What is cryptocurrency mining? Cryptocurrency mining is the process where the user’s computer adds transactions to the cryptocurrency’s blockchain by solving the complicated mathematical problems associated with that specific currency’s algorithm. In return for this computer’s “work” the miner receives a small fee for verifying that transaction block. In this “How To” cryptocurrency mining guide and cryptocurrency mining business Lever Rank review, we dive into cryptocurrency mining and the potential profits in mining crypto.
Hybrid Online/ Brick and Mortar
Varies Depending on Scale – As Low as $300 to Start
Varies Based on Costs and Cryptocurrency Prices
40 out of 100
What are Cryptocurrencies?
Before you can answer “what is cryptocurrency mining?” you need to understand what cryptocurrencies are. Cryptocurrency is a form of digital money, designed to be secured by blockchain technology into an almost unbreakable code. Cryptocurrencies were designed to be anonymous (in most cases), with all transactions permanently recorded in the public blockchain ledger.
Cryptocurrencies Are A Breakthrough in Finance
Crypto is seen as a breakthrough in the world of finance and money in general. For the first time, the primary unit of commerce (money) has been removed from government control, as well as banking control. Payments are made from one person directly to another, bypassing banks and governments completely. Instead of bank vaults and control of government backing, security is provided by the blockchain. Governments cannot “print more money” or in any other way control the value or amount of cryptocurrency in circulation.
Some of the more popular cryptocurrencies (with the highest market capitalization) include Bitcoin, Ethereum, XRP, Bitcoin Cash, and Litecoin.
Understanding Cryptocurrency Mining
Even with the above answer to “what is crypto currency mining?”, understanding what it entails is not necessarily clear. There are a lot of moving parts involved that can take you some time to understand. Fortunately, once you are familiar with these moving parts and can make processes for your operation (and automate them), the time impact drops exponentially.
To be successful with mining cryptocurrencies, you need to understand quite a few different things:
- Mining Hardware
- Mining Software
- Cryptocurrency Algorithms
- Mining Pools
- Cryptocurrency Wallets
- Cryptocurrency Exchanges
As with any manufacturing business, raw materials costs (and keeping them as low as possible) are critical for profitability. In cryptocurrency mining, raw materials are in fact one central thing – electricity. Your miners are converting electricity into cryptocurrency over time and you are in effect “dollar cost averaging” into the chosen cryptocurrency you are mining with your crypto miners. A penny difference in your electricity costs per kilowatt hour (kWh) can make the difference between profitability and losing money.
Research the cost per kWh in your area BEFORE getting into crypto mining. If you are considering mining at home, the cost per kWh should be displayed on your electric bill. Note that cryptocurrency miners consume a lot of electricity and operate more efficiently at 208-240v versus the standard 110v wall outlet.
Another tip is to look at commercial and industrial power rates as well, as they can be more that 50% less than standard residential rates depending on the size of service in the building.
There are several different directions to go when choosing the hardware needed to mine cryptocurrencies for your mining operation.
These miners use the power of the computer’s CPU (central processing unit) to mine the different cryptocurrency algorithms. In effect, any computer can mine for cryptocurrency using its CPU. As the mining difficulty increases for that specific coin and algorithm, CPU mining becomes less cost effective. (The revenue generated does not exceed the cost of electricity.)
Benefits of CPU Mining
A benefit of CPU miners are that they are the most flexible in terms of being able to switch between algorithms and being able to mine coins that are only able to be mined with a CPU. Other benefits are that since all computers have a CPU already, it is an easy way to try out mining before purchasing new computer equipment.
Drawbacks of CPU Mining
Unfortunately, some of the drawbacks are that most cryptocurrencies are not profitable to mine with a CPU, and some cryptocurrencies are not CPU-mineable.
There are some instances that CPU mining is profitable:
- Cheap access to electricity and an abundance of CPUs that can be used for mining,
- Focusing on CPU-only coins that keep out the faster, more dedicated miners such as ASICs,
- Mining newer coins with lower difficulty and hash rates.
These miners use the power of graphics cards (also known as Graphics Processing Units or GPUs) to mine cryptocurrencies. GPUs are designed to process very intensive repetitive tasks, versus CPUs, which are designed to multitask different operations (ie to run your computer). GPUs see an 800+ times increase in efficiency over some CPUs.
