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How to mine for cryptocurrencies

In our guide you will get to know the various factors and trade-offs you need to consider, before launching your own profitable mining venture

When you are setting out to mine for cryptocurrencies you have to think through the various factors that will impact your overall profitability. These factors can be broken down into various buckets of capital costs, operational costs and expected revenues. If you can master and balance these three areas then you too can start the process of evaluating a cryptocurrency mining operation.

Expected Revenues

So the first major decision to make is to choose if you are mining the sha-256 algorithm or not. The sha-256 mining algorithm is used today with Bitcoin and Bitcoin Cash (and a few other smaller coins like Litecoin Cash and Unobtanium). Sha-256 miners like the Bitmain’s Antminer, Halong Dragonmint and the Avalon 6 represent the most readily-available miners to purchase quickly and in quantity. If mining a Sha-256 coin then you know you will be mining for coins in the biggest chunk of mining done today. This means you will be mining coins in the highest volume hash rate for high liquidity coins.

If you chose to not mine this algorithm then you will dramatically be increasing the speculation factor in your expected revenues, with sha 256 you can expect to have a more stable growth in hash rate and a liquid enough coin to sell daily without losing money in spreads.

It’s best to plan to also sell newly-minted coins daily back into the fiat currency that you purchased your miner in, if you chose not to do this then you are simply speculating into the asset you are mining.

Capital Costs

Now you have decided upon your mining algorithm you can start looking into the market, to find the most efficient miner for you. For the rest of this guide, let’s suggest that you picked to mine sha-256, using a readily available off-the-shelf miner. The recommendation would be to go for the Newsted generation of miners available from the big hardware manufactures in the space (Bitmain, Halong or Avalon).

Personal factors that will determine your choice will include availability to buy the miner you want, import taxes that may be due and finally discounts that may be negotiable based on the number of miners you are purchasing.

Operation Costs

The major operational cost to mine for cryptocurrencies will be, of course, electricity. The electricity cost will also be a key factor to determine the hardware you chose. If your electricity cost is high then it may be worth waiting for a ‘latest generation’ equipment to reduce overall payback times for the hardware you need to buy (for example, wait two months for a more efficient miner to arrive that will pay back in 200 days vs another immediate delivery miner that pays back in 300 days).

Another key aspect is the operational cost it takes, to keep your mining operation running 24 hrs a day (with minimal downtime). Any time you aren’t hashing away will be discounted from the payback time you calculated on your initial capital investment.

Environmental costs are the final area that shouldn’t be overlooked. Its easy to mine in a spare bit of space (a loft, for example) but not thinking about aspects like heat management or even general logistics may lead to significantly shortening the lifespan of your miner. There have been examples of people tripping over wires and bringing down a whole stack of miners (with this leading to the end of a particular operation).

Mine for cryptocurrencies – final thoughts

There are many dynamics and choices to be made if you are deciding to mine for cryptocurrencies and launch your own mining operation. However, the most important factor is about the love for computer hardware projects. If you are not the type of person who likes rebuilding fans or debugging drivers then this simply won’t be a profitable venture for you. Good luck!

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