You’re probably reading this article on Bitcoin Magazine, so I assume you already know what Bitcoin mining is. But if you need a refresher, have a read through here.
WHY SHOULD I MINE BITCOIN?
As for the “why” of Bitcoin mining, there are plenty of reasons.
The most obvious reason is that you’ll earn bitcoin. For the privacy enthusiasts, it is worth mentioning that this bitcoin is KYC-free.
But you’re already able to get bitcoin, whether that be by clicking the Fold wheel or using your BlockFi credit card, or buying some on your favorite exchange. The difference with mining is, if you’re doing it right, you’re getting these satoshis below market price. Maybe that’s the most obvious reason to mine Bitcoin. It can be very profitable.
If you were moved by Jack Maller saying that he would die on this hill, you might be looking for a way to do your part. Plebs, like you and me, can get involved by mining Bitcoin.
If you’ve been around long enough, you’re familiar with the old “51% attack.” The quick summary is: If someone could spin up enough machines to have more than half of the total hash rate, they could theoretically damage our beloved blockchain. The attacker could double spend, or censor transactions, or generally DOS the network.
When you fire up an honest mining rig, you’ll be making a 51% attack that much harder. For every terahash you contribute, the attacker will need an additional 0.5 terahashes (TH) or more, so the more machines we can bring online, the more resistant the Bitcoin network will be to this type of attack.
Another reason, the reason I became interested in mining, is to help decentralize the network. As recently as early 2021, one of the biggest concerns around Bitcoin was the fact that a significant amount (if not a majority) of the worldwide mining power (aka, hash rate) was concentrated in China. Since I care about the Bitcoin network, and I do not live in China, I thought that I could help, in my own modest way, by adding some non-China-based hash rate to the network. If the hash rate were more evenly spread around the globe, a single nation would find it impossible to shut down enough of the network to destroy it.
HOW DO I MINE BITCOIN?
Some of the most common questions I see about mining are around which CPU or GPU is best for mining Bitcoin. The fact is that you can only effectively mine Bitcoin with a purpose-built mining computer (aka, a mining rig). These rigs have hundreds of application-specific integrated circuits (ASICs) in them which were designed for hashing transaction blocks in as little time as possible. They’re orders of magnitude faster than CPU/GPU solutions.
You’re going to need an ASIC rig.
The first decision you’re going to have to make is whether to set up and run the machine yourself, or to just throw money at the problem and have a company run your rig for you. I don’t have any experience when it comes to hosted mining, so I’m going to focus on how you can run an ASIC all on your own.
Your second decision is going to be the most painful. You’re going to have to decide how much to spend on a rig. The speed of these machines is measured in terahashes per second (TH/s) so, the more TH/s you run, the more Bitcoin you earn. The resellers have figured this out too, so the more TH/s you buy, the higher the price.
Many resellers will have new and used equipment for sale. The used machines are going to look tempting because their price is generally far lower than the new rigs, even on a dollar per TH basis. If you do go the used route, be aware that you may not get a fully-functioning rig.
I am speaking from experience. I purchased 11 used machines and nearly half of them had problems which required that I swap around parts until I was able to bring eight online. The reseller may be able to replace/repair the device if it’s a larger organization, but if you’re buying off of another pleb on eBay, you might be buying someone else’s headache. This is a caveat emptor situation.
As you shop around for machines, you’ll probably also come across the idea of buying from some future month’s batch. These future batches are generally cheaper than in-stock inventory, and feel like a bargain, but there is a hidden cost and risk. The cost is that in the future, the worldwide hash rate will (probaby) be higher, so those machines will earn less per TH than they do today. The risk is that the manufacturer may not be able to fulfill that batch.
I am speaking from experience again. I placed orders with two different vendors for the April 2021 batch. One vendor delivered the machines in July 2021, and the other vendor has promised to deliver them in January 2022. I have my fingers crossed on that second order, but I’m not holding my breath.
And let’s not forget about scams. Hopefully you’ve heard the adage that if something sounds too good to be true, then it probably is. This applies to buying ASICs. If every other vendor is asking $10,000 for that one rig, but you find a website offering the same machine for $5,000, it is a scam.
I’ve bought machines through eBay and from online stores, but I want to walk you through buying from Alibaba.com, the Amazon of China.
WHAT BITCOIN MINER SHOULD I BUY?
There are several well-known manufacturers of mining rigs. The two I am most familiar with are Bitmain, which makes the Antiminer series, and WhatsMiner, which makes the M3x series. (There are others, such as Canaan, which makes the Avalon series, but I have no experience with them.)
