The thought of starting a crypto mining operation can be thrilling and exhilarating. However, it is really not for the faint of heart because of all of the components that need to come together. Having the right knowledge about investment, research, resource, and equipment can either make or break your endeavour.
Choosing the Right Investment Method
Mining is the top way to hold an underlying cryptocurrency. Mining offers a long-term way to build a nice Bitcoin purse. Mining is known to outperform the method of simply buying and holding. This is best determined by figuring out the dollar cost average strategy. This particular strategy is best for markets that are very volatile just like Bitcoin and other cryptocurrencies.
Once a dollar-cost average strategy has revealed to many people is that they should probably consider going into the mining business. However before anyone should take on that endeavor it is important to understand what the goals should be, investment time frames and what the deployment strategy will be most fruitful.
Before excitement to dive into this new endeavor takes over it will be important to decide what mining rigs will be the best, what will the electricity rate be? What are all the out of pocket components? What is the current cash flow and what will be the future cash flow from mining? Setting up with the most accurate operational expenses is key to setting up a cash flow that earns back your investment with rewards.
One of the most common metrics for earning back money is called the “payback period”. Basically, you’re trying to figure out how many days it is going to take until you are paid back in your mining efforts from the original investment.
In the world of mining, there are typically two strategies that are a go-to for minors as it relates to their investment. There are no hard rules on this, as some miners like to use a combination of strategies when it comes to rewarding management.
The way this strategy works is that after a miner buys his or her rig they will sell off the operating expense into cash. Then the remaining amounts will be held in Bitcoin.
Simply put, after a miner buys a rig the miner will sell the rewards into cash daily as long as the machine is operating.
For some time now the Mine&Hodl have been the strategy to outperform the other strategies. That doesn’t mean it will always be that way. That’s why it’s crucial that every miner continuously analyzes the reward management factor in accordance with risk tolerance, investment capital, and timeline.
it is not uncommon for miners to begin this journey simply because they have found a way to get a hold of cheap power. That can be encouraging and inspirational, but after a miner realizes that to build a sufficient infrastructure that it is quite costly. Some might be deterred while others plunge forward.
It is important to capitalize on the right rigs for the amount of cash flow one is expecting for a great return. For the purposes of better profitability, it is important to optimize every machine that will be plugged.
Dealing with OpEx and CapEx
This part cannot be missed; it is crucial for efficient mining. Calculating the OpEx means that it is to your utmost good to find the lowest cost hosting and electricity for Asics. The way that OpEx is measured is in the kWh rate. This lumps together the total cost of running electricity, machines, wattage from rigs, cost of staffing, the cost of the Internet, and any other expenses one decides to add on.
So when all of these numbers come together you will be able to figure out what your daily operating costs will look like. To give you an idea of what an equation can look like check it out below:
3 kW of power × $ 0.055 kWh x 24 hours/day = $3.96
There have been plenty of miners who have gotten older generation equipment at very decent prices when they have low-cost power. That recipe can still create profitability for miners.
One thing that can be frustrating to miners is the realization that ASIC revenue currently, will more than likely not be the same next year. The thing about the Bitcoin mining profitability is that it always declines against the hash rate. This means it takes more hashrate for computing power to earn revenue.
Getting Started with ASIC
ASIC versus GPU
Many miners start mining at home and in that case, a GPU rig is most popular to begin with. GPU rigs host quite a number of graphic processing units they most successfully mine coins like Ethereum. Some miners love to go beyond working from home and send miners to a choice hosting facility. In that case, it is most of the time better to begin incorporating ASICs. Time has shown that both types of equipment have been good investments for miners and have been able to make a lot of money throughout recent years. However, the industry is now looking to ASICs more as the standard machine.
Altcoins versus Bitcoin.
We all know that Bitcoin has been the major focus when it comes to buying and holding, as well as mining. The revenue earned from Bitcoin has been a lot higher than other cryptocurrencies. However, there is a new trend growing in miners also mining altcoins. Though cryptocurrencies bring in smaller revenues from mining, that doesn’t mean that those revenues won’t turn into greater returns as those coins increase in value over time.
