Since 1983, cryptocurrency has been an idea, an obsession, a reality, and eventually a global phenomenon. Cryptocurrency has promised to be a technocracy of global currency out of the hands of governments and into those who have the know-how and powerful enough rigs to access it. So how can you go about doing that?
Well, that answer is a complicated one with a lot of things to consider within it. For better or worse when people talk about getting into cryptocurrency, it’s often described as this golden hen, like it’s a kind of get rich quick scheme.
The talk of investing in currencies like Bitcoin as if they were a commodity or stock has never been a sure thing any more than actually investing in those traditional commodities or stocks. While this article will go over what you need for that type of investment, what we will go into more detail about is cryptocurrency mining.
Cryptocurrency mining, unlike simply buying an amount of cryptocurrency and waiting for the price to rise as if it was a stock, is a job or paid process that is necessary to the trading of cryptocurrency as a whole.
Cryptocurrency mining is what turned the world upside down as cryptocurrencies rose in value and global popularity and are at the heart of what many talk about when they attempt to ‘get into crypto.’
Whether you are investing or mining cryptocurrency neither process is straightforward. This article will walk you through everything you need to know to get started from wallets to types of mining, to how miners make money, to what you need to build your own cryptocurrency mining rig. So let’s get started.
When people talk about making money on cryptocurrency, what they are usually talking about is not the transactions done with cryptocurrencies like Bitcoin or Ethereum, but the process of verifying those transactions called cryptocurrency mining.
So what is cryptocurrency mining? Well in short, because mining is as complicated as you want it to be, the mining process boils down to attempting to solve a mathematical puzzle called ‘Proof of Work’ in order to send money securely.
Every transaction done with any kind of cryptocurrency requires a randomly generated code to be sent and received. This Proof of Work is the encryption process of cryptocurrency across the blockchain and is the reason it is so secure.
That randomly generated code is the answer to the Proof of Work and is called a ‘hash.’ Cryptocurrency mining is the process of generating random numbers through brute force processing power until a miner happens to generate the correct hash for a transaction first so that it can be validated, sent and received.
But after generating the correct hash, how does the cryptocurrency miner make any money? Well for every successfully generated hash, the miner receives a payment called a block reward.
Block rewards vary from currency to currency, but generally, they are a set amount of units of cryptocurrency rather than a price or fee, built into every transaction done via that cryptocurrency. That set amount decreases as time passes based on a function that limits the total number of a specific cryptocurrency that is in circulation to avoid inflating the market.
So basically, cryptocurrency miners earn money by doing the work of verifying transactions done with that specific currency.
To get specific for a moment, Bitcoin uses the model described above where for every successful hash provided by a miner, the number of Bitcoins given out remains constant. Therefore when the value of Bitcoin rises, a miner receives more money per successful hash for doing the exact same amount of work.
During the cryptocurrency boom of 2020 and to this day, many cryptocurrencies values surged. That meant that the rewards of mining surged with them, bringing new interest, miners, and tech until the phenomenon snowballed into what we have today.
Types of Cryptocurrency Mining
So that all sounds great, more money for the same amount of work, verifying transactions, skyrocketing value to the moon: sign me up.
Well here’s the rub: because of all of the interest and money in cryptocurrency in the past few years, mining has become incredibly competitive and specialized.
Most of the oldest cryptocurrencies were originally mined slowly and deliberately because there wasn’t a lot of competition, and the pay wasn’t anywhere near what it is today. Pretty much anyone with a computer could do it. That has changed.
Interest and money have basically led to an arms race of processing power for cryptocurrency mining. Anyone with the most processing power can make the most money. That means that to mine cryptocurrency today requires huge amounts of processing power, consumes massive quantities of electricity, and needs a lot of specialized tech.
Now to be the fastest not only requires the most current graphics cards, if not even more specialized tech, but often your best bet is still to join groups to stack your odds in what is called miner pools.
Another way to get around this high barrier to entry is to farm out the tech altogether to cloud mining operations. But we are getting ahead of ourselves.
Let’s go over the different types of cryptocurrency mining (because of course there are different types of cryptocurrency mining), what they do, what they require, and how they fare in the harsh light of today’s cryptocurrency landscape.
