Cryptocurrency Mining – Can You Make Money?

Cryptocurrency Mining – Profitable?


make money with cryptocurrencyI recently wrote an article about ways that you can make money with cryptocurrency.  That article covered investing, along with a few other clever ways to make money with cryptocurrency that didn’t necessarily involve buying it.

One method of making money with cryptocurrency that I specifically did not mention in that article is cryptocurrency mining, and people who are familiar with cryptocurrency mining might have noticed that omission.  Over the years, a lot of people have discovered that cryptocurrency mining is a way to earn Bitcoin and other altcoins without directly investing, and under the right circumstances, it can be both profitable and relatively “hands off.”

Under other circumstances (most, as it happens), cryptocurrency mining is likely not going to be profitable.  Is cryptocurrency mining worthwhile?  Can you make money with it?  What is cryptocurrency mining, exactly?

Cryptocurrency Mining Overview

All transactions involving cryptocurrency take place on a distributed database called a blockchain. By design, no one person or company controls this database; it’s shared among a number of computers called nodes.  When a transaction takes place, these nodes need to verify that the transaction is valid and they also need to verify that the transaction only took place once.  This eliminates the possibility of double spending and the possibility that someone might try to cancel a transaction.

cryptocurrency mining

No, not that kind of mining

The original design of Bitcoin created a system that rewarded the computers that participate in this validation system.  All of the nodes participating in validation also participate in adding to the blockchain, and a series of math problems determines which computer gets credit for creating the next block in the chain.  When that block is created, the computer that solved the problem that created the block is rewarded in Bitcoin.

Initially, that reward was 50 Bitcoin, but the reward halves every four years or so.  The current reward is 12.5 Bitcoin.  Still, with a single Bitcoin currently worth some $9000, a reward of 12.5 Bitcoin is a lot of money, and because of this, thousands of computers participate in this process, which is known as cryptocurrency mining.

Initially, one could “mine” Bitcoin this way by installing some software on any available computer.  There was a time, back in 2010 or so, when an individual could potentially earn 100 Bitcoin per day using a regular desktop PC as a Bitcoin node.

People quickly discovered that they were more likely to earn cryptocurrency mining rewards if they had hardware that was specifically designed to mine Bitcoin, and that led to the creation of what is known as an ASIC.  That stands for “Application-Specific Integrated Circuit.”

For the layman, that basically means cryptocurrency mining with a small computer that is designed to do one thing only, and in this case, it means that one thing is mining Bitcoin.  A number of companies were soon producing Bitcoin ASIC machines that were capable of performing far more calculations per second than any desktop computer ever could, and people who bought those machines, which sold for several thousand dollars each, were soon earning all of the cryptocurrency mining rewards.

This led to the creation of “cryptocurrency mining pools.”  A mining pool is a group of people who have decided to use their computers to collectively mine a particular coin.  Should any computer in the pool earn a reward, the reward is shared among all of the members of the cryptocurrency mining pool in accordance with the amount of work they have contributed.

With more computers mining Bitcoin every day, you increase your chances of earning anything at all by participating in a cryptocurrency mining pool.

Cryptocurrency Mining Hardware

asic cryptocurrency miner

ASIC Cryptocurrency Miner

Over time, it became apparent to many people in the cryptocurrency community that not only were the ASIC machines dominating Bitcoin mining and reaping most of the rewards, but it also became apparent that the companies that make those machines were earning most of the money in addition to profiting from the sale of the ASIC miners.

The Bitcoin mining software was written in such a way that it rewarded raw computing power.  Creators of newer cryptocurrencies have tried to avoid this situation by using algorithms that didn’t rely so much on processing power as they do on system memory.  This made it difficult to create an ASIC to mine such coins as Ethereum or Monero.

Instead, individuals were once again able to participate in the cryptocurrency mining process using their own computers.  Interestingly enough, the cryptocurrency mining software for these coins doesn’t rely on the computer’s central processing unit (CPU) as much as it does on the graphics processing unit (GPU).  That’s right – it’s the computer graphics card that’s doing all the work.

Of course, if a computer doing cryptocurrency mining with one GPU can earn a little bit of Ethereum, then one with two GPUs should be able to earn more, right?  That’s true, and there are now people mining altcoins with computers that have anywhere from 2-16 graphics cards in them!

This has rendered the market for high end graphics cards rather volatile, with high performance cards selling for twice their suggested list price on the free market as people building cryptocurrency mining rigs have shown that they’re willing to pay far more money for a cutting-edge graphics card than are the gamers for whom the cards were initially designed.

GPU Cryptocurrency Mining Rig

GPU Cryptocurrency Mining Rig

What this means is that if you want to earn money with cryptocurrency mining, you either need to buy one or more ASICs to mine Bitcoin and similar coins, or you’ll need to build a high-powered computer with one or more expensive ($500-$1000 each) graphics cards.

There are advantages and disadvantages to each, but ASICs do have one serious drawback – they’re only good for one thing.  Over time, the amount of computing power required to mine any given cryptocoin increases, which means that over time, an ASIC eventually becomes useless as newer and faster models come to market.  When that happens, you simply throw it away as it cannot be used for anything else.

