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Bitcoin Mining: Everything you Should Know

Mining Bitcoin can be an interesting way to obtain cryptocurrencies, but there are many considerations to take into account. Before starting, it is convenient to understand that Bitcoin is based on a distributed network ( blockchain ) where some give up computational power, which makes the network resistant to attacks, and in return the network rewards these nodes with fractions of Bitcoin randomly.

This task of giving up computational power in exchange for random rewards is called mining , as it has similarities to traditional mining, where work is done in exchange for material rewards. Many times there is talk of mining “farms”, where large organizations are dedicated to this task, but the truth is that it is possible to mine Bitcoin at home under certain conditions that we are going to describe.

Why mine Bitcoin?

Although the main reason to mine Bitcoin is to obtain it more cheaply than in a normal purchase , there are other reasons why you may want to mine Bitcoin even if it is not excessively profitable.

One reason to mine Bitcoin is to be able to invest in this cryptocurrency on a recurring basis so that its purchase price is averaged and it is less exposed to price variations. This is known as DCA ( dollar cost averaging ) and mining is a good way to do it because you are constantly “investing” in Bitcoin on a daily basis.

Another reason to mine Bitcoin may be wanting to invest in this cryptocurrency but not agreeing with the data collection policy of the main exchanges where they are usually bought. Bitcoin mining is quite anonymous and is one of the chosen reasons for those who want to obtain Bitcoin without the kyc ( know your customer ) policies of the exchanges .

The price of electricity and profitability

Profitability has already been mentioned in the previous section. And it is that, ultimately, mining Bitcoin is spending electricity in exchange for a reward , cryptocurrencies. The computing power that is made available to the network in exchange for the reward has an economic cost that is determined by the electricity bill.

This cost is not negligible. A mining equipment may well consume 3 kW of power , which over the course of a month consumes
2,000 kWh at an average price of 0.15 euros/kWh (rates that predate the brutal rise in electricity prices that we have experienced in Spain) are about 300 euros.

Therefore, for Bitcoin mining to be profitable, the electrical cost of mining has to be less than the rewards we receive for said mining. How many Bitcoin (or rather, fractions of Bitcoin) are obtained by mining? The answer is complicated.

The investment

As we have seen before, to mine Bitcoin you need specific hardware. In the early days of Bitcoin, a computer was enough, right away the GPUs of the graphics cards began to be used, but today none of this is not enough to generate enough computational capacity to obtain a reward.

This specific hardware is called an ASIC , which is nothing more than a set of integrated circuits to perform a specific task. As has been seen in the profitability table, there are multiple ASIC models to mine Bitcoin. The oldest ones are more inefficient, the most modern ones allow mining even with relatively high electricity prices.

The most logical thing would be to opt for modern hardware, but there is also a drawback: the price. A modern hardware to mine Bitcoin can be around 8,000-12,000 euros , depending on the moment.

Other considerations: installation, heat, noise and taxation

Once someone is determined to mine and has made the purchase of the ASIC, there are still quite important issues to be resolved. The first would be the installation .

Mining ASICs normally consume, as we have mentioned, 3 kW of power . This is equivalent to the consumption of an oven or a ceramic hob, but none of these appliances consume 24 hours a day, 7 days a week.

Therefore, it is necessary to check that the electrical installation is going to support said powers. Normally, a specific circuit breaker is placed in the electrical panel with wiring of a suitable section to connect the ASIC . This may mean calling an electrician to set it up. In other things, perhaps you can skimp, but not here because electrical safety is essential, nobody wants to have a fire at home.

Alternatives

If all of the above does not convince, it is normal: mining is an activity that requires a lot of dedication . Another way to get started in this world is to look for another cryptocurrency that requires less computing power and can be mined with a simple PC with a good GPU, and then exchange these cryptos for Bitcoin (careful, swaps must be declared for tax purposes).

If the reason why you want to mine is to obtain Bitcoin without kyc , there are possibilities although they rise in price. Perhaps the simplest is to resort to networks for buying and selling cryptocurrencies between individuals , being a well-known hodl hodl .

But if you simply want to have Bitcoin and mining is excessively complicated and kyc is not a problem, the easiest thing to do is to buy on a reputable exchange.

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