Things haven’t been kind to the blockchain or the crypto space as of late, with several platforms having gone bankrupt or shut down for one reason or another. The price of the grandaddy digital asset of them all, Bitcoin (BTC), while having rallied a few percentage points from its recent low of about U.S.$17,000 per coin, is still struggling as of this writing to break out of its current U.S.$22,500 price point.
On top of this, the largest sell-off by BTC miners occurred earlier this month which, in itself, might have contributed largely to the sudden drop in price. Or was it Elon Musk’s decision to sell off U.S.$9 billion worth of BTC in order to produce more liquidity on Tesla’s balance sheet?
Whatever the case, these are the kind of hits that keep on hitting when you’re solidly entrenched in a bear market. But that doesn’t mean you still shouldn’t be buying the digital asset. It also doesn’t mean you shouldn’t consider starting up a BTC mining operation of your own.
It’s not all that complicated if you have access to clean and relatively cheap power. You don’t need a trademark registration or even the establishment of an LLC to do it either. All you need is the cash to buy some mining rigs, and you’re in business.
However, there’s some crucial information you need to be aware of before you plug in your first miner. According to a new business report, no matter the electrical source available to you, the crypto mining industry is shifting towards more “renewable energy sources.” But keep in mind that mining is the critical component to the existence of BTC as a decentralized digital property, which means it’s not going away anytime soon.
Defining Bitcoin Mining
Say the crypto experts, BTC mining is the process where a network of computers run the original BTC code over and over again. This occurs to make certain transactions are not only legal but that they are added correctly to crypto’s blockchain. The mining process is also how new Bitcoin is created and circulated.
According to the chief operating officer of an online crypto education site, bitcoin mining is essential for the digital asset’s overall security. A global network of high-powered computers is in a competition to see who can be the first to validate a series of operations and transactions, which are referred to as a block. The winner will add the new block to the existing blockchain.
Here’s how miners make money: they are paid a transaction fee along with 6.25 Bitcoin per block. That is, they are able to create the block correctly. As of this moment, that equates to about U.S. $147,000.
How Bitcoin Mining Works
Confirming BTC transactions and then having them recorded on the blockchain means solving a series of complicated algorithms. This is what’s considered BTC’s “proof of work consensus mechanism.” Proof of work means adding a new block to the blockchain about every 10 minutes or so. The more powerful your miners, the more you’re going to win new blocks.
The newest generation of BTC miners incorporates application-specific integrated (ASICs), which are precisely programmed for BTC mining to handle the vast computing power required. The new miners are able to generate all the probable answers to the BTC block equations at a rate of 100 trillion hashes every second.
What’s a Bitcoin Hash? It’s the measurement of computing power miners use on the blockchain network in order to process their transactions. This takes an enormous amount of energy.
Mining Bitcoin in Your Home
It’s most definitely possible to mine BTC inside your home. However, you will be operating at a distinct disadvantage when compared to institutional miners who have access to low-cost energy and who can save cash by purchasing BTC miners in bulk.
Even though some people insist on running BTC mining operations inside their homes, the process, as of late, is said to have become expensive. It is also regulated by the government, and this has marginalized some of the small mining operations.
But this doesn’t mean mining in your home is a pipe dream. It will, however, take some upfront money. You will need an ASIC BTC mining rig to start with, and this will cost you somewhere around U.S.$10K.
What you will also have to watch out for is the price of residential electricity. It can be so expensive to mine at home that it might not be profitable. You also have to make certain your mining rigs don’t overheat.
In order to figure out if BTC mining at your home will be profitable, you can consult with one of several Bitcoin mining calculators you can find online. If mining on a small scale at home doesn’t make financial sense, then consider starting a larger operation with some partners who are willing to put skin in the game in the form of cash investments.