Benefits of GPU Mining
Some of the benefits of using GPUs in mining are that GPU miners are very flexible in that they can easily switch between different coins based on profitability.
GPU mining is scalable per computer, meaning that you can always add another GPU to the system if your motherboard and power supply can support the additional GPU card. Some GPU builds using the ASUS B250 mining expert can support 19 GPUs in one computer.
GPUs are easily purchased new or on the used market through eBay. GPUs are consistently upgradable via computer bios updates or computer driver updates from the manufacturer. GPUs also retain a large portion of their value for resale on the used market as they can be used for a host of different things such as gaming, general computer use or even machine learning applications.
Drawbacks of GPU Mining
Even with all of the benefits, GPU mining does have some significant drawbacks.
GPU based mining rigs take up a much larger footprint than ASIC miners and CPU miners. They also consume a lot more power versus both CPU and ASIC miners, and don’t have the processing power to compete agains ASIC computers.
GPU miners are not able to mine CPU-only coins, however you can always task your computer’s CPU to mine one coin while the GPUs mine another.
An FPGA (Field Programmable Gate Array) miner uses specialized high power computing chips that can be reprogrammed after they leave the factory. What this means for cryptocurrency mining is that they can be reprogrammed for any coin.
A few companies have started manufacturing FGPA mining cards and systems, both as stand-alone miners and as add-in cards that accelerate GPU mining.
Benefits of FPGA Mining
One of the main benefits of FPGA mining is the high hash rate (nearing that of ASIC miners) and the flexibility of being able to change algorithms. This helps your hardware be profitable longer and increases your chances for a positive ROI.
FPGA mining is also very energy efficient. For example the Squirrel Research BCU1525 has the mining power of up to 30 NVIDIA 1080ti GPUs, but only uses 150W.
Using a GPU for comparison, one NVIDIA1080ti averages 197.82W when ETC (Ethereum Classic) mining (Tom’s Hardware). One FPGA uses less power than a single GPU and has the processing power of 30 units of this model GPU.
Drawbacks of FPGA Mining
FPGA mining is relatively new, and the technology is expensive. Some FPGA cards are priced at $3,000+ per card. Also with such a new technology and porting to cryptocurrency mining, the software choices for mining are complex and not readily available.
ASIC (Application Specific Integrated Circuit) Miners are just that – miners created to mine one algorithm. The specific chips are set at the factory to do only one thing, mine that specific algorithm, and cannot be reprogrammed.
Benefits of ASIC Mining
True “plug and play” operation of the miner. Basically, you buy the miner, plug it in to power and ethernet, enter your pool information and wallet information and you are mining. This makes operations easy and explains why it is the choice of most professional mining operations.
The miner is designed to operate 24 hours a day from the beginning. Using consumer technology (GPUs) under 24/7 load in professional operations will lead to a much higher instance of hardware failures.
ASIC miners are more energy efficient than GPU miners and they are magnitudes more powerful than GPU and CPU miners. This leads to higher profitability and quicker return on your investment.
Drawbacks of ASIC Mining
The biggest risk of investing in ASIC miners is the lack of flexibility (restriction to a single algorithm), combined with high cost.
The lack of flexibility reduces the lifespan of the ASIC miner (due to the nature of mining difficulty increases built into cryptocurrencies), and there is virtually no resale value for the hardware. You have a limited time to mine and get your money back with an acceptable rate of return before you have to reinvest in new hardware.
This lack of flexibility also factors into the risk that specific coin developers can choose to “fork” their algorithm (making a slight change in the original algorithm) to intentionally make ASIC obsolete. Monero is an example of a coin that forks repeatedly to be “ASIC-resistant”, spreading mining across the masses, instead of concentrated in the hands of a few industrial sized ASIC mining farms.
Ok, we have discussed the types of hardware needed for cryptocurrency mining, but now lets discuss the software that controls your miners. Mining software actually sends the instructions to your CPU, GPU FPGA or ASIC chips to perform the calculations needed in mining.
ASICs have the mining software built into the system, drastically simplifying the process. Since it is already compatible with the hardware (that cannot change), ASICs are typically ready to go out of the box.
