How to mine cryptocurrency from home

• Crypto “mining” uses computational power to power and secure proof-of-work blockchain networks.

• Consensus mechanisms like proof-of-work allow network participants to “mine” block rewards paid in a blockchain’s native cryptocurrency.

• Key considerations when planning your mining operation include hardware and electricity costs, as well as the underlying asset’s network hash rate.

Mining is a process that proof-of-work (PoW) blockchains use to verify transaction data, secure the network and issue new units of cryptocurrency. 

Anyone can participate in this process and become a miner. 

Miners compete against each other to win a cryptography-based competition and earn the right to propose the next block of transactions on the blockchain.

To compensate successful miners for their efforts, PoW-based blockchain protocols automatically distribute a block reward containing an amount of newly-minted cryptocurrency.

Block rewards can sometimes represent a significant sum of money. This has made crypto mining an extremely competitive industry — especially on large blockchains like Bitcoin. 

If you want to learn more about the mining process, you can check out our article, What is bitcoin mining?

Despite the intense competition, there are still ways for everyday blockchain users to join in the mining process from home without needing to part with huge sums of money.

All around the world, thousands of individuals are helping to ensure the integrity of proof-of-work blockchain networks by participating in the mining process — and earning rewards for their contributions in return.

Cost

The top considerations for most at-home mining setups are the fixed and variable costs of crypto mining. 

Mining costs can significantly impact profit margins, so being as efficient as possible with these costs is critical.

There are three main costs associated with crypto mining:

• Initial equipment costs: To start mining, you’ll need to either rent or purchase your own mining equipment. Buying mining rigs from overseas will also likely involve shipping fees and import taxes that those considering mining should take into account.

• Maintenance costs: For people running their own machines, they’ll need to factor in general maintenance costs associated with running, repairing and updating their equipment.

• Electricity costs: Mining rigs consume electricity to generate hashes. Running mining rigs 24/7 can result in considerable energy bills. Using more efficient equipment or operating in areas with cheaper electricity can help to reduce bills and improve overall mining profitability.

While the cost of a mining rig is usually a one-time purchase, maintenance and electricity costs accumulate each day. For this reason, the most profitable miners are either highly efficient or deployed in areas with low electricity costs.

Another consideration is the blockchain network itself.

More widely adopted cryptocurrencies, those with a higher market cap, are generally harder and more expensive to mine. This is simply because the block rewards for cryptocurrencies like bitcoin are highly lucrative, which attracts more competition to win them.

At this point, bitcoin mining has become a global industry in its own right. Hobby miners must compete against multi-million dollar mining companies that control vast warehouses full of specialized mining equipment.

But while the odds may seem impossibly stacked against individuals, it’s important to remember that crypto mining is still a game of luck that anybody can win.

Hash rate

The best way to gauge the overall difficulty of mining a certain cryptocurrency is to look at its hash rate.

Hash rate represents the total sum of all computing power used to mine a particular cryptocurrency, at a certain time. The higher the hash rate, the more difficult it will be to compete to win block rewards, and vice versa. 

Hash rate is also a useful metric to assess the overall health of a blockchain network. As a general rule, blockchain networks with a higher hash rate are perceived as being more secure against attacks. This is because the greater the hash rate, the harder it is for someone to attempt to gain majority control over the network.

More prominent cryptocurrencies like Litecoin tend to have a much higher hash rate than smaller ones like Beam. That means it generally requires more computing power to successfully mine a block of transactions on Litecoin’s network.

There are several free online charts that anyone can use to track a cryptocurrency’s hash rate.

Equipment

As a general rule, higher-powered equipment theoretically improves a person’s chances of discovering new blocks. 

You can think of it like a lottery system where a person holding a million tickets is more likely to win than someone with just one ticket. That being said, the person with one ticket still stands a chance, albeit a very slim one.

For people interested in mining leading cryptocurrencies like bitcoin, they’ll likely need more efficient and powerful equipment to stand a chance of earning block rewards. However, less costly equipment may work for smaller networks with lower hash rates.

Mining Pools

When mining for larger cryptocurrencies like Bitcoin or Litecoin at home, mining pools can often be the most effective option. 

As the name suggests, mining pools allow individual miners to combine computing resources with others to form a single mining unit. By doing so, the collective empower of the pool often stands a better chance of earning block rewards than a single individual on their own. 

If one member of the pool successfully mines a block, all miners in the pool proportionally share the rewards based on their contribution to the pool. 

Difficulty adjustments

When a network’s hash rate declines, mining “difficulty” also tends to decline, making the next set of blocks easier to mine until the next difficulty adjustment period. 

For bitcoin, this is usually once every two weeks, or 2,016 blocks. For Dogecoin, difficulty is adjusted after every single new block is discovered.

Many networks automatically decrease their mining difficulty algorithmically when the hash rate decreases. This process is done to ensure that new blocks are discovered at a consistent rate.

Litecoin, for example, has a 2.5 minute set block time target. To make sure miners produce blocks at a consistent rate of 2.5 minutes, the difficulty constantly adjusts based on how quickly previous blocks were found.

More miners typically drive up the hash rate, which, in turn, increases the overall mining difficulty.

