilowatts).
  6. Multiply the answer from step 5 by 24 (the number of hours in a day).
  7. Multiply the answer from step 6 by the price of electricity per kWh. This is your cost before the mining pool fee.
  8. Subtract the answer for step 7 from the answer for step 4. This is your profit before the mining fee.
  9. Subtract the mining fee from the answer for step 8. This is your profit.

This method doesn’t take into account the one-time cost of buying a mining computer, so keep that in mind.

After calculating how much money you’ll make from mining Bitcoin, you may wonder if it’s legal to make money this way. I’ll go over that next.

Bitcoin Mining Legality

If you live in the U.S., Bitcoin mining is definitely legal in most areas of the country. However, some cities or states may have banned it or are planning to ban it.

CNBC has reported that Bitcoin mining is illegal in Plattsburgh, New York, and that a bill to ban Bitcoin mining in all of New York is being considered in the state legislature4.

But in most areas of the U.S., Bitcoin mining is legal.

If you sell your Bitcoin mining proceeds to anyone other than a licensed exchange, you may run afoul of U.S. or state crypto laws. You’ll also need to pay taxes on the crypto you earn through mining.

A Deeper Dive: I’ve provided an analysis of U.S. crypto regulations and a guide to state crypto laws so you can find out about crypto legality in your state.

Once you’ve figured out how to be profitable and legal, you’ll need Bitcoin mining software to get started. The next section will consider some options.

Cryptocurrency Mining Software

There are a few options available for Bitcoin mining software.

The easiest software to use is a cloud mining app like SHAMINING or ECOS. These apps will rent out Bitcoin mining computers to you and configure them for you. All you have to do is pay the rental and electricity fees and collect your payments. Using a cloud mining app is the absolute simplest way to get started mining Bitcoin.

On the other hand, the fees for cloud mining services are usually higher than the fees for regular mining pools. So if you don’t mind putting in a little more work, it may be more profitable to buy your own mining computer and join a mining pool.

FYI: A mining pool is a group of miners who combine their hashpower together to solve the hash problem more quickly. If you’re an individual miner, you’ll need to join a mining pool — because the Bitcoin hash problem is too difficult to solve by a single computer in a reasonable amount of time.

To join a mining pool, you’ll need PC mining software like GGMiner or BFGMiner. Once you’ve got it up and running, you can connect to a mining pool like Poolin or Slush Pool and start collecting your rewards.

There is also a mobile mining app called MinerGate. Because of the low power of mobile devices, mining with a mobile app isn’t very profitable. But some people still like to do it because they think it’s fun.

Unfortunately, MinerGate is not available for iPhone, so only Android users can take advantage of it. Here is a table summarizing these Bitcoin mining software options.

Mining app Type of mining
SHAMINING Cloud
Pionex Cloud
CGMiner Windows, Mac, or Linux PC
BFGMiner Windows, Mac, or Linux PC
MinerGate Android mobile device

The next few sections will consider some common questions that often get asked about Bitcoin mining.

How Many Bitcoins Can You Mine in a Day?

Many people wonder how many Bitcoins can be mined by a person in a day.

There are currently 6.25 bitcoins produced in each block, and a block is produced every 10 minutes. This means that there are 6.25 (Bitcoins per block) x 6 (blocks per hour) x 24 (hours per day) = 900 bitcoins produced each day.

How many of these you get depends on the percentage of hash power you control. For example, if you control 1% of the hash power on the network, you’ll be able to produce 900 * 0.01 bitcoins = 9 bitcoins per day. However, you would be running a very big Bitcoin mining farm in this case.

Pro Tip: Mining pools and cloud mining apps won’t let you sign up without a wallet. We’ve published this list of excellent crypto wallets to help you figure out which one to use.

Let’s take a more reasonable example. And put your thinking cap on for this one. Let’s say that you buy an Antminer S15 mining computer that has a 28 TH/s hash rate. The current hash rate is around 223.7 million TH/s. This means that you control 28 / 223,700,000 = 0.0000125167635% of the hash rate of the network. So your share of the bitcoins per day will be 900 x 0.000000125167635 = 0.0001126508715 BTC per day. This is around $3.42 worth of Bitcoin per day at today’s price.

How Much Does It Cost to Mine One Bitcoin?

This is another frequently asked question about Bitcoin mining.

It depends upon a number of factors, including the power consumption of your mining computer, the price of electricity, and how long it takes you to produce a Bitcoin.

But let’s use the example from the previous section. An Antminer S15 uses 1,596 watts per hour. So it uses (1,596 / 1,000) x 24 = 38.304 kWh per day.

The U.S. national average for electricity prices is 13.83 cents per kWh5. So assuming you’re paying the average price, it will cost around $5.30 per day to run this mining computer.

In the last section, we established that this computer produces 0.0001126508715 BTC per day. At this rate, it will take 1 / 0.0001126508715 = 8,876.98 days (about 24 years) for this computer to produce 1 BTC. This will cost around $47,000 total.

As I am writing this, the Bitcoin price is around $30,000. So the Antminer S15 is not profitable for U.S. miners right now, so you would need to either use a more efficient miner or find lower electricity costs to be profitable.

However, if you’re not going to sell until you have an entire Bitcoin, this will take 24 years, and there’s no telling what the price will be at that point. It may or may not be a wise investment.

Wrapping Up

Recently, crypto mining has come under a lot of criticism. Many financial analysts and environmentalists have claimed that mining is economically wasteful and bad for the environment.6

In response, newer networks like Fantom (FTM) and Solana (SOL) have launched with PoS systems that completely do away with mining, and even Ethereum plans to eliminate mining in the summer of 2022.

But despite this move toward PoS, some of the top 100 crypto networks still use mining, including Bitcoin, Ethereum (ETH), Dogecoin, Litecoin, Bitcoin Cash (BCH), Ethereum Classic (ETC), and others.

Supporters argue that mining is the only way to prevent a network from becoming centralized7. So despite the criticism of it, it doesn’t appear to be going away anytime soon.

In the meantime, you can use the information in this article to decide whether crypto mining will be profitable for you, and if so, how to get started mining right away.

Citations
  1. Bitcoin.org. Bitcoin: A Peer-to-Peer Electronic Cash System.
    docs.google.com/viewer?url=https%3A%2F%2Fbitcoin.org%2Fbitcoin.pdf

  2. Coinguides.org. (2022). HashPower Calculator – Convert Hash to kH/s to MH/s to GH/s to TH/s to PH/s.
    coinguides.org/hashpower-converter-calculator/

  3. Blockchain.com. Total Hash Rate (TH/s).
    blockchain.com/en/charts/hash-rate

  4. CNBC. (2022, May 5). New York is close to a bitcoin mining crackdown — here’s what that means for the industry.
    cnbc.com/2022/05/05/new-york-bitcoin-mining-moratorium-proceeding-through-state-house.html

  5. Save on Energy. (2022, May 2). Compare electricity rates by state.
    saveonenergy.com/electricity-rates/

  6. The Ascent. (2021, Nov 10). 4 Facts That Prove Bitcoin Is Still Disastrous for the Environment.
    fool.com/the-ascent/cryptocurrency/articles/4-facts-that-prove-bitcoin-is-still-disastrous-for-the-environment/#:~:text=The%20average%20Bitcoin%20transaction%20consumes,Visa%20transactions%2C%20according%20to%20Digiconomist.

  7. Hackernoon. (2022, May 9). Considerations Regarding Proof of Work vs. Proof of Stake.
    hackernoon.com/considerations-regarding-proof-of-work-vs-proof-of-stake