Others systems require you to install the operating system, appropriate drivers, prepare the operating system for mining (a whole lot of fun with the auto-updating monster that is Windows 10), resolve hardware conflicts et cetera. I am more interested in getting the system up and running as quickly and inexpensively as possible, and consistently making residual income (this is the “Levered Income” blog, after all).
Cryptocurrencies make use of different hashing algorithms to secure their blockchains. These algorithms tell you what type of miner you need in order to mine the specific coin. For example, Bitcoin uses the SHA-256 hash algorithm. If you want to mine Bitcoin, you will need an ASIC miner that mines the SHA-256 algorithm since the difficulty is so high.
An example of an ASIC miner from Bitmain that mines SHA-256 coins is the Antminer S17 Pro. It is important to remember that ASICs are limited to one algorithm, not one coin. So while the Antminer S17 Pro can mine Bitcoin, it can also mine smaller cap coins such as Peercoin, Bitcoin Atom and Namecoin.
Switching to a smaller cap coin can make mining a certain algorithm more profitable than mining a larger cap, more mainstream coin. For example, using coincalculators.io, I checked the profitability of using the Antminer S15 SHA-256 miner. Note the results where daily profit after electricity was actually higher for Bitcoin Cash versus Bitcoin.
Simply put, a mining pool is a group of miners that get together to pool their resources. The reason for this is to smooth out their earnings over time, making income more predictable and consistent. The pool operator charges for this service, typically 1-2% of earnings.
I do only pool mining, as I am more concerned with consistent mining income. Also something to consider is that you will have consistent mining expenses (electricity, infrastructure and rent are examples).
The idea is that if there are 100 chances to find the mining reward for discovering the block, one miner will have a 1 in 100 chance of finding the reward (but will keep the entire reward). The pool miner in a pool of 20 miners will keep 5% of the reward, but has a 1 in 5 chance of finding the block due to the power of the 20 miners pooled together.
A cryptocurrency wallet is where you store your cryptocurrency. It acts as your own personal vault – almost like your own bank – and is secured by your password. This “wallet” is how you send, receive and store your digital currency. It is secured by a “private key” associated with your account
There are several different types of cryptocurrency wallets, and their level of security varies based on the type.
Your private key, recovery phase and wallet are stored on a piece of paper. This is probably the most secure option from a hacking perspective, but if you lose the paper or there is a fire, you lose you currency.
Everything is stored on a hardware key that attaches to your computer. Hardware wallets like the Ledger Nano S (what I use) connect via USB and are considered extremely secure. Hardware wallets support multiple currencies, simplifying managing multiple currencies.
If you lose your wallet, you can regenerate the account holdings on a new hardware wallet (if you have the recovery phrases and keys). Without the password/pin, no one can access your hardware wallet.
This is software created by the cryptocurrency development team is installed on your computer. Typically it will generate a recovery phrase and/or keys in case the computer is lost or crashes. Desktop wallets can get cumbersome when you have a lot of different cryptocurrencies.
This is software created to allow access to your cryptocurrency accounts via a mobile app. These are very convenient as they can store over 500 different coins. I personally use Coinomi for coins not covered by my Ledger Wallet.
Exchanges operate similarly to regular currency exchanges and brokerages, in that you can exchange one cryptocurrency for another cryptocurrency (Bitcoin for Ethereum for example), or convert your cryptocurrency to regular money by selling it on the open market.
There are many different exchanges around the world and they all have their pros and cons. I will go into detail of cryptocurrency exchanges and trading platforms in other articles, but below are some of the exchanges that I use together to convert cryptocurrencies into dollars. (I don’t trade cryptocurrencies.)
Coinbase is a centralized cryptocurrency exchange located in the United States. It was established in 2013 and has a 24-hour trading volume of $96,073,950 USD across 19 different coins and 45 trading pairs.
Kucoin is a cryptocurrency exchange based in Hong Kong that was established in 2014. It has a 24-hour trading volume of $22,227,428 USD at the time of this article across 188 different coins and 412 trading pairs.
STEX is a centralized cryptocurrency exchange registered in Estonia that has a smaller 24-hour trading volume ($16,896,868 USD) but access to larger amounts of smaller-cap coins (262 coins with 372 trading pairs).