The machines I can recommend for most everyone are from personal experience, ranked from most to least expensive, are:
S19 Pro 110T (Antminer)
S19 95T (Antiminer)
M31s+ 84T (WhatsMiner)
The prices for these are pretty high, so in full disclosure, I’m planning on buying the Canaan Avalon 1246 for my next batch. They look like the most cost-effective ($/TH) units available as of the time of this publishing.
If these newer machines are beyond your budget, you could consider a used machine. I can recommend the Antminer S17 series, and there is the Antminer S9, which is a popular, low-cost way to dip your toe into the mining pool. Double check the warranty situation. Some Alibaba vendors will create a proof-of-life style video for the rig you’re buying, so you can be sure it was working before they shipped it to you.
I’ve found that the price for all of these miners is pretty well thought out. These vendors know how much bitcoin the machines will earn, and they know the price of bitcoin. Armed with this information, it looks like the prices are set at around nine to twelve months’ worth of bitcoin at today’s spot price. Practically speaking, if you’re paying in fiat, the prices will go up and down with the price of bitcoin, but if you’re paying in bitcoin, the price should be relatively stable.
BUYING BITCOIN MINERS FROM ALIBABA
I’ve purchased a few times from a few different vendors on Alibaba. Here are my tips for purchasing Bitcoin miners from Alibaba:
1. Only buy from a vendor who is willing to do the deal through Trade Assurance. This means that you use the Alibaba website to send money. This will add 3% or 4% to the transaction, but it is worth paying to establish trust with the vendor you’ve chosen. You might choose to buy without using Trade Assurance when you buy from that vendor again, as I have done, but I don’t recommend that route for your first order.
2. Shipping will be extra, and if you live in a country that taxes these kinds of imports (such as the U.S.), there may be significant taxes. You can avoid these import taxes by asking for a DDP price — DDP stands for “delivery and duties paid.” The company will ship it from itself (probably in China) to an agent of its in your country, and when the machine clears customs, including paying any duties, the domestic agent will FedEx or UPS the machine(s) to your address.
3. Expect the shipment to take three or four weeks or more. This is where Alibaba isn’t like Amazon Prime. Picture your ASICs in a shipping container on a boat crossing the ocean on its way to you. They will get there, eventually.
DDP and Trade Assurance are the two big secrets to dealing with Alibaba.
THE PHYSICAL REALITIES OF AN ASIC
You’re going to need to plan out where the ASIC is going to do its work. These things are hot and loud. Imagine a few hairdryers, blowing on high, 24/7/365. You can’t run these machines in your bedroom.
To deal with the heat, you’re going to want a space that can vent hot air to the outside or can take in fresh air from the outside. There are 3D-printed fan shrouds you can buy (on eBay) which will direct exhaust or intake air. This can solve the heat issue. I ran my first ASIC in my garage, using the fan shrouds and a long duct, to pipe the hot air into my house. This heated my house for the whole winter.
To deal with the sound, you’re either going to need a dedicated room, or a detached structure like a prefabricated shed in your backyard. Another clever solution, which I haven’t tested, is using a combination of fan shrouds, exhaust ducts and an ice chest. YouTube has a few videos on this technique. It looks like it will work, but I haven’t tried it.
If you scale up enough to need more equipment-density than Igloo coolers will permit, you might start to think about air conditioning. Let me save you some trouble and money. One kilowatt (kW) can generate around 3400 British thermal units (BTU). These machines are using around 3.2 kW, which makes more than 10,000 BTU. You would need one of those R2-D2-like portable AC units for each ASIC to fight off all of the heat they’re generating. Unless you’re going to go industrial scale, I recommend you skip air conditioning, and buy some high-speed fans. Get familiar with calculating volume and figure out how that relates to a fan’s cubic feet per minute (CFM) number — this is why you paid attention in middle school math.
These machines are as sturdy as tanks, in that if you drop them, they’ll break, but they can stand a hot and dusty environment better than you might have thought. This means you’re not going to need to set up a clean-room type environment.
Once you pick your location, get something to set the machine on. I use metal racks, like you might use in a kitchen pantry, but just about anything will work.
CONNECTING YOUR BITCOIN MINER TO A NETWORK
WiFi is not an option as ASICs are specialty devices for mining bitcoin. Most don’t even have a power switch, much less WiFi and USB compatibility. So, you’re going to need wired internet. Pick up a switch and some CAT-5 cables as you start to plan out your setup.
However, the good news is that these machines use very little data. I ran my first ASIC behind an Eero and found that it used around one megabit per day (not per second). So if you have a stable broadband internet, you should be good to mine, even with several ASICs.
ELECTRICITY CONSUMPTION OF BITCOIN MINERS
Most of these rigs run on 240 volts and draw around 15 amps or more. In some parts of the world, this might be a standard plug, but in the U.S., the typical wall plug is 120 volts, so some of you may need to do some electrical work before you plug in.