The most popular form of cryptocurrency mining is called GPU mining. GPU mining generates hash through using graphics processing units (GPUs), the same graphics cards that render the newest video games.
GPUs are incredibly efficient at working quickly on multiple hashes simultaneously and because of that are the dominant form of cryptocurrency mining today. Most guides you’ll find online that discuss building your own cryptocurrency mining rig are talking about GPU mining.
Later in this article, we are going to run through the components required to build your own GPU cryptocurrency mining rig as well.
But here again, we run into a serious hurdle when it comes to GPU Mining. Graphics cards that go into GPUs and the semiconductors that are built into graphics cards are facing the worst global shortage in the history of modern computing.
We discussed this topic in detail in our article about ‘Why Graphics Cards are so Expensive’ so we’re not going to go into too much detail here. Suffice to say, the combination of wild demand for graphics cards along with myriad issues in production and the global supply chain created the perfect storm of rising prices and scarcity.
If you can get your hands on the coveted graphics cards like Nvidia’s GeForce RTX 30 series or AMD’s Radeon RX 6000 series, they might be at much higher prices than you might have paid at release.
CPU mining started as the dominant form of cryptocurrency before the rise of powerhouse graphics cards that we can’t get our hands on today. As mining got both more lucrative and competitive, miners had to use faster, more efficient ways to generate a hash. Because of that competition, CPU mining has largely fallen by the wayside.
CPU mining is slower, more deliberate, less consistent, and usually not profitable these days. The reason it is widespread is that basically, any computer can do it. Kind of.
You can start CPU mining by simply downloading mining software. Odds are that you will overheat your computer in a matter of hours, however. And if you don’t, the increased electricity bills may very well outweigh any block rewards you manage to receive.
Application-specific integrated circuit (ASIC) mining makes use of not multipurpose computer components used for gaming, producing, or coding, but specialized machines built specifically to mine cryptocurrency. Just as GPU mining outpaced CPU mining, now ASIC mining has surpassed the speeds of even the most impossible-to-find GPUs.
ASICs are built for a specific cryptocurrency, so you will buy one knowing it will only mine Bitcoin or Litecoin or whatever other currency you can find one for.
Broadly, ASIC mining works by matching the Proof of Work algorithm to a specific cryptocurrency. So rather than generating random hashing and hoping to get the correct one through sheer processing power and luck, ASIC plays off of the internal algorithm encrypting the cryptocurrency as a whole in order to provide the correct hash.
The dominant company that produces ASIC mining rigs is called Bitmain. Bitmain’s line of Antminer ASICs turned the cryptocurrency world upside upon release in 2013.
ASIC mining was so much more efficient than GPU mining and relatively inexpensive, they led to a race to get as many as you could together, more or less centralizing the mining process to farms: massive facilities solely dedicated to mining.
This centralization becomes problematic because Bitmain also uses its own ASIC rigs to mine cryptocurrency for profit itself. Bitmain’s mining pool Antpool is estimated to mine about 17% of all blocks. That is all blocks period.
That means Bitmain is both the sole producer of the most powerful cryptocurrency mining rigs to date, as well as controls the plurality of the mining market. That level of control has led to some serious controversy.
Many under the #FairMining have alleged that Bitmain uses its outsized role in both producing and mining the most powerful cryptocurrency mining devices to shift markets, drive up prices, and snuff out competitors.
There are even movements within the cryptocurrencies themselves to change their internal algorithms in order for ASIC mining rigs to be less effective and allow smaller, even individual miners a chance to get back into the market.
In fact, some cryptocurrencies are even being created via algorithms that have been specifically designed to be resistant to ASIC mining. This debate is still very much still up in the air, however. Between the shortage of graphics cards and the affordability of ASIC rigs, they might very well be a part of the cryptocurrency mining landscape from here on out.
Antminer S19 Pro
Source: Antminer USA
Setting up your own cryptocurrency rig costs thousands of dollars, even when you can find the components, many of which have been notoriously hard to find since the beginning of the Covid-19 pandemic.