Lbank is a centralized cryptocurrency exchange based in China that was established in 2017. At the time of this article, it has a 24 hour trading volume of $630,639,549 USD across 92 different coins with 463 trading pairs.
Binance is a centralized cryptocurrency exchange based in Malta that was established in 2017. At the time of this article, it has 24-hour trading volume of $887,190,814 USD across 150 different coins with 463 trading pairs.
Changelly is an interesting twist on cryptocurrency exchanges. Changelly is non-custodial exchange instant exchange, meaning that they never hold your cryptocurrency. They act as an intermediary between cryptocurrency exchanges and users.
If you move beyond just a few miners and begin to scale mining operations, there will be an additional investment in infrastructure to support your miners.
Racks of servers, GPU miners and ASICs generate a large amount of heat and noise. Scaled operations require ventilated data rooms with proper airflow and noise isolation.
For example, the Antminer S17 Pro ASIC cryptocurrency miner from Bitmain operates at 82 dBA. According to IAC Acoustics comparative noise levels, an 80 dB noise level is similar to the noise level of a garbage disposal (80 dB) or a food blender (88 dB) and is 2 times as loud as 70 dB. Remember that this runs 24/7, so this obviously would not work in a residence. Even in an outdoor shed, the noise level could be unpleasant.
Looking at the Antminer S17 Pro’s detailed specifications:
You can see that max electrical draw in watts is 3371 at the wall and the miner requires 220v electricity to operate (pulling 15.32272 amps). A typical wall circuit in a residence is only 120v on 20 amp breakers (here in the US).
Typical mining farms are circuited with 30 amp 220v breakers, meaning that with this new machine, they can only run 1 Antminer S17 Pro at full turbo power on one breaker. (A 30 amp circuit can only actually support 24 amps of power draw due to safety headroom in electrical circuiting). One miner consuming an entire electrical circuit is a large infrastructure expense.
If you wanted to support 30 Antminer S17 miners running at full power on the turbo setting it would take 30 of your 30A 220V circuits, a large portion of your infrastructure. But it isn’t about the infrastructure, it is about the profitability.
Lets take a look at maximizing the profitability of your infrastructure.
Look at the detail above, an Antminer S17 Pro at full “turbo” power maxes out at 3371 watts (15.32272 amps) at the wall. I run a quick daily profitability check on the miner based on my electrical costs and get the following:
Bitcoin Cash shows total daily revenue of $11.19 with a profit of $4.72 after electrical costs or a 42.18% profit margin. You can support 30 miners running at full power with 30 circuits, so with 30 miners, your daily profit is $141.60 or $4,248 per month.
Now lets take a look at profitability after switching to “low power” mode, where the miner uses 2079 watts (9.45 amps) at the wall.
Bitcoin cash shows a total daily revenue of $8.35 with a profit of $4.36 after electrical costs or a 52.21% profit margin, a 10% increase. Note that this increase in the profit margin occurs with a .36 cent decrease in actual profit. Your daily profit is $130.80 or $3,924 per month.
Example 1 shows your 30 circuits of electrical infrastructure maxed out for this miner running at full power to make a profit. Take a closer look at example 2 however.
In example 2, you are only using 50% of capacity by running the miners in low power mode. You can add an additional 30 miners in low power mode to maximize the infrastructure investment. By maximizing the electrical infrastructure investment, you can increase daily profitability by 100% to $261.60 or $7,848 per month.
This simple example doesn’t take into account the profitability decline curve of the miners themselves. I just wanted to show how important electricity was to infrastructure and total profitability. Manipulating one small variable (switching from a high to low power consumption) can have a dramatic effect on profitability at scale.
Since this is a “How To” cryptocurrency mining tutorial: What do I need to get started with Cryptocurrency Mining?
Now that we have discussed “what” (what is cryptocurrency mining) and its component parts, lets move on to the “how” in this “how to” cryptocurrency mining tutorial.
Step 1: Research the coin(s) that you are interested in mining.
Are you interested in the largest and most heavily traded cryptocurrencies (Bitcoin and Ethereum are examples)? Are you interested in smaller alternative cryptocurrencies (Zcash and Electroneum are examples). I currently mine both larger and smaller market cap coins (including the 4 just mentioned). Coinmarketcap.com is a great place to start.
Step 2: Choose a Wallet.