For each individual rig you intend to run, I recommend a dedicated 240-volt, 20-amp circuit. Having one circuit breaker per machine will give you more flexibility for repairs, and limit the “blast radius” if something goes wrong on one of the circuits.
SETTING UP YOUR ASIC
Once you have the miner, and your electrical outlets, and your wired network, it is time to set up the machine. There are very few technical skills needed to set up the miner.
The hardest thing you’re going to need to do is figure out the IP address your miner is using. The right way to do this is to look at the devices connected to your home network’s DHCP server (which is typically your router). Here is a high-level walkthrough for doing this:
On all of the routers I’ve used, I’ve opened a web browser and typed in the IP address of the router. The router is probably going to be something like: 192.168.0.1, or 192.168.0.254, or 10.0.0.1, or 10.0.0.254. If you can figure out your computer’s IP address, you can try changing the numbers after the last dot to “1” and see what happens.
Once you log in to your router (try “admin,” or “password” in the password field), look for the advanced settings.
Under the advanced settings, look for “DHCP Server,” or “Connected Devices” or something similar.
Look at all the IP addresses given out by your router and see if you can figure out which one is the miner you just plugged into the network. (Yes, the ASIC needs to be plugged into the network and electricity at this point.)
If those steps sound too daunting, try brute forcing it. Figure out your IP address and change the number after the last dot from every number between “1” and “254.” (Finding someone who can help you with the DHCP-router method might be faster.)
You’ll know you have the right IP address because a webpage will load, and a username-password dialog should show up. The default for that dialog is either “root” and “root” (for Antminers) or “admin” and “admin” (for WhatsMiners).
Once you find the IP address and enter the username and password, you’ll see a webpage that looks like it was teleported straight from the 1990s. You’re looking for the “Miner Configuration” option. Here is where you’re going to enter your mining pool URL, name and password.
But what is a pool, and where do you get the URL, name and password? Now seems like a good time to explain mining pools.
BITCOIN MINING POOLS
You don’t need to know much about the Bitcoin protocol to run an ASIC. The only bit that is important here is mathematical probability. With the global hash rate being greater than 100 exahashes per second (EH/s), your 95 TH/s machine represents around 0.000095% of the total. This is also the chance that your miner has of finding the correct hash for the current block and earning the block reward.
You might mine for years and still not solve a block at that rate, but the electric bill comes every month.
The solution is to join a mining pool, which is a group of other miners all working together to try to solve blocks and share the rewards. Pools are free to join. You only need an email address. When you sign up, you’ll pick a username. This could be your Twitter handle or the name of your pet goldfish.
There are many pools available, but the ones I’ve tried are Slush Pool, F2Pool and Luxor. They all work and pay around the same. Every pool will have a URL that you’ll need to enter into your miner. Each pool will have its own unique URL, but it will be something like one of these:
You’ll enter this URL, and the username you chose when you signed up for the pool, along with anything as the password (the letter “x” is a common password) into the “Miner Configuration” section of your ASIC. Don’t forget to click the “Save” button to start mining.
PROFITABILITY OF BITCOIN MINING AT HOME
Your biggest recurring expense is going to be electricity. The newer/faster rigs use around 3.2 to 3.5 kW. That’s around 84 kWh per day, so you’re spending around $7 per day or more on electricity, depending upon your electricity rates.
With the global hash rate still recovering from the China ban, pools are paying around 0.0087 BTC per petahash (PH). So, if you’re using an S19 (95 TH, or 0.095 PH) you’re looking to earn around 0.0008265 BTC per day. A bit of quick math says that you’re paying $8,469.45 per bitcoin. So if you sell your mined bitcoin to pay the electric bill, you should have some left over (aka, profit).
But it is not all puppies and rainbows in the world of Bitcoin mining. The global hash rate is going to recover, so when it doubles from where it is today, the value of each TH will be cut in half. Then there is the Halvening. Within three years, the mining reward will be cut in half, and that will also cut the value of each TH in half. Put those two reductions on the number above and you’ll be mining bitcoin for around $33,877.
So, if you’re interested in the profit aspect of mining, you need to decide if you think the price will increase or not, and let’s be honest, you probably haven’t read this far without being somewhat bullish on Bitcoin.
Bitcoin mining is a great way to earn some KYC-free bitcoin.
Not every pleb can run a miner, but if you have the ingredients it is surprisingly simple to do. Checklist:
Place: Have a plan for the sound and heat
Electricity: You’re going to need a 240-volt, 20-amp circuit per machine
Wired internet, a switch and some CAT-5 cable
The ASICs: new or used
Pick a pool