How many machines are needed?
That is really a subjective answer. It really depends on how strategic you want to be when it comes to the return on your investments in regards to your machines. It’s so important to spend time understanding the predictive future value of Bitcoin. Then combining that estimate with your OpEx cost and the production of BTC based upon how your machine works.
Newbies tend to make a lot of mistakes in mining. It is so much better to take time to weigh what is measured above and have a staggered approach that way there is not as much risk in the initial capital. Naturally, if you continue on the process you will gain certain expertise and experience that will allow you to make better decisions and scale up in a way that is efficient, practical, and more profitable.
If you are lucky enough to have all of your capital all at once and deploy that gives you a better opportunity with an ASIC seller, pool operator, and hosting provider. It simply allows you to have more leverage when all of your capital is there on the upfront. It will lower your cost all around, and get you profitable quicker.
Buying Second-hand or from Manufacturers
Time reveals all truth. Time has definitely shown that buying from manufacturers has been the best way to go when it comes to the new generation machines on the market. Big time miners have been known to buy thousands of new rigs from the manufacturers. As you can imagine that is a huge investment.
There is still room in the market to purchase second-hand machines. There are certain risks to be aware of before making a decision to buy older, second-hand machines. Those risks could include warranties that are outdated, damage to machines because they can’t keep up with computing resources, and counterparty risk.
If it turns out that none of those risks apply to your particular situation it can be beneficial to you if all of your other costs, especially electricity are cheap. If you can’t get good deals on all the other resources then profitability can be more challenging. You may see your return on investment in the longer term.
ASIC brokers can be lifesavers as they have helped thousands and thousands of miners sell and buy equipment. So, down the road, if you ever wanted to sell your equipment a broker can help you with the process.
The way that brokers make the money is generally pretty simple. They will either take a percentage off the deal, or they can add a flat rate on top of the miner. So whatever the current value is of the mining machine maybe they’ll add $40 on top. It is well worth using a broker because they make all of the transactions a lot less risky. They do all the heavy lifting of verifying the mining hardware and ensuring payments, shipping, and all of the things that go into purchasing or selling.
Choosing the Right Hosting Company
You can have all of the other pieces of the puzzle come together smoothly, then not have the right hosting program and have many headaches. However, on the flip side if you have a great hosting company it can make your mission so much easier.
Some of what makes a hosting solution great are that they focus on remote access, in-house maintenance, minor management, good customer service, and VPN access. You can have all of these features and benefits at a great rate. The lower your rate for the hosting plan the more profitable your investment will be.
I would encourage you not to just pick anyone that looks great and has all these features. It’s best to do your research to figure out who has been most proven in the realm of hosting for mining.
Repairs and Warranty
Starting off on any kind of venture it’s easy to forget that things may not always go as according to plan. That there may be issues that need to be fixed beyond our scope. That being said you never know when a piece of equipment can break down. When it comes to mining rigs that could be a thing. Something like the heat sink collapsing, hash board issues, or a fan that’s not working correctly can impede all of your efforts.
There are certain miners that are notorious for having certain types of issues. Knowing that in advance can either help you come up with a game plan for having it repaired or knowing what the warranty is, or simply choosing another option.
When it comes to the procurement of your equipment be aware that if you get them from outside of your country, there will be tariffs and duties added on to the cost. It’s most popular to have mining rigs come from China and you can expect those extra costs to be attached.
Also, understanding that depending on what type of miner you get it may not be available to you right away. It’s not like ordering something on Amazon Prime and it’s showing up two days later. If you purchase miners directly from the manufacturer there can be lead times up to 8 months or more.
Right now getting ASIC equipment in place is one of the main barriers to entry when it comes to mining. The best plan of action to take has a lot to do with everything that has been talked about in this guide. Knowing your OpEx cost, doing your research on what elements can leