Mining is the backbone of cryptocurrency. Miners run the network by processing and verifying all transactions and changes of state to it, and they get a cut of transaction fees for their trouble. Huge warehouses filled with cutting-edge mining technology mine the largest cryptocurrency, Bitcoin, making billions of dollars a year in revenue. Crypto mining usually becomes more difficult as better technology is developed, but Bitcoin mining difficulty has nosedived in the last couple of months.
Recently, Bitcoin mining experienced a major shift because of an impactful ban on cryptocurrency mining and services in general in China. Mining warehouses in China ran off of cheap electricity (often from burning fossil fuels), turning a massive profit, but they are being forced out of the country. This shift has made it significantly more profitable, at least in the short term, for small miners because they have less competition. It may be the perfect time to get a mining rig running and start earning crypto.
Proof-of-Work vs. Proof-of-Stake Cryptocurrencies
Consensus mechanisms are the methods cryptocurrencies use to verify additions to the network and agree on its state. Proof-of-Work (PoW) and Proof-of-Stake (PoS) are by far the most widely used consensus mechanisms. On PoW blockchains, miners complete random and complex mathematical functions to verify blocks of transactions. It requires sophisticated and expensive hardware to compete with the computational power of every other miner on the network.
PoS mechanisms, on the other hand, verify transactions and single states of the network by checking validator nodes that require minimal hardware. Miners on PoS blockchains stake a certain amount of crypto and run validator servers to earn their cut of transaction fees. PoS is generally considered more decentralized than PoW because a network participant’s mining power is limited by the amount of the crypto they stake. For example, if a miner on a PoS blockchain puts up 1% of the total staked crypto, they can only mine 1% of the new blocks. PoW miners instead need to build up computational power to mine more blocks.
Currently, the 2 largest cryptocurrencies, Ethereum and Bitcoin, both use the PoW mechanism. It’s unlikely Bitcoin will move away from its PoW mechanism, but Ethereum has made the switch to PoS a goal for the upcoming year. Ethereum is slated for a massive round of upgrades called Ethereum 2.0. The updates will alter the architecture of the blockchain to speed up transactions, lower transaction fees, dramatically decrease energy consumption and increase network security. The move to PoS will be one of the biggest alterations allowing for these benefits.
ASIC Mining vs. GPU Mining
Miners make use of 2 main types of hardware to mine PoW cryptocurrencies, application-specific integrated circuit (ASIC) and graphics processing unit (GPU) rigs. GPUs are designed for video editing and gaming but also happen to mine PoW cryptos well. Many crypto enthusiasts with gaming computers put their devices to use by mining their favorite PoW cryptocurrency when they aren’t gaming.
ASIC miners are devices that are designed to mine 1 specific cryptocurrency (maybe 2). On the surface, this setup seems ideal. They are devices built exclusively for crypto mining, so they must be the best technology to use, right? The answer is more complicated than you might imagine and rests on the marked difference between these types of mining.
GPU mining is almost certainly the better option to mine cryptocurrency for small miners without access to underpriced electricity. Some of the main factors in which GPU mining beats out ASIC rigs are its modular components, flexibility and residual value. GPUs can mine pretty much any PoW crypto, unlike ASIC miners, which can only mine whichever crypto they are designed for.
GPUs hold more value than ASICs over time because they can do more than just mining. Older ASIC miners quickly lose value because mining farms constantly upgrade their hardware to solve the cryptographic functions faster, leaving old models in the dust. GPU mining computers can be upgraded easily, unlike ASIC miners, by simply adding more (or better) graphics cards. ASIC miners also use boatloads of electricity, so they are less profitable in regions with high electricity costs. However, for warehouse owners with low electricity costs and fast access to new ASIC models, ASIC miners are much more profitable than scaled-up GPU rigs.
How Much Can I Make Mining Cryptocurrency?
Your potential profit depends on a few main factors: electricity cost and consumption, hash rate (how fast the mining rig can find solutions) and initial hardware costs. If you already have a working computer with one or more relatively modern GPUs, it likely will be profitable, especially while Bitcoin and Ethereum mining difficulty is low. Electricity consumption and costs vary significantly by each region and could make mining unprofitable. For example, mining would lose money in Hawaii where the average price of electricity is $0.31 per kilowatt-hour while the national average is about $0.13. With cheap electricity and a few thousand dollars of hardware, you could start making $600+ a month from a modern mining rig with multiple GPUs. Before purchasing mining equipment, enter your miner’s specifications and electricity costs into a mining profitability calculator to project your profit potential.
Best Cryptocurrency Mining Opportunities
- Staking Ethereum on Coinbase
Coinbase provides an Ethereum 2.0 (Eth2) staking pool for its users to earn up to 5% APR on their ETH. Coinbase moves your Ether to the Eth2 testnet and stakes it in a validator node to verify transactions and earn fees. There are about 6,000,000 ETH staked on Eth2 validator nodes earning interest. The main downside of staking on Eth2 is that once your Ether is on the testnet, you won’t be able to send it back to the Ethereum mainnet until the 2 networks are merged (planned for late 2021 or early 2022). Also, Coinbase’s Eth2 staking is currently only available to U.S. customers (and not in New York).
