Popular cryptocurrencies like Bitcoins, Ethereum and some other cryptocurrencies become available for use after being mined. A lot of people would love to mine their own cryptocurrencies, but perhaps do not know about is profitability, and as such are undecided about mining or just buying the cryptocurrencies on crypto exchanges. Whatever the case may be, you should have an idea how profitable it may be.
To start mining, you will need to set up a mining rig, which is an array of computer hardware used in mining the cryptocurrencies. However, before you go for a mining rig, you need to follow these steps:
- Decide what currency you want to mine
Know the properties of the various cryptocurrency options you have, most cryptocurrencies either use the SHA-256 algorithm or the Scrypt hashing algorithms.
- SHA-256: For effective mining of Bitcoins and other SHA-256 algorithm based cryptocurrencies, the Application Specific Integrated Chips (ASIC) processors are used for mining, and they are very expensive
- Scrypt: Scrypt algorithm cryptocurrency mining requires GPU based mining rigs.
The mining rig you pick is dependent on the algorithm of the cryptocurrency you intend to mine.
- Choose your rig
Picking your rig is a function of your budget, and what cryptocurrency you want to mine. You can go about this in two ways:
- ASICs: These are ready made, and come shipped with the necessary peripherals. However, they are very expensive.
- Do-It-Yourself (DIY): This means, you build your mining rig using a lot of graphics cards. It is much cheaper than ASICs.
Cryptocurrency mining usually consumes a lot of electricity, which is a very important factor to consider in profitability. You need to know the power requirements of the mining equipments. There is the need to know the mining efficiency of the different systems available using this formula:
Mining efficiency= hashing speed/power consumption
If you have gone through the processes of getting and running your mining rig, then you need to calculate and know the profitability, and this is a function of the electricity your miner has consumed, if you are spending more on power than you earn, then it is not profitable.
To know just whether you are mining at a loss, you should get some help with a profitability calculator, there are different web based profitability calculators you can use, when you are on the profitability calculator website, you will be required to input various parameters to get your profitability results. These parameters include:
- Power consumption
- Cost of equipment
- Hash rate
- Current Bitcoin/cryptocurrency price.
The profitability calculator will do its calculations and let you know how long it will take before you can get returns on your investment. Mining cryptocurrencies is usually more profitable for big mining companies because they possess more equipment. To make it more profitable, you can use renewable energy, or go to places like Georgia where electricity is relatively cheap. However, you can join a mining pool to earn bitcoin, or get from a bitcoin trading website.
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