There was a time when you could easily find nuggets of gold on riverbeds or in rock walls. As more and more prospectors entered the frenzy, technology and scale became key to beating competitors in the search for the precious metal.
Similarly, there was a time when you could simply mine Bitcoin at home. All you needed was a laptop, run some software, and if you were the lucky one, you could create this ‘fun internet money’ out of thin air.
However, as more people entered the space, it also became more difficult to mine Bitcoin. The elegance of the system is such that the more efforts are made to mine a block on the blockchain and mint Bitcoin, the more computing power is needed to be successful. This has led to a sort of arms race between miners, leading to the emergence of large Amazon-esque Bitcoin mining facilities, together using more electricity than the Czech Republic.
There are different types of mining methods, but here are some key avenues:
- ASIC mining uses Application-Specific Integrated Circuit devices that have been built with the sole intention of mining Bitcoin and other cryptocurrencies. This hardware comes in a variety of forms, and some kits are way more expensive than others. They’re especially beneficial because of how they deliver exceptional levels of computing power while minimizing electricity costs.
- GPU mining appears to be the approach most popular among mining facilities. For this method, graphics cards are used to mine data from the blockchain. Although they are effective, graphics cards can be extremely expensive and are also high maintenance, meaning that cooling and reliable access to electricity are vital.
- CPU mining involves mining crypto from your computer. It’s a simple and inexpensive approach to take, but unfortunately, it’s pretty impractical when it comes to mining Bitcoin. This method is best reserved for altcoins — in some cases, you can even find mining software that will run in the background and use spare computing power to mint crypto.
Joining a Mining Pool
Instead of going at it yourself, you could also choose to join a mining pool. A mining pool is basically a group of miners who share their computing power over a network and get rewarded based on the amount of power each contributes as opposed to whether or not the pool finds a block. As such, mining pools help make revenue for miners more predictable.
Note: Joining a mining pool is not the same as ‘cloud mining’. Mining pools involve a group of miners sharing the rewards as per their share, but cloud mining involves a service provider whom you have to pay for mining and in turn, you get the rewards. Although there are legitimate ventures that sell mining power this way, you need to be on the lookout for scams. And even though it’s low maintenance on your part, do remember that you may need to enter into a lengthy contract with high monthly fees.
Some of the most popular mining pools include F2Pool, Poolin, AntPool, Huobi.pool, ViaBTC, 1THach&58COIN, SluchPool and NovaBlock.
Before joining a mining pool, you should know that there are different reward structures and payout schemes. Here are a the main reward types:
- Pay-per-Share (PPS) – The amount is fixed for each user and is paid whenever a share is submitted.
- Proportional – The users are awarded proportionally to the amount of share contributed by them.
- Score-based – This method gives prominence to the newer shares than older shares and the user is awarded proportionally based on the time of submitting the share.
- Pay Per Last N Shares (PPLNS) – This is similar to the proportional type but varies in rewarding each share in multiple rounds.
- Full Pay-per-Share (FPPS) – This is similar to PPS but includes dividing transaction fee among miners along with rewards. The transaction fee is distributed according to the miner’s hash power.
- Shared Maximum Pay Per Share (SMPPS) – This is similar to pay per share but will pay you less what the pool earns.
Earn a Passive Income
If your intention is simply to accumulate more Bitcoin without trading too actively, there are other ways to earn Bitcoin. The easiest way, by far, is to place your Bitcoin into a Savings Product on AAX.
There is no lockup required, meaning you can withdraw your funds at any time. Each minute a tiny amount of Bitcoin is added to your account, offering an annual interest rate that is higher than any other cryptocurrency exchange out there.
You can learn more about AAX’s Bitcoin savings products here.