Legality

Besides energy and difficulty considerations, it’s also important to stay up-to-date with the legal status of crypto mining in your jurisdiction. 

Many countries have announced outright bans on crypto mining in recent years, including China, Iran, Venezuela and Kosovo. 

International crypto regulations are subject to constant change as the world grapples with this evolving technology. Don’t get caught out on the wrong side of the law — ensure you can even mine crypto in your region before starting.

Before you begin mining at home, you will first need to decide if you want to mine independently (known as solo mining) or as a part of a mining pool. 

Solo mining allows you to keep the block reward in its entirety (rather than sharing it among a pool of other fellow miners). However, earning a block reward independently can be extremely difficult, for many of the reasons stated above. 

Joining a mining pool, on the other hand, theoretically increases your chances of earning something from mining, albeit a proportional share minus pool charges and associated costs.

After you’ve chosen whether to mine independently or as a part of a pool, you’ll need the following three things:

• A crypto wallet

• Mining software

• Mining hardware

Crypto Wallet

Unlike mining hardware and some types of software, crypto wallets are free and widely available. Wallets serve as the destination for the block rewards that successful miners earn, though not all crypto wallets support the same cryptocurrencies.

Many mineable cryptocurrencies have specialized wallets, and their websites typically have more detailed information on which wallet to use. Here are a few examples:

• Bitcoin wallets

• Dogecoin wallets

• Ethereum Classic wallets

• Kaspa wallet

For a deeper understanding of the various types of crypto wallets that exist today, check out our article, Web3 wallets: A complete guide.

Mining hardware

Cryptocurrency mining typically requires high-performance Central Processing Units (CPUs) and Graphic Processing Units (GPUs). However, in recent times, larger networks like Bitcoin require much more powerful Application Specific Integrated Circuits (ASICs) that are custom-built to generate trillions of hashes per second. 

Crypto mining technology constantly evolves, so it’s best to check manufacturers’ websites for the latest equipment. Generally, the following manufacturers are the most popular for each type of hardware:

• CPUs: AMD and Intel

• GPUs: NVIDIA

• ASICs: Bitmain, Canaan, and MicroBT

Additionally, you may need to purchase separate power supply units (PSU) to run your equipment. 

Most leading manufacturers provide a range of PSUs to suit different machines. As a general rule of thumb, choosing a PSU with ~20% higher watt capacity than your mining rig is often recommended. I.e. If your mining rig runs at 500 watts, use a PSU that runs at 600 watts. 

If you plan on running multiple rigs simultaneously, it’s advisable to do thorough research on the associated electrical demands to prevent damaging machines, or causing other issues.

Beyond the more expensive ASIC miners, there are much cheaper mining hardware alternatives, such as BitAxe devices, the Nerdminer T3 and the Canaan Avalon Nano 3.

These solutions aren’t nearly as powerful, and the chances of successfully mining a block on a large network like Bitcoin with one of these options is incredibly low. This limitation has earned these mining rigs the nickname “lottery miners.”

Free online tools allow you to estimate just how long it would theoretically take for you to mine a bitcoin block using a lottery miner.

Nevertheless, these plug-in-and-play devices provide a fun gateway into crypto mining without the complex technical requirements and costs associated with running more sophisticated rigs.

Software

In some cases, you may need to install specialized software to compete in the proof-of-work competition with a mining rig and verify new blocks of transactions.

Various software programs are available for each mineable cryptocurrency, and bridge a miner’s equipment to the blockchain network. Most mining software is free to download and specifically programmed to mine a particular cryptocurrency.

Here are some examples of software for different cryptos:

• Bitcoin software

  • CG miner, Easyminer, Kryptex 

• Litecoin software

  • CG miner, Easyminer, Kryptex 

• Ethereum Classic software

  • Gminer

• Monero software

  • XMRig

• ZCash software

  • Claymore Miner

It’s worth noting that some mining devices come with software pre-installed. 

The aforementioned lottery miners, for example, are regarded as plug-in-and-play devices. These simply need to be connected to a WiFi connection and a cryptocurrency wallet address to begin mining.

Mining cryptocurrency profitably comes down to a wide range of variables. It’s often a good idea to check the projected profitability of a mining operation before parting with any money, to see if it’s viable to begin with.   

There are plenty of online resources to gauge a miner’s profitability based on the equipment. Nicehash, Whattomine, and Minerstat have detailed profitability calculators for many mineable cryptocurrencies.

Most of these tools provide approximate calculations based on your equipment specs, local electrical costs and the current blockchain hashrate. Calculated profitability figures should not be relied upon wholly, as the mining landscape frequently changes.

Crypto mining has received bad press in the past due to its perceived carbon emissions. 

However, there’s a growing body of evidence that Bitcoin mining may help promote renewable energy. Not to mention, there is a growing number of “clean” mining operations that use power from alternative sources, instead of burning fossil fuels.

The Bitcoin Mining Council (BMC) is an open consortium of crypto mining companies and other related businesses formed in May 2021 to promote renewable energy-powered Bitcoin mining.

According to their update from August 2023, the BMC represents 43.4% of the global Bitcoin mining network, of which 63.1% of their operations use sustainable energy sources.

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