Bitcoin mining captivates many people, including those inexperienced in the field who wish to enter the crypto world without having to invest heavily.
The problem, however, is that mining Bitcoin without investing a bit is practically impossible.
In fact, to be honest, it is possible to try mining Bitcoin with low-cost equipment, but it is practically impossible to achieve results. The real risk is spending money on energy costs without earning anything, or almost nothing.
The situation changes only if one is willing to invest a bit.
Bitcoin Mining
Bitcoin mining is the process through which new BTC transactions are validated and added to the blockchain. In turn, the blockchain is the ledger that contains all valid transactions.
Mining Bitcoin therefore means participating in this process, and it can essentially be done in three ways.
The first and more complex option is to equip oneself with a highly powerful mining rig to independently attempt to validate blocks and collect the reward.
The second option, quite complex but simpler than the first, is to equip oneself with a medium-low power setup and contribute its computing power to a mining group (called a pool).
The third, which is not recommended, is to invest money in so-called cloud mining.
The goal remains the same: to find, block by block, the unique hash that validates it, allowing the block to be added to the blockchain and to collect the reward.
This hash changes from block to block, and to find it, billions upon billions of hashes must be generated every second, verifying for each one that it is indeed the correct one.
Approximately every 10 minutes, a new block is mined, and the process starts all over again.
The First Method
It should be noted right away that to successfully mine Bitcoin solo, large-scale setups are generally required.
In reality, it is possible to search for the hash with any rig of any size, even theoretically by doing the calculations manually. The problem is that Bitcoin mining is a competition where the reward is given only to the single miner who finds the hash, and the more computing power one has, the more likely they are to find it.
Therefore, those with limited computing power find it nearly impossible to independently discover even a single hash that confirms a single block. This implies that individuals with minimal computing power must effectively opt for the second method, unless they possess extreme luck.
The problem is that mining is a highly energy-intensive activity, and since the more hashes are extracted, the higher the probability of finding the right one and claiming the reward, it ultimately becomes a competition that rewards those who consume the most electricity.
Therefore, if you mine Bitcoin with very low chances of successfully finding the hashes that validate the blocks, you end up bearing significant costs due to high electricity consumption, but without earning anything in return.
Creating a high-power Bitcoin mining facility, capable of solo mining, requires such substantial investments that only well-funded companies can undertake it. Suffice it to say that often even a million dollars is not enough to have real potential to achieve tangible and significant results.
The Second Method
To address this issue, mining pools were created in the past.
These are organized groups of miners, which often anyone can join if they wish, where they pool their computing power with that of other group members, so as to formally appear as a single large miner, but in reality, it is composed of many small miners who combine their power.
This methodology greatly increases the likelihood of successfully extracting the correct hashes, but it has a dramatic downside.
The fact is that the reward is granted to only one miner, and only once per each block. Therefore, in the case of mining pools, when any device from one of the group members manages to find the hash that confirms the block, the pool collects the reward and then redistributes it to all members in proportion to the computing power provided.
Thus, even in this scenario, those with greater computing power earn more, and it often happens that those with less receive such a small portion of the reward that they cannot cover the expenses.
The Third Way
In theory, cloud mining involves renting computing power provided by third parties, thus eliminating the need to use owned mining hardware.
The problem is that those who claim to offer cloud mining services often lie, with the specific intent of scamming the inexperienced.
In fact, the payment for the service is made in advance, and it provides absolutely no guarantee of revenue. This means that many of those who claim to offer this service collect the money, and then perhaps provide nothing to the paying user, thus avoiding even the electricity costs. In the end, the user receives nothing, except having sent their money to scammers.
To be honest, there are also genuine cloud mining services, but they operate differently. It is indeed possible to rent computing power from data centers equipped for Bitcoin mining, but then you need to configure the machines remotely, independently, hoping to have done it correctly and competitively. In other words, only expert users manage to do it successfully.
How Bitcoin Mining Works
To mine Bitcoin, it is necessary to own and operate hardware capable of executing the SHA-256 algorithm, which underpins Bitcoin’s Proof-of-Work.
Therefore, initially, it is necessary to purchase or lease these machines, install them, configure them correctly, and get them running.
These machines cost several thousand euros each, and generally, one alone is not enough because its computing power is too low compared to that of large facilities with hundreds or thousands of machines.
Once started, the machine begins to randomly mine an extremely high number of hashes per second in the hope of finding the one that validates the new block. When someone finds it, the block is added to the blockchain and validated, and then it moves on to the next one.
Each time someone validates a block, they receive a reward in return, which is currently 3.125 BTC, but it halves approximately every four years.
Solutions Accessible to Everyone
For individual users, the main option is to use ASIC miners or cloud mining.
ASICs (Application-Specific Integrated Circuits) are devices designed exclusively to mine specific algorithms, such as SHA-256. They are the only effective option for mining Bitcoin as they offer high hashrates with highly optimized energy consumption.
Purchasing an ASIC is best done through reliable retailers, typically websites specialized in selling these machines.
The first issue, as already mentioned, is the cost. Powerful ASICs are required, and these cost several thousand dollars.
The second issue is the configuration, as it is not at all simple to set it up correctly and efficiently.
Joining a mining pool, on the other hand, is quite straightforward, although selecting the best one does require some knowledge of the sector. Moreover, the best mining pools change over time, but fortunately, switching from one to another is relatively simple and quick.
Unfortunately, it doesn’t end here, because it’s also necessary to optimize efficiency, and especially to replace the machines when they become obsolete (generally within a few years).
Therefore, this is not exactly a solution accessible to everyone, but at least it is available to those who have several thousand dollars to invest and a good understanding of how to configure and optimize these machines.
Mining Without Owning Hardware
In theory, there exists an alternative that is truly accessible to almost everyone.
As highlighted earlier, however, cloud mining is often a scam.
In theory, cloud mining allows you to rent hashrate from remote data centers, thus avoiding the costs of purchasing and maintaining hardware.
To be honest, there are also legitimate cloud mining platforms, but they are quite few compared to the hundreds or thousands of scam platforms.
Generally, scammers operating in this specific sector promise high returns and require no effort from the user. Legitimate platforms, on the other hand, do not promise any earnings and, most importantly, inform the user that they will need to configure the rented computing power after payment.
Profitability
The decisive factor for the profitability of Bitcoin mining is the costs, particularly the operating expenses due to the enormous electricity consumption.
For example, a used entry-level ASIC costs around a thousand dollars, while a new one can easily cost more than $2,000. However, these are machines with relatively low computing power.
The cost of electricity in this case can be around $10 per day, or slightly less, therefore the monthly figure can be around $300, rising to more than $3,500 annually.
It should not be forgotten that high energy consumption also generates a lot of heat, and therefore these machines often need to be cooled.
The cooling equipment can cost a few hundred euros, and in turn, it will consume a significant amount of electricity.
The problem is that this way you can generate just over $10 a day in revenue, so in the end, it’s not worth the effort. In other words, it’s better to buy BTC when the price is low, rather than mining them with such profitability.
In truth, profitability varies significantly with the market value of BTC, because Bitcoin mining revenues are indeed in BTC, but its market value can fluctuate greatly and very quickly.