- Ethereum GPU Mining
Ethereum GPU mining is one of the most profitable and simple ways to mine cryptocurrency. You need a computer with basic PC parts: CPU, power supply, motherboard, RAM, a hard drive and most importantly one or more GPUs. Check a mining profitability calculator to see that your hardware won’t lose you money from high electricity costs. Amazon and other electronics retailers offer already built mining computers, but they are a bit more expensive. Make sure you still have a use for your new rig after Eth2 releases (like mining Bitcoin); otherwise you will just have to sell it. Now that you have the hardware, join a mining pool like Ethermine or Kryptex. It’s pretty simple to join, and each has detailed explanations on their websites.
- Kryptex Mining Pool
Kryptex might be the easiest and fastest way to start mining with your computer. Just go to its website, sign up for an account, install the Kryptex program and start mining. The program runs a benchmark test on your computer to choose the best mining algorithm for your hardware. It even tracks multiple algorithms all the time to ensure you’re running the most profitable one. Payouts from Kryptex are always in Bitcoin, so you don’t need to worry about swapping mined altcoins. It boasts profits of about $95 per month with a modern gaming PC or even up to $615 per month for a mining rig with multiple high-performance GPUs. Like all other mining opportunities, you need to ensure your mining venture will be profitable with the Kryptex mining profitability calculator.
- Bitcoin ASIC Mining
ASIC mining is even simpler than setting up your own GPU miner if you have the necessary starting capital. The most important step of setting up an ASIC rig is choosing the device. ASIC miners are expensive and can become obsolete in a year or less as new technology is developed. Make sure the purchase makes financial sense with a mining profitability calculator. Remember that mining with high electricity costs, especially using ASIC miners, can lose you money. If you decide it is profitable and buy an ASIC device, you need to configure it with a guide from the manufacturer or get help from mining pools with ASIC support to get it running.
Is Mining Crypto in 2021 Worth It?
Historically, mining Bitcoin and Ethereum has become less and less profitable (in BTC and ETH, not necessarily USD) as more miners join the network. After China’s recent push to remove Bitcoin miners from its country, Bitcoin difficulty, the metric describing the amount of computation required to mine the next BTC block, has plummeted. It fell more than 40% since its peak on May 15, 2021, according to BTC.com. Ethereum difficulty has also dropped significantly since its peak, but it’s only about 20% lower than its high in May.
While mining difficulty is much lower right now, that likely won’t continue to be the case. This trend doesn’t mean it won’t be profitable for you, especially if you already have the hardware. Joining a mining pool is easy and may be worth your time. If just investing in cryptocurrency isn’t enough, putting your PC to work to earn even more might be perfect for you.
Crypto Mining Alternatives
Mining is not the only way to passively earn cryptocurrency. BlockFi and Celsius each provide interest-bearing crypto accounts offering far higher rates than savings accounts with major banks. With a BlockFi interest-bearing account, you could earn up to 4% APY on Bitcoin and Ethereum deposits and even more with stablecoins like USDC and DAI. Check out the platform’s interest rates to learn what you could make with your crypto.
Celsius offers similar cryptocurrency interest-earning accounts with an even longer list of supported cryptos. It has great interest rates that are even higher for users outside of the U.S. If you don’t want to go through the trouble of setting up a miner or if your energy costs are too high, BlockFi or Celsius can be alternative passive income streams.
Best Exchanges For Buying Cryptocurrency
So many optimal trading platforms offer cryptocurrency trading that it’s difficult to choose the best one. U.S. investors looking for a crypto-specific exchange with incredible security and a multitude of features and supported tokens should check out Coinbase and Gemini. If you are looking for a platform that also offers stock and ETF trading along with cryptocurrencies, Webull and Robinhood are fantastic options. All 4 of these platforms make trading cryptos extremely easy on desktop and with simple apps on iOS and Android.
- securely through Coinbase's websiteBest For:Coinbase Learn
Sum of median estimated savings and rewards earned, per user in 2021 across multiple Coinbase programs (excluding sweepstakes). This amount includes fee waivers from Coinbase One (excluding the subscription cost), rewards from Coinbase Card, and staking rewards. ³Crypto rewards is an optional Coinbase offer. Upon purchase of USDC, you will be automatically opted in to rewards. If you’d like to opt out or learn more about rewards, you can click here. The rewards rate is subject to change and can vary by region. Customers will be able to see the latest applicable rates directly within their accounts.
- securely through eToro's websiteBest For:Demo Accounts
Cryptocurrency is offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk
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Cryptocurrency Investing vs. Mining
If you have a gaming computer (or any PC with solid GPUs) and live in a region where electricity isn’t too expensive, you might want to start mining cryptos with it. Although you need to consider a few downsides to putting your tech to work, the question of investing versus mining gets more complicated if you don’t already have the hardware. Cryptocurrency mining will probably turn less and less profit as time goes on whereas investing in any specific crypto might not. Both options are volatile and you might lose or make money either way. It’s up to you whether you think the start-up cost will be worth more in the long run when invested immediately or built up slowly with a mining rig.
Related content: WHAT IS BITCOIN MINING?
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