If you’ve built a cryptocurrency mining computer with multiple GPUs and you find that they’re not performing well anymore, you can disassemble the computer and sell the cards on eBay, as they will still have value to gamers.

Regardless of the method you choose – GPU mining or ASIC cryptocurrency mining, you’re going to be spending several thousand of dollars on your mining rig.

If you want an ASIC miner, it’s easy to get started.  The largest manufacturer of ASIC cryptocurrency mining equipment is a company called Bitmain, and they can sell one to you for a few hundred to a couple of thousand dollars.  They’re easy to install and are largely plug and play.  You just need electricity and an Internet connection.

If you’re interested in going the GPU route, you’ll either have to build your own (there are instructions available on the Web) or you can buy a pre-built GPU mining rig from sites such as eBay.

cryptocurrency mining frameBuilding a cryptocurrency mining rig is quite a bit more trouble than simply buying an ASIC and plugging it in.  If you’re going to be doing cryptocurrency mining with a computer that has one or two GPUs in it, it’s fairly easy – just buy a computer (or build one) that has at least two slots for a video card.  Put the cards in, install Windows, install your mining software (downloadable from many sources.)

The software tends to be a bit buggy and is not well documented, so you’ll likely have to find a forum where other miners can help you configure it.

If you’re going to build a GPU cryptocurrency mining rig with more than two graphics cards, things get a bit complicated rather quickly.  While there are motherboards that support a dozen or more graphics cards, you will find that there isn’t a computer case that supports that many cards.  For that, you’ll have to build a computer around a custom cryptocurrency mining rig frame. This will have an “open air” design that allows the cards to get adequate cooling.

You’ll find that this also requires GPU extension cables, as there’s no way to cram all the cards together in the small space provided by the card slots or ports.

You’ll find that you end up with a large, not-all-that-attractive jumbo computer.  You may have to do a bit of tweaking in Windows in order to get more than 3-4 cards to work together and you’ll likely have to do some tweaking with the cryptocurrency mining software, as well.

Still, there are thousands of people who are making money with cryptocurrency mining this way, though the business is not as profitable as it used to be.

Cryptocurrency Mining Power Consumption

When you’re engaging in cryptocurrency mining, you’re going to be running one or more machines 24 hours a day and that requires power.  An ASIC is a relatively low powered machine compared to a computer with 8 graphics cards, but either type of cryptocurrency mining equipment is likely to cost you a few dollars per day in electricity costs, and that adds up over a month’s time.

Depending on where you live, a single cryptocurrency mining rig could use between $100-$200 of electricity per month.

How Much Can You Earn?


Graphics card, or a GPU

There’s no simple answer to how much you can earn in cryptocurrency mining.  Potential cryptocurrency mining earnings are determined by taking into account the cost of your mining equipment, the cost of your electricity, and what coin you are mining.  Bitcoin mining is now almost exclusively dominated by large companies, and individuals are going to have better luck mining altcoins.

Sometimes, you’ll find that on one day, a particular coin might be worth mining, but a dramatic drop in that coin’s value could make it unprofitable the next day.  If you’re using GPU cryptocurrency mining equipment, you can easily change the kind of coin that you’re mining so that you’re always mining the one that’s the most profitable.

There are cryptocurrency mining pools and mining software that will allow you to easily switch from one coin to another as profitability changes.  A site called What to Mine has a calculator that lets you see at any given time what coin is the most potentially profitable one for you, though the calculator isn’t well documented and can take a while to figure out.

Most rigs mining altcoins will be able to earn between $2-$20 per day before taking electricity costs into consideration.  To earn $20 per day, you’ll likely need a computer with 6-8 graphics cards that cost $1000 each, meaning that it could take more than a year to earn back your initial investment.

That assumes, of course, that the amount of computing power required to mine any given coin doesn’t dramatically increase during that time.  If it does, you’ll have to replace your graphics cards with newer (and more expensive) ones, though you can sell your old cards on eBay and recoup some of your money.

On the other hand, if you’re able to depreciate the cost of your hardware over time on your taxes and you live in a place where you can buy inexpensive electricity, you might be able to show a net profit through cryptocurrency mining.

Most people will likely decide that cryptocurrency mining is not worth their while.

Cryptocurrency Mining Summary

While people do earn money with cryptocurrency mining, it’s not nearly as easy or as profitable as it used to be.  There’s a lot of competition for mining rewards, and the mining hardware is expensive.  If you’re building a mining rig for GPU mining, you’ll have to be computer-savvy and know how to build a PC with multiple graphics cards.  You’ll also have to accept the fact that you will have very high electrical bills.

Most people will only be able to earn $5-$10 per day and will likely decide that it’s not worthwhile to spend $3000-$8000 for mining equipment in order to earn such a small sum.  On the other hand, you do get paid directly in cryptocurrency and many miners are accepting low profits or even losses in the short term in hopes that the cryptocurrency that they are mining will increase in value over time.

In that case, choosing the right coin to mine could pay off in the long run.  For most people, however, investing in cryptocurrency directly is likely a better option than cryptocurrency mining.

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