Dominated by Institutions, Bitcoin Mining is also Possible from Home
- Individuals might get a return on their initial investment from mining profits within about a year.
- As mining difficulty rates increase and competition over block rewards ramp up, home-based miners will find it increasingly difficult to make a profit.
- Individuals increase the chances of making mining profitable for themselves by joining a pool.
Cryptocurrency mining is big business. In the month of April alone, when bitcoin (BTC) hit its all-time high of around USD 65,000, BTC miners generated almost USD 3bn in revenue, resulting from sales of the coins they had obtained via either block rewards or transaction fees.
Such figures would lead most people to assume that Bitcoin mining is now largely the preserve of big organizations, commercial entities with the resources to invest in the construction of large plants capable of commanding a significant slice of Bitcoin’s massive hashrate, or the computational power. However, opinion on this question is very much mixed, with at least one miner -- known on Twitter as burn the bridge (@econoalchemist) -- recently affirming that it is possible for individuals to profitably mine BTC from the comfort of their own homes.
He told Cryptonews.com that, even with relatively inexpensive ASIC miners, individuals can earn money at home by joining a pool. On the other hand, mining companies argue that Bitcoin mining will remain out of reach for the vast majority of individuals, and that most people would be better off investing in a mining firm if they want to share in its profits.
Do-it-yourself home Bitcoin mining
Posting in mid-July, US-based Bitcoin community member econoalchemist shared data revealing that it is actually possible to make money by mining Bitcoin at home, at least if you lived in the United States and in an area of the country with relatively low electricity costs. In particular, he suggested that it’s more cost-effective mining bitcoin yourself than directly purchasing BTC with USD.
Speaking with Cryptonews.com, he explained that, contrary to what many might suppose, mining Bitcoin at home is feasible for the average US resident.
“Several ASIC distributors are located in the US, most homes have an abundant power capacity, and the average kWh rate is USD 0.13,” he said.
According to econoalchemist, an individual running a modest 80Th ASIC mining unit with a USD 0.13/kWh rate can accumulate BTC for 57% below the current market spot price.
“Continuing with this example, it means that over the course of a month, an individual would spend USD 327.60 in electricity operating their ASIC and they would earn 0.016386 BTC, a USD 786.52 value,” he added.
Econoalchemist pointed out that there is a range of more modest hardware options for anyone intrigued by mining.
“I recommend starting small with an S9 ASIC, these cost roughly USD 450 today and they will produce roughly 8,000 to 10,000 sats [USD 4.4] per day. The newer generation ASICs will cost anywhere from USD 5,000 to USD 10,000 each right now,” he said.
He added that most individuals will get a return on their initial investment from mining profits in both USD and BTC terms within about a year, other things being equal.
“There are a lot of variables that go into these considerations like overall network hashrate, network difficulty, kWh rate, BTC market price, upfront costs, infrastructure requirements and they are constantly changing. But for the average US resident, there is a wide buffer in both how low the price of BTC can go and how high the network hashrate can get before mining at home just doesn't make sense,” he explained, noting that he explored these considerations in more detail in an article published at the end of July.
It’s not only that mining Bitcoin at home (via a mining pool) is more cost-effective than buying it directly, but that mining provides a way of obtaining BTC without having to submit to know-your-customer (KYC) regulations.
“These regulations require users to attach their personally identifiable identities to their Bitcoin activity which exposes the individual to many risks such as third-party data breaches, unrealized capital gains tax, and 6102-style confiscation. Mining Bitcoin at home mitigates these KYC associated risks but there is another benefit in that the average US resident can get more bitcoin for their money by mining it at home than they can buying it through a risky DCA [dollar-cost averaging] service,” econoalchemist said.
Not everyone agrees that mining Bitcoin at home is the best strategy for individuals.
“Bitcoin mining is increasingly out of reach for most home-based operations. Given the scarcity and buying power required to obtain new equipment, energy, and infrastructure, home miners will largely need to rely on used equipment and colocation facilities,” said Zach Bradford, the CEO and President of CleanSpark, a Nevada-based energy technology and clean Bitcoin mining company.