This is where you keep your cryptocurrency safe. I keep my largest holdings in a hardware wallet, but I use phone wallets, web wallets and local wallets for convenience. I do not store any cryptocurrencies on an exchange as they are frequently targets of hackers.
Step 3: Choose a miner.
The type of miner depends on the currency you want to mine. For example, Electroneum requires ASICs to mine profitably. I use Bitmain ASIC miners and the model that mines the original Cryptonight algorithm is the Antminer X3. Bitmain does not currently sell the Antminer X3 any longer, but used ones are available on eBay and Amazon.
A great place to research ASIC miner profitability is ASIC Miner Value. Just enter your electrical costs per kWh at the bottom and you can see the miner’s daily profit.
Step 4: Choose a Pool.
Go to Pool Explorer and enter the coin name and it will return a list of pools for that specific coin. You can navigate to the specific pool and follow their instructions for setting up your specific miner. Below is an example using PoolExplorer.com to find Electroneum mining pools.
Step 5: Power up your miner and enter the pool instructions via the miner’s interface.
That is it – you are mining!
Bookmark your pool’s page with your miner’s wallet address and you can always go back to see how well your miner is hashing on the pool side. Bitmain miners (actually most ASIC miners) require you to access the miner interface via a web browser to change the configuration.
These 5 steps will change if you are building miners (either CPU, GPU or FPGA), and I will go into more detail in setting up these more complex types of installations in another article. I focused on ASIC mining because of the ease of getting started and the availability of inexpensive ASICs on the used market that are still profitable.
PROS AND CONS
No “how to” cryptocurrency mining primer would be complete without looking at the overall “pros” and “cons” of cryptocurrency mining.
Cryptocurrency mining is a relatively simple way to make money.
Basically you can purchase a mining computer (or configure your existing computer) and start mining.
It is a “low touch” source of residual income.
Once you set everything up, it is very easy to automate. Your mining farm runs 24/7 with very little involvement if set up correctly.
It is getting cheaper to get into mining.
The abundance of hardware and persons interested in getting into cryptocurrency mining have driven down the costs of specialized hardware.
Mining is a tangible way of getting involved with cryptocurrency.
Miners keep the cryptocurrency market alive and are the infrastructure on which the blockchain runs. Without miners, there would be not transaction confirmations, and the value of the currency would drop to zero overnight without buyers and sellers.
Cryptocurrency is Considered an Asset for US Tax Purposes.
You pay income tax on the profits of bitcoin mining at the regular income rate, but when you sell it, you only pay the capital gains rate on the profit difference between acquisition costs and the sale price.
As more miners get into mining a specific coin, the difficulty in mining that coin increases. This leads to a need for more powerful and energy-efficient equipment. (Something akin to a digital arms race).
Electricity costs can make and break your operation. Small increases in electrical rates and downward fluctuations in cryptocurrency prices can make your mining hardware obsolete.
There are a lot of moving parts from infrastructure, hardware and software, mining pools, coins to choose from, exchanges to trade on and wallets to store your currencies. You need to understand how they all work together to be successful.
Cryptocurrency prices are very volatile. These wild swings can make mining profitable one day and unprofitable the next. Also, the money accruing in your wallet can rapidly decrease in value before you can exchange it into dollars, making previous mining not profitable.
Fast Decline Curve
The profitability of mining hardware has a very fast decline curve, making mining hardware obsolete in short time spans.
You can lose money
Ultimately, like any business, you can lose money. Focusing on streamlined, profitable operations from the beginning will help you succeed. Do your math and make sure it makes sense. Start with electrical costs.
I am focused on “ease of operation” to reduce the amount of time I need to “touch” operations. When developing a business with a great amount of leverage, I seek to spend the least amount of time with the business once it’s in operations. There are a lot of different ways to approach cryptocurrency mining from choices of hardware, computer operating systems, mining software, coins to mine and so on.
In addition to ease of operation, I am also focused on:
Diversifying the coins I mine.
A central theme of the Levered Income blog is the diversification of residual income streams. This diversification reduces the amount of reliance on a single residual income stream and ultimately reduces risk.
I follow this same approach when looking at the different coins that I choose to have my miners mine. I look for coins with different algorithms and different use cases. I look for different and well-staffed developer teams. I also look at smaller, newer coins such as Electroneum and Zcash as they have the most ability to grow exponentially versus the more established coins like Bitcoin and Ethereum.