And after all that, the rig you set up will almost certainly pale in comparison to the top-of-the-line cryptocurrency mining rigs and farms. This is why Cloud Mining is such a popular option, especially for newcomers trying to break into the cryptocurrency world.
Cloud Mining is the process of renting out an existing mining rig and reaping the rewards from its mining. Many companies have set up what is known as farms: facilities housing thousands to tens of thousands of rigs all dedicated to cryptocurrency mining.
In order to offset the upfront cost of the facility, as well as the truly prodigious electric bills these rigs must rack up, companies will offer to rent out rigs to individuals.
Usually, to rent a rig or number of rigs from these farms you will have to pay a deposit to begin, and then pay ongoing electricity bills specific to your rented rig. The renter will then, however, earn the cryptocurrency given in block rewards earned from their individual mining rig over the allotted rental period.
These days, there are a lot of companies that are dedicated to Cloud Mining. They specialize in currency to currency, types of cryptocurrency mining, and the periods and costs associated with that rent.
Doing the research about hash speeds, power usage, and pay structure is key to how you can make money by cloud mining. That being said, there are two interesting exceptions that are of note when it comes to cloud mining
First, an option growing in popularity is the ‘free’ model of cloud mining. Of course that is a misnomer, you do have to pay for these free models, but here’s what they mean: rather than paying a deposit anywhere from a couple hundred to a couple of thousand dollars to start and then get hit with ongoing electricity bills, the free model waives that initial deposit so that you can see earning before paying a cent.
That being said, the fastest, best mining rigs aren’t doled out to those refusing to pay upfront. Companies will rent slower rigs and have been known to tack on conditions or higher rates to cover the lack of deposit that comes with free models.
The second exception is the possibility to rent across a lifetime. Rather than paying for annual or five-year contracts, several companies like NiceHash and Swiss Gold Global allow investors to rent rigs for their entire lives.
This model stops you from paying ongoing rental fees at the expense of a single upfront cost. If you want to cast your die with cryptocurrency for the long haul, but don’t want to build your own rig, this can be a great model for you.
So for the first three methods of the cryptocurrency described above: CPU, GPU and ASIC mining, the processing power of a single, or even a few simultaneous rigs pales in comparison to global competition.
Because of this, cryptocurrency miners band together in what are called mining pools to combine their processing power, stack their odds, and share the block reward together.
Mining pools differ wildly on how they divide out their block rewards, what tech you need in order to join, entry costs, and how they function. Here is a list of the largest pools globally.
Some of those massive pools like BTC.com and the aforementioned Antpool have a solid record and have been around for a long time for the cryptocurrency world which means they are relatively stable (again, for the cryptocurrency world).
The most important thing to consider when joining mining pools, however, is transparency and payouts. Doing your own research into how accurate the pool’s total hash rate is as compared to what they advertise will assure you that the pool’s owner or owners aren’t skimming from the top.
Doing similar research into payout schemes will give you a similar piece of mind. As a good rule of thumb, being able to compare what is advertised with real-time dashboards of the pool’s current work is a good sign for transparency.
For payouts specifically, cryptocurrency mining pools usually use pay-per-share (PPS) or pay-per-last-n-shares (PPLNS) methods to dole out block rewards. The difference there is that PPS is a constant amount no matter how much of your processing power went into the mined block.
PPLNS is a percentage of your shares to the total. Investopedia has an incredibly in-depth guide explaining these considerations in more depth as well as many others as well.
But long story short, depending on the power of your rig, and how much you are willing to put pay upfront, the size and payout structure of your pool can affect your earning wildly.
So with an understanding of what cryptocurrency mining is as well as the different methods mining can be done, paired with knowledge of pools, what is the next step?
Just like creating a saving account to store your money, your should find and create a cryptocurrency wallet for your potential earnings.
Cryptocurrency wallets are a secure way to store any cryptocurrency that you earn either from transactions or mining. Interestingly enough, because cryptocurrency is neither tangible nor centralized, you don’t actually need a wallet to store your funds.
Large hubs for crypto transactions like Coinbase and Binance actually allow you to keep your earnings on their site. Wallets are simply a more secure way to store your funds.
