Mining Hardware: An Explainer
Since the cryptocurreny’s inception back in 2009, it has presented a multifaceted investment opportunity to those willing to embrace it. Due to the relative volatility of crypto compared to fiat currency, the market is rife with opportunities to both gain and lose money, depending on how tactical and well-informed your decision-making is.
No matter whether you’re a day trader, a swing trader, an arbitrage trader or a scalper, there is always a way to take advantage of the market and exchange your tokens for a return. This is even true within the current crypto winter that we’re living within.
Although prices are considerably lower than they were a few months ago, the bear market gives every investor a bit of time to work through their strategies, consider their portfolio and try to make investments which will likely have a solid, long-term future. But this isn’t for everyone. In order to have a positive future within the crypto market, it is important to keep your head in the game and stay invested, which is not always feasible within a market which is constantly twisting and turning.
Is There Another Way To Earn Crypto?
Since the beginning, there has always been another way to earn more crypto. It exists within the makeup of blockchain technology itself; a process carried out day after day to ensure the blockchain remains secure and crypto is able to be traded.
This is a process called mining. Whether it’s for Bitcoin, Ethereum or any other coin, behind the scenes there have always been users who verify transactions, track asset ownership and ensure that the coin’s network remains safe and secure. These miners are then rewarded for their work with a portion of BTC or ETH, depending on which blockchain they are mining.
Anyone can do this. All that is needed is strong and capable computer hardware that is able to deal with the heavy, complicated calculations that need to be made.
But what exactly does crypto mining entail and what kind of hardware is needed to achieve it? Below is a detailed account of crypto mining hardware as well as a few examples for anyone who wants to dip their toes in the water and give it a shot.
What Is Crypto Mining?
To understand what crypto mining is and why it is needed, it is first important to acknowledge the concept behind cryptocurrency itself. Crypto is run through decentralised networks, which mean there is nobody in charge and no centralised organisation that the coins are being transferred through, unlike a traditional bank for fiat currency. Due to the fact there is no government or bank for regulation, it is up to the users to share and maintain these responsibilities, which includes monitoring and legitimising transactions in the blockchain in order to ensure their validity.
Crypto mining is a critical component of the blockchain’s ledger, allowing it to develop whilst also keeping it stable. It is the process which leads to new coins being entered into circulation, using sophisticated and professional hardware to solve complex calculations to secure and validate a block. Miners compete against each other, using their hardware to be the first one to solve the mathematical problem and subsequently be rewarded for their efforts.
As a coin-making strategy, it can be quite a painstaking and costly way to earn yourself more coins. There are many miners across the globe, meaning there is a whole load of competition to work against if you want to be on the receiving end of a reward. A lot of the time it comes down to whose computer hardware is the strongest and most capable, which means you have to be technologically efficient to have a place in the competition.
How Much Could Mining Earn You?
Working out exactly how much a miner earns can alternate between different coins so, in this instance, let’s look specifically at Bitcoin. Since crypto’s inception, the rewards for mining Bitcoin have been reduced by half every few years. To give you an idea, when Bitcoin was first being mined back in 2009, validating one block would earn you as much as 50 BTC. A few years later, this was halved to 25 BTC, then again to 12.5 BTC in 2016. In 2020, the reward came down to 6.25 BTC.
Although it may seem like a big drop in reward, the market price of BTC has tended to align with the reduction of new tokens entering into circulation, meaning the lowering inflation rate has led to more of a scarcity within the market. When coins are more scarce, the price has risen with them, which means the lowering reward schemes within mining have not taken much away from the competitors who calculate the solutions first.
For example, in March, 2022, if you were to trade bitcoin you would be earning as much as $39,000 per token. For miners, then, earning 6.25 BTC for working out the hash would lead to a $243,750 reward, which is rather a lot of money simply for solving an equation. This is why the very dedicated miners stick to the process and regularly update their hardware in order to stand a chance of winning. Although it can be lengthy and pain-staking, the rewards of mining can outweigh the amount of time and money you have put into becoming a miner in the first place.
How Easy Is It To Get Involved?
It’s relatively open to newcomers. That is not to say, however, that you should simply jump straight into mining in the expectation that you will soon be making hundreds of thousands of dollars. As mentioned previously, computer hardware is the most important thing to consider when it comes to actually winning the competition.
You can be the smartest mathematician in the world, but if you’re running your mining process on a rickety old Windows computer, then you’re not going to get very far. There are a number of nodes operating within the blockchain network, so in order to stand a chance, you need the best operating system you can possibly afford.