Bradford also noted that as mining difficulty rates increase and competition over block rewards ramp up, home-based miners will find it increasingly difficult to make a profit. He admitted that in some cases certain miners may be able to perform reasonably well, but most will on average be priced out of the mining sector.
“I could imagine a scenario where someone is able to use stranded or excess renewable energy to increase access and bring down the cost of energy but competitive mining machines would still be too expensive for most home-based operations,” he told Cryptonews.com.
These misgivings aside, not everyone operating within the mining industry holds that Bitcoin mining is out of reach of the home-based individual. For BitRiver CEO and founder Igor Runets, individuals increase the chances of making mining profitable for themselves by joining a pool.
“Although customers of our colocation services are mainly institutional mining businesses, some of our customers are actually pools of individuals who combine their resources to get bulk pricing from both the machine sellers and the datacenter that provides hosting for those machines. Somebody with modest means could also join such pools to get the most out of their resources,” he told Cryptonews.com
Opinions are also mixed on whether home-based mining has been declining in recent years, or whether it’s making at least a modest resurgence, as knowledge of its feasibility spreads.
“It has been declining in tandem with the growth of large, well-funded companies across the world that are now mining [...] Mining equipment is so specialized now that it is often out of reach for DIYers and at-home miners,” said Bradford.
On the other hand, econoalchemist suggested that based on what he himself has witnessed since the end of 2020, mining from home has actually increased.
“Up until [Bitcoin blogger/expert] Diverter wrote Mining For The Streets the narratives around home mining were negative; ‘It's too expensive to mine at home,’ ‘You can't compete with industrial-sized miners,’ ‘You would be better off buying bitcoin from an exchange.’ Well, Diverter absolutely shattered those narratives and mopped the floor with them,” he said.
Since reading Diverter’s article, econoalchemist has written his own guide on home mining, which he says has helped spread knowledge about mining and given people enough confidence to solve common mining problems (e.g. too much noise and heat) by themselves.
“Fast forward to today and there is Steve Barbour designing the black box enclosure, Matt Odell showcasing home mining on his Citadel Dispatch podcast (Episode 31 & 38), and people like CoinHeated taking immersion cooling to the next level,” he said.
Taking a view somewhere in the middle of both poles, Igor Runets said that, while home-based mining has grown along with the popularity of cryptocurrencies since Bitcoin’s launch, industrial-scale mining has been growing much faster and accounts for most Bitcoin mining worldwide.
“This is not only because of the increasing economic infeasibility of small-scale mining but also because of the increasing noise and heat challenges for home-based operations,” he said.
Also, there’s a new service, launched this week by Compass Mining, a US-based online marketplace for Bitcoin mining hardware and hosting. Named At-Home Mining, it is described as a direct-to-consumer service that allows purchasing Bitcoin mining equipment for the home, with an ASIC mining machine being delivered to them, allowing customers to mine Bitcoin without having to pay additional hosting facility fees.
Some tips for would-be home miners
Assuming you might like to try home-mining for yourself, there are a few things you’d need to keep in mind.
First of all, join a mining pool, since finding a block is extremely unlikely if you’re mining solo.
“Personally, I like SlushPool; it is super easy to set up, they have a cool mobile app so I can monitor my ASICs while on the go, and they are not part of the Bitcoin Mining Council. By joining a pool, you will see mining rewards trickle in every day,” said econoalchemist.
Secondly, you need to be aware that scammers may try to take advantage of your eagerness to acquire mining hardware. Fortunately, there are a few more trusted channels you can use to source equipment.
“Use the Hardware Market Verfied Listings Telegram channel. MineFarmBuy and Kaboom Racks are reputable distributors and they post ads there often. Even if the ad has a Minimum Order Quantity (MOQ) don't hesitate to reach out to the seller, they will often consolidate several small orders to reach their MOQ,” econoalchemist explained.
On the other hand, Zach Bradford suggested that most individuals would be better off investing in a trustworthy mining company.
He says, “Do your research. Find a company that fits with your values [...] Setting up at home is probably prohibitive for most people at this point. But there are many ways to be involved in building and supporting the Bitcoin blockchain.”
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