It’s 2018 and the world is suddenly abuzz with the idea of cryptocurrency, or as a layman would like to call it - Bitcoins. Bitcoin has quickly become a thing of the cult. With values going up as high as $19,200 for a single Bitcoin, the constantly fluctuating value of the cryptocurrency has also bewildered the best of us. But it has not stopped miners from mining for more coins.
In 2017, you may have read hundreds of stories around the efficacy of Bitcoins and how few miners rose in the crypto-mining scene to become millionaires. Though most stories are a hoax and are baits for unsuspecting victims, Bitcoin is undoubtedly a legitimate currency and you can earn them and exchange them for real currency.
Here’s a detailed guide to help you learn crypto-mining and keep you away from the Ponzi schemes that are masquerading the internet.
What is a Bitcoin?
Bitcoin is a type of digital currency independent of central banks or governing bodies. There are complex mathematical algorithms online which rewards a ‘miner’ with Bitcoins in exchange for solving those algorithms using a computer.
Do Bitcoins Have Real Value?
Yes! Even though they are not tangible, Bitcoins have high-value in markets. There is a limited supply of Bitcoins available to be mined. In fact, there will only ever be 21 million Bitcoins. The creator of Bitcoin modeled the cryptocurrency after gold mining. Gold has been a store of value since first introduced by the Egyptians as money.
What machines would I need to mine Bitcoins?
A personal computer is definitely out of the question. Let’s say if you might have used your flagship PC to mine a Bitcoin in 2009, you could have easily mined nearly 2000 coins in a couple of weeks. Since more miners have joined the mining-rush, you would now require sophisticated systems like Antminer S9 or cloud mining services like Genesis Mining to do the digging.
If anyone has used a PC in 2014 to mine Bitcoins, they would manage to mine 1 Bitcoin by 2112. That’s some crowd right there!
What are the Bitcoin jargons I should know?
Since Bitcoins are a fairly millennial concept, the technical terms revolving around the idea is slightly wacky.
Hash Rate - Any mathematical algorithm a miner’s computing system needs to solve to translate it into cryptocurrency. The more the number of miners the higher the hash rate.
The Four units to measure a miner’s performance.
- MH/s = Mega Hash per second
- GH/s = Giga Hash per second
- TH/s = Terra Hash per second
- PH/s = Peta Hash per second
Bitcoins per block - A consistent number of Bitcoins are created when an algorithm is cracked. Around 50 Bitcoins are generated and is halved at every 210,000 blocks or in 4 years. The current block count (at the time of this article) was 520,000. The next split will be in 2020 ideally.
Bitcoin Difficulty - Every 10 minutes a consistent amount of Bitcoin is generated in the system. Since there are more miners now than ever, the difficulty has increased in relation to Hash Rate. Which means, the larger number of miners the more difficult it becomes to extract the cryptocurrency.
Electricity Rate - The electricity consumed to generate Bitcoins reduce your profitability. Since Bitcoins need a lot of electricity for mining purposes, it is only ideal that you use an inexpensive mining farm, cheap colocation or “miner friendly” data centers.
Power Consumption - Every miner has different mining capacity and this means different power consumption rate. For example, a Bitmain Antminer S9 consumes 1,323 Watts of power. This is more than most home electrical outlets can handle. Make sure you also take this factor into consideration before purchasing these machines.
Mining Pool - A pool is a group of miners who extract Bitcoin in together and share in the profits when a team member successfully mines a Bitcoin. Benefits of mining pools include consistent payouts, ease of configuration and performance stats.
Pool Fees - A Pool Fee is the amount a miner pays to the mining pool for the services and its operations. The profits are split fairly using the cash rate as the reference for each miner’s work. If you have a higher hash rate, you take the higher share of profits. Pool Fees are generally very low.
Time Frame - The amount of predefined time you spend to mine for currencies. The more your predefined time frame, the more Bitcoins you get.
Profitability Decline Per Year - This is an elusive term and misleading if not understood properly. Since the profitability of Bitcoins is not pre-set, no one can ever judge how they are going to be valued at any time in the future. You can calculate the Bitcoin values using Bitcoin Profitability Calculators. One of the major reasons why no one can assure you how profitable this cryptocurrency business is going to be.
Conversion Rate - A conversion rate is a rate at which the Bitcoin can be exchanged for actual currency acknowledges by the banks. If you wish to convert Bitcoins into money, then this should concern you. Although, the rates are always fluctuating.
Using Cloud Mining and Data Centers to Mine Bitcoins
Cloud Mining or Data Centers are third-party services which allow you to host your crypto-mining operations on their cloud or data center rigs. This means you will have a significantly discounted rates as your consumption rate will decrease dramatically.
This is because most elaborate data centers and cloud mining solutions have other mining pools on their systems. Collectively, everyone pays lesser for hosting a crypto-mining pool.
Data centers can be thought of as purpose-built buildings that have abundant power, cooling, Internet, security and redundant systems. Many data centers can survive manmade and natural disasters such as hurricanes, earthquakes, flooding and tornadoes.
Advanced Strategic Computing Initiative (ASCI) machines are designed to provide the maximum amount of computing power for Bitcoin and cryptocurrency mining. As mentioned, they are not made for residential or home use. They are very loud and exhaust large amounts of heat which must be dealt with. This is why many cryptocurrency miners look to data centers and mining farms for their mining machines.
Electricity costs are the single largest cost for both data centers and cryptocurreny mining operations. Prices can range from $85 per kW to $220 per kW depending on the location and price per kWh charged by the utility company. Therefore, many data centers utilize renewable energy sources to lower costs. This includes hydropower, solar and wind.
Beyond that, data centers have sophisticated cooling solutions which keep the systems running 24x7 ensuring increased productivity.
We almost forgot to mention security. Physical security and security monitoring such as CCTV is an important aspect for miners. Each mining machine can cost $1,900. Many mining operations can have 50, 100 or even thousands of machines. Data centers offer the peace of mind knowing that your hardware is safe from being stolen.
Cloud Mining is a remote crypto-mining solution where one can rent computational power from cloud mining services and remote data centers. Cloud mining helps you cut-down on the costs which would arise from buying your own mining hardware or renting them at data centers.
For cloud mining, all you need to have is an e-wallet and an active internet connection. This is one of the best ways to mine cryptocurrency for individual miners. Even small-scale to medium-scale corporations prefer this method.
How to start mining Bitcoins?
Cryptocurrency mining can be a tremendously daunting process. There are a ton of logistics and you need experience to avoid being taken advantage of. But what it needs most is a trustworthy source which can help advise you on the type of hardware, what to mine, and where to mine.
We, at Datacenters.com, have the two-fold advantage of being able to advise our clients on mining and where to place their miners. Our dedicated IT team comprises of experts who can help you set your crypto-mining ventures.
Feel free to get in touch with us. We can help set-up your first mining operation. Even if you have previous experiences mining cryptocurrency, we can help you find cheap power and miner friendly data centers near you.