What Does Mining Hardware Do?
Mining hardware is essentially trying to work out a number. Every ten minutes, the blockchain asks miners “what number am I thinking of?” and each miner has to work it out. As the answer is a 64-digit hexadecimal number, this is an incredibly difficult task to achieve.
Miners have to make as many guesses (which are known in the mining community as “nonces”) as quickly as possible. Each nonce is 32 bits in size, and the first miner to generate a hash that is less than, or equal to, the target completes the block they are verifying and is rewarded with the tokens.
This is why the computing power needed to achieve the amount of nonces is so high. Without the best system, or at least a very efficient system, a miner will have little chance of being the first to work out the hash.
What Hardware Is Used For Mining?
Back in 2009, any user would be able to mine the blockchain with a regular personal computer, but this is no longer feasible. The Bitcoin network aims to produce a new block once every ten minutes, with every computer competing against the other to solve the hash. With so many alternate computers working on the same problem, the hash is going to be solved far faster than if only a few computers were working on it.
To alleviate this, the blockchain changes its difficulty every two weeks; the more nodes within the blockchain, the harder the mathematical problem is going to be. In order to be competitive within the blockchain today, miners would (at the very least) need to invest in a powerful graphics processing unit or (more suitably) an application-specific integrated circuit.
An ASIC machine, in particular, is the best-case scenario for any new miner, seeing as the blockchain is nearly entirely made up of these machines at the present. They have more hashing power and energy efficiency than either a CPU or a GPU, and they can allow users to produce just over 200 TH/s at around 27.5 joules per tera hash.
What Is The Best Mining Hardware On The Market?
For anyone looking to secure mining hardware, here is a brief overview of the five best in the market right now:
Antminer S19 Pro
The Antminer S19 Proo is an ASIC miner hardware which is probably the best when it comes to mining Bitcoin. It is high in efficiency, hash rate, and it has a power consumption of 29.7 joules per terahash. With a daily profit of $12 and an electricity cost of $0.1 per kilowatt, the Antminer will give an annual return of 195%, making it the best option for industrial mining.
AMD RX 580
If you are more inclined to trade ether rather than any other cryptocurrency, then the AMD RX 580 is one of the best options in the market right now. It is not only one of the more affordable machines you will find, but the card uses a lot less power than the competitors, meaning it is far more sustainable and efficient compared to usual NVIDIA cards. The hash rate power is 32.74 MH/s, with a power draw of 84 watts.
Avalon Miner A1166 Pro
With just 0.01 kilowatt power cost, the Avalon Miner A1166 Pro is one of the most profitable devices for Bitcoin or any SHA-256 miners. It is produced by a notoriously successful company who have manufactured a number of leading mining machines, so it’s certainly an efficient, affordable and safe option for anyone looking to give mining a go.
Having been released back in 2020, the WhatsMiner machine is mainly used to mine Bitcoin, Bitcoin Cash and BSV. It has a high-power consumption, so it is typically utilised by experienced miners, and with a power cost of $0.01 it can procure a daily profit of as much as $12. It is a lot more expensive than other mining hardwares on the market, however, with a current price tag of $3,999.
Bitmain Antminer S5
Having been on the market since 2014, the Bitmain Antminer S5 is a good option for any beginner who is open to a bit of experimentation. In terms of profit, it is not really effective unless the value of BTC is very high. This is more of a cheap option used for hardware, firmware and software experimentation; giving you a little bit of space to play around and find your feet before you jump into the mining field.
Is It A Good Time To Buy Mining Hardware?
Despite the fact we are heading into a crypto winter, now is as good a time as ever to get involved as a crypto miner. The blockchain continues to operate just as it ever did, and if predictions from crypto experts are correct, then tokens such as Bitcoin and Ethereum are still on track to be worth a large amount by 2030, meaning the tokens you earn as a reward are still just as valuable.
Having said this, there is an energy problem when it comes to mining. With so many computers working against each other to validate a hash, the power consumption is heavy. This is why networks such as Ethereum are moving to a POS (proof-of-stake) platform, which gets rid of the mining concept entirely. It is still unknown how successful this will be, and sister platforms such as Ethereum Original will continue to work on POW. Bitcoin and a number of other platforms will also still operate on POW, so it doesn’t look like the near future of mining is changing too drastically.
It is important to do a lot of research before jumping into mining, however. Apart from the five hardware machines previously mentioned, there are a lot of options on the market and you would need to find the one that is best for you both practically and financially. The blockchain is ready to be mined, so find your equipment and get to work!