Think of it as a stock trading app versus your banking app. You can keep a pool of money in the stock trading app, but at the end of the day, it is more secure on a personal account.
So let’s go over the different types of cryptocurrency wallets, discuss how they function, as well as their pros and cons.
The biggest distinction between wallets is hardware or software wallets. More widely known as cold (hardware) and hot (software), wallets can either come in the form of physical hard drives that you have to purchase yourself or third-party software that you can use for free or a fee.
Cold wallets are undeniably more secure. You put your funds on a hard drive and that is where they stay. Third parties cannot make you pay for transactions or withhold funds, and they cannot be hacked.
That being said, they are vulnerable to getting lost or destroyed. Certain cold wallets come with ‘keys’ to access your wallet. Sometimes these keys are passwords, while other times they are secret QR codes that if lost, are unable to be retrieved.
This is the major threat to cold wallets. Headlines of lost hard drives worth millions of dollars still circulate because of loss of keys or accidents involving cold wallets.
Hot wallets come in many variations. Some come as both an app and website that have to be accessed online like Coinbase, while others like Electrum only deal in specific cryptocurrencies, in this case, Bitcoin.
Hot wallets vary from software to software, especially when it comes to security. Some let you look directly at the software’s code, others have levels of security that can be added or taken away.
An interesting middle ground between hot and cold wallets is what is called desktop cryptocurrency wallets. Desktop cryptocurrency wallets are software that you download and access from your computer, rather than a third-party website.
From there you have a password that allows you to access your funds, as well as the ability to back up that account on other computers.
Depending on your preference of wallet and the type of cryptocurrency you plan to be mining or trading in, you can find great resources for lists of the best cryptocurrency wallets. Money.com has a good generalized list of many different types of wallets that you can use across the types we’ve gone over here and more.
Building your Own Rig
So if you’re still with me after all of that, there is only one thing left to do: get your very own cryptocurrency mining rig. As I said above we are going to be running through the components of a GPU mining rig, what to look for, and what you might need.
If you are interested in ASIC tutorials, PC Mag has a wonderful guide including how to heat your house with the heat put off from mining rigs.
But before we get into the components, however, we want to run over some prebuilt computers that you can buy right now that can mine cryptocurrency without the need to build your own rig.
If you are looking to make cryptocurrency mining a passive income or run your mining rig twenty-four hours a day, you need to be either making your own or buying ASIC rigs.
That being said, a lot of gaming rigs can moonlight as cryptocurrency miners. Prebuilt gaming rigs come with good graphics cards, plenty of memory, and most importantly cooling systems. They won’t be the fastest nor most efficient, but out of the box, you could start mining.
If you want to mine cryptocurrency and still get some serious ray tracing into your games, there’s a space for that. Both the Alienware Aurora R11 Gaming Desktop as well as the MSI MPG Trident AS 10SC-1208US SFF Gaming Desktop as candidates that can live in both the gaming and mining world.
Naturally, these rigs won’t get the hash rates of dedicated custom-made cryptocurrency mining rigs. You also might run into overheating issues if running them week after week. Buying pre-built PC’s also always runs the risk of paying more for preassembly.
But if you don’t want to sacrifice your basement or spare bedroom into a mangle of graphics cards, exhaust pipes, and whirring fans, these rigs might be a nice way to have your cake and eat it too.
Barring that, for all you looking to build your own dedicated GPU cryptocurrency mining rig, will let you dive into the components you’re going to need.
Naturally, the most important part of a GPU mining rig is your graphics card(s). Graphics cards will directly correspond to your end hash rate, so picking out which, and more importantly, how many you want is key.
Top-of-the-line GPU mining rigs have several to dozens of GPUs all working simultaneously. But getting your hands on them might be tricky.
In our article on the exorbitant costs of graphics cards, we discussed various strategies to get your hands on them including stock tracking tools and lotteries for the best GPUs. Otherwise, know that you don’t necessarily need the latest and greatest for GPU mining.
AMD and Nvidia have seen a resurgence of even their older models of graphics cards for just this purpose. Bitcoin.com’s guide to GPU mining lists hash rates of various popular models, including some GPU’s years out of date. Don’t be afraid to settle for what you can find. These days any alright GPU is hard to find.
