Bitcoin laid the foundation of all the cryptocurrencies that are available today as it introduced the blockchain technology for transaction verification. This action of verification of transactions was done by a computer owned and operated by someone else, called a node in the network of computers. This enabled Bitcoin to produce more Bitcoins out of thin air to pay as a reward for the verification operation and this whole process is called mining. Back in 2010, all you needed was a decent computer and a stable internet connection and you could mine a few Bitcoins with ease.
So one can say that back then Bitcoin mining was a profitable endeavor, but that is not the case right now. Crypto mining has become an industry of its own and a certain sense of competition is now seen everywhere. This is because of the relatively low supply now and a ton of miners, making the mining operation less and less profitable. Another reason for this is that the block reward has been going down since 2009, initially it was 50 Bitcoin per block. Then in 2012, it got down to 25, later in 2016 to 12.5 and now it is down to 6.25 since May 2020.
This is known as having the reward, initially the reward was kept quite high because it would encourage people to invest more. This meant that the cryptocurrency could grow quickly and later on people still would mine cryptocurrencies, even if the reward went to zero, they would earn from transaction fees.
6 Types of Crypto Mining
So let us dive deeper into the types of mining options for cryptocurrencies available:
CPU mining has been with us since the very beginning of cryptocurrency, the first-ever Bitcoin was probably mined using CPU mining. This is an easy way of mining cryptocurrency and back in the old days there were fewer miners and mining difficulty was quite low which made using your computer’s CPU worthwhile. Now it is one of the most inefficient ways of mining as the profit gained is way less than the cost of hardware and electricity.
CPU mining was soon replaced by GPU mining. Since graphics processing units are capable of performing nearly 800 times more instructions than a normal CPU makes them an ideal candidate. Since mining does not require any intelligent decisions to be made at the miner’s end, the repetitive task is ideal for crypto mining. GPUs are not suitable for mining Bitcoins.
Traditionally CPUs or GPUs were repurposed for mining cryptocurrencies which made them a little inefficient. FPGA stands for Field Programmable Gate Arrays, these arrays can be programmed to execute specific sets of commands making them an ideal candidate for crypto mining. When put to the task FPGAs outperformed both CPU and GPU mining by miles.
ASIC mining has been a part of a lot of controversies lately as ASIC mining rigs were designed with keeping only one task in mind, mining cryptocurrency. ASIC stands for Applications Specific Integrated Circuits, these are chips that are programmed to do a specific task. ASIC mining was introduced in 2013 and is considered one of the best still today for mining Bitcoin and other cryptocurrencies. ASIC makes it near impossible for GPU miners to mine.
Since the tasks associated with mining are getting difficult with each passing day, miners started to make pools for miners. Every member in the pool contributes its computing power to the task at hand and if the pool wins the block. The reward is shared among every member based on the work they have put in. Mining pools are a great way for people to earn some cryptocurrency even if they have minimal computing power.
Cloud mining is the latest edition in ways of how people mine. How this works is that you buy and set your mining rig in a distant data center where it operates 24/7. Companies provide mining services by the hour, hash rate, or even by month. This is suitable for those who are unable to afford mining rigs at the moment.
5 ways to Keep Crypto Mining Operations Profitable
With that being said here are 5 tips which you could implement by yourself to improve your mining operations and keep it profitable.
Good Hosting Service
Choosing a good hosting service provider in terms of hosting can make or break a deal for crypto miners. If you are currently using a hosting service that is not giving you satisfying results then it might be time to think about changing your service provider. You can start by looking for a high powered and strategically located data center offering competitive rates for their services. This would be beneficial as it would increase your current hashing power and maximize profits.
Optimize Existing Miners
Mining cryptocurrency for a long time could exhaust your rig and once the halving has occurred it is time for you to optimize your rig. A better-optimized rig would ensure profits even after the reward has halved. Use a suitable optimization tool according to your miner and improve your hash rates, this would ensure profitability by keeping the device in service for longer.
Replace Your Miners
If you have tried optimizing your mining device but still achieved nothing then it might be time to throw in the towel on your mining rig. Device upgrades always prove profitable as they increase your computational capability. For quite some time the Antminer S9 was considered the gold standard but that is not the case anymore. The newer S17+ provided 73 TH/s as compared to S9’s 14 TH/s. So, if you think your device is quite outdated, it might be time to consider getting a new miner for yourself.
Access to Cheap Electricity
Replacing your mining rig is not the most suitable option for everyone and sometimes optimization does not do much either. If that is the case with you then you should start looking at alternatives, one good alternative is getting access to cheaper electricity. If electricity is not cheap in your country then you could opt-out for alternatives like solar or power. If it is possible then one could place their mining farm in a country where electricity is cheap, like Russia where it costs half than that in the US.
Reliable Mining Pool
If you are new to the crypto mining industry or have been a part of it then you might have heard of mining pools. It is advised that every miner should be a part of a pool regardless of the number of mining devices that you have. The chances of finding a regular block without a pool are quite low making the possibility of earning reward quite slim. The oldest two pools Slush Pool and F2Pool, it is estimated that F2Pool has around 20% of the entire Bitcoin block.
Normal people who are planning to mine on their home computer will have it quite difficult as the cost associated with getting started is very high. The incorporation of small miners into the network would increase decentralization and would align with Satoshi’s visions. This might be possible soon with cheap hardware and low-cost power.