Purchasing Miners with maximum flexibility.
Miners that can only mine one algorithm (most ASIC) miners are by design not as flexible as miners that can mine any algorithm (CPU or GPU miners for example).
Once an ASIC miner’s algorithm is no longer profitable to mine, you now have an expensive paperweight. The miner costs more to operate that the revenue generated per day. With CPU or GPU miners, you can resell them as they can be used for other purposes (servers, general computing, etc) in addition to just mining. If you want to keep mining, you can always change to a different coin or algorithm that is profitable.
I do use a majority of ASIC miners, but I look for miners that have a lot of different coins available to mine for that specific algorithm. For example an SHA-256 ASIC miner can mine 17 different coins.
Purchasing Used Equipment.
The cost savings can be substantial versus buying new and shipping the miners from China (especially with the 25% tariff). Ebay and other auction websites are a great source to pick up used cryptocurrency miners.
There are quite a few calculators online such as coincalculators.io and asicminervalue.com that can help you calculate what miner profitability is, along with the profitability decline curve and electrical costs.
Purchasing obsolete equipment for pennies on the dollar and repurposing it versus sending it to the landfill.
Old corporate server hardware is a great source for CPU miners capable of mining new, smaller cryptocurrencies. You can buy powerful server hardware for pennies on the dollar compared to new and have access to multi-core and multi-thread processors.
16-core multiple processor obsolete servers are available on eBay, use less than 300w or power in some cases, and are easy to configure.
Reducing the amount of software that I need to learn.
Early on, when starting cryptocurrency mining, I used old Mac Pros with Mac OSX, Mac Pros with Linux, Windows 10, and ASIC operating systems.
Although I am relatively technically proficient, I found that downloading the mountains of software for different operating systems very time consuming. This effectively removed any leverage I was generating on the income from cryptocurrency mining.
I have since eliminated all operating systems from my mining operations except Windows 10 (which is a necessary evil for GPU and CPU mining) and Bitmain ASIC products. I have learned one central mining control system (Awesome Miner – discussed below) through which I can download several different types of mining software and also control and update all of my Bitmain ASICs.
Purchasing Miners that are very energy efficient.
Throughout the article, I constantly refer to energy costs. Any way you can reduce power costs will have a direct and positive impact on your profits.
Choosing a miner such as the Bitmain X3 which uses 465W of power versus the Bitmain S9i which uses 1310 watts results in almost 75% less energy used in mining. In times of falling crypto prices, your revenue shrinks while your electrical costs remain constant. The lower your costs, the more efficiently you can operate.
I use Awesome Miner to control my entire mining operation.
Instead of learning different mining programs, downloading them from the internet and worrying about viruses and compatibility, Awesome Miner handles all of that and more. I can install and switch between different mining software from my main interface and track hashing rates and profitability.
Awesome Miner will even tell me the most profitable coins to mine based on my electrical costs and computer hardware. I actually use Awesome Miner to switch to the most profitable coins automatically so I don’t need to spend time watching mining progress.
Awesome Miner is free to use on 2 miners, and if you do purchase a license it is a one-time cost and will never expire! Access to upgrades are also free! The software is aptly named indeed.
Another “go to” in my toolbox is TeamViewer and it is something that I use every day for all of my businesses, both online and offline.
TeamViewer is a remote access tool that allows you to remotely login and control Apple Mac computers, Windows machines and linux systems.
In mining operations, I use the tool to monitor and control my main Awesome Miner computer in the mining room from anywhere I am in the world. I can log into all of my repurposed servers CPU mining as well as all of my GPU miners. Combined with Awesome Miner, it makes maintenance and monitoring of multiple computers simple and saves me tons of time.
The Levered Income “Lever Rank” rates a tool or business model on how much it levers your time and effort into generating you income. Working at a job is ranked at a “1” (1 hour of work generates 1 hour of pay) and someone that just gives you free money (I wish I knew someone like this) is ranked at a “100”.
Crypto mining has a Lever Rank of 40, due primarily to the extreme fluctuations in cryptocurrency value and fast changes in mining difficulty.
Going through our short list of questions that we try to answer when evaluating a business:
Is there a market for this business?