Mining rigs, unlike PCs, don’t use cases. They are not meant to be portable nor contained. Cases will trap heat put off by your rig, which is why mining rigs use open-air frames instead. There are a lot of good aluminum frames on the market right now, but anything that’s going to fit the size of what you want to make is fine.
So the most important thing about a motherboard, especially given the rarity of GPUs, is that first, you want your motherboard to have a lot of ports for graphics cards, and second, that it is compatible with the type of graphics card you intend on buying.
Given the scarcity of graphics cards, we’d recommend choosing a motherboard after deciding what graphics cards you can get to ensure that they are compatible.
Depending on just how many graphics cards you use, issues of heat can be a problem even with sufficient cooling. Many complex rigs use USB PCI-e risers in order to spread out your graphics cards to better disperse heat in the air. Risers give you the option of not cramming all of your heat-producing components in one tight spot.
When it comes to RAM, the odds are you won’t need egregious amounts. The standard minimum is eight Gigs of RAM, so depending on just how many graphics cards you can get your hands on, adjust accordingly.
Your CPU doesn’t need to be the cutting-edge, blazing-fast tech that you want your graphics cards to be. In a perfect world, it would be something like AMD’s Ryzen Threadripper 3990X.
The last time we checked, this is not that world. The cryptocurrency community tends to like AMD CPUs, but for GPU mining, your CPU won’t affect hash rates, so you don’t need to be dropping a lot of money for one.
This might sound like a broken record, but depending on the type and amount of graphics cards you are using, choose your PSU accordingly. You will have to work out the math of just how much wattage is used from each GPU, as well as whether or not you want to be overclocking.
There are lots of specific guides to these calculations depending on what type of GPU you get, and barring that, online calculators like OuterVision can help as well.
HDD and SSD
The amount of memory within your rig won’t affect hash speeds. Dipping below fifty gigs might be a risky endeavor, but thankfully, these days it isn’t hard or expensive to find massive hard drives for just this purpose.
There are recommendations for SSD’s up to 120 Gigs, but especially starting out, a hard drive will serve you just fine.
Though not a physical component, the mining software you use is just as important as any of the components we have gone of thus far. Cryptocurrency mining software varies much like wallets in how they function.
Some work for specific operating systems, some come free while others must be paid for. Software functions for specific types of mining and come in different stripes of customization. So depending on your preferences choose accordingly.
Multiminer is a nice software for beginners because it has a startup wizard, as well as internal information about pools and terminology that might be confusing to newcomers.
Other popular mining software includes CGMiner and Awesome miner, both of which are compatible with GPU mining.
It’s hard to say where cryptocurrency will be even just in a few years’ time. The rapid arms race from CPU to GPU to ASIC mining threatens to change the cryptocurrency model as we understand it.
Cryptocurrency as a whole seems to teeter on the bleeding edge of tech, commerce, and industry in a way that few things ever have in human history.
That being said, the meteoric rise in value and popularity of all things crypto has cemented it as a staple in both the investment and tech worlds. Cryptocurrency demands that we pay attention to it. And the beauty of that attention is that it is easier than ever to get into cryptocurrency yourself.
Options like cloud mining and easier access to wallets allow those who might be leery of building their own rig the ability to invest, mine, and participate in the global cryptocurrency phenomenon.
This trend can be seen across the investment world as every app sprints to provide the ability to ‘trade crypto’ on it. For some, getting into cryptocurrency can be as easy as buying shares of a Bitcoin from Venmo.
For those interested in the hard tech, of setting up rigs and maxing out hash times, there are more resources, guides, and options than ever before, down to the most minute of details. While components like GPU’s and ASIC rigs can be rare or expensive, with every passing day more and more options for getting your hands on them become available.
And beyond that rarity, for every component involved in constructing a mining rig, there have been hundreds of pages written discussing everything from ports to software to cooling to aesthetics.
And that might be the most important thing about the boom in cryptocurrency: the communities created because of it. There are thousands of mining pools and hashtags and forums of people coming together to ask questions, give answers, and make some serious money from their knowledge of tech. And with the guide, hopefully, you are one step closer.