There is definitely a market for cryptocurrencies. I see cryptocurrencies ultimately disrupting the way money is used now. Money is already making the slow journey to digital realm (think credit cards, online brokerages, currency trading).
How much risk is associated with this business?
I look at cryptocurrency mining risk from 2 different ways.
From an operational standpoint, you do not need employees so there is no chance of litigation from employee issues or a customer getting hurt in your place of business. More importantly, the customer cannot get hurt using your product since you are in effect using your cryptocurrency miners to “print money”. The IRS has published guidelines for tax reporting on cryptocurrencies so we have clear (relatively speaking, as the IRS is never clear) guidance on complying with tax laws.
From a stability standpoint, there are tremendous risks in cryptocurrency in general. Such a innovative and new way of conceptualizing money leads to speculation, wild swings in value and a lot of scams. Your operation can go from profitability to losses in a very short term.
How long in the future is the business expected to pay residual income to the business owner?
Mining is the backbone of the market. Without miners securing blocks on the blockchain, there are no transactions and no cryptocurrency. If managed correctly, this business can exist as long as cryptocurrency exists.
Is the amount of residual income fixed or does it grow over time?
The amount of residual income generated by cryptocurrency mining is not fixed, and can fluctuate with coin-mining difficulty, infrastructure costs, raw materials costs (electricity) and coin valuation. As cryptocurrencies are adopted more and more as a unit of commerce, there will be more demand for mining to validate and secure an ever increasing number of transactions.
How much investment is needed to start up the business?
This can vary tremendously based on how you want to scale the operations.
You can currently purchase a used miner on eBay that is still profitable for less than $300.00 and start making money right away.
Of course, you will need the right infrastructure to support a large amount of miners, and this can get expensive. Although mining doesn’t take a lot of physical space, upgrading the electricity and ventilation in the building can get be expensive.
How much money is needed to run the business?
This business does not require a large reserve, in that you can shut down miners when mining is unprofitable and then restart them when profitable again. You do need to put aside profit for future hardware replacements.
How much time and effort is needed to start up the business?
Learning how to get started took a while even though I am very familiar with computers and understood the process.
If I had known to just buy ASIC miners and Awesome Miner to control everything at the beginning, it would have been a lot easier and more profitable faster. I did want to spend the time to understand CPU and GPU mining, and I do enjoy building computers, so it was a good fit for me. I liked setting up the automation processes for operations (automatic profit switching and remote monitoring).
How much time and effort is needed to run the business?
I log into Awesome Miner remotely using TeamViewer once a day to make sure everything is running properly and it usually takes about 2 minutes. When I am in the same city as the farm, I typically spend a bit more time adding new miners, new mining pools and new coins to the mix.
Can this business lead to other symbiotic or support businesses in the future?
After understanding and starting this business, I now can start a business building mining computers for others, start a mining pool (something that I am very interested in doing), or even start a coin in the future.
Is learning this business model helpful to starting other businesses?
Yes, I believe learning about cryptocurrency mining has given me a better understanding of cryptocurrencies in general. I do believe that peer-to-peer transactions that bypass government and banking control are the future.
In this “how to” cryptocurrency mining guide we took a deep dive into answering “what is cryptocurrency mining?” and how to increase your residual income mining cryptocurrencies.
I enjoy technology and the leverage it gives you to make money. Technology can make your employees more effective, you more effective and can leverage a few minutes of work into something that generates income for a long period of time (affiliate marketing is an example).
This use of technology mining cryptocurrency is in effect “printing money”, something that I find fascinating. Money that is not subject to government control, borders, inflation, banking policy, reporting requirements, and is private and truly peer-to-peer. Transactions are cheap, global and instant, and are not subject to a centralized third party to make the transaction for you.
I am attracted to businesses that fill needs – you need a roof over your head (I am a huge fan of real estate and REITs), you need food, you need energy, and you need to be able to buy and sell them (that is where money comes into the equation).
People need money to buy and sell things, even when they don’t have a bank account or credit card. They need money even when their country’s cash becomes worthless (think Venezuela) to buy food and pay rent. Cryptocurrencies solve these problems. Cryptocurrency mining is a way to be part of that solution and to provide infrastructure for that solution looks like a great opportunity over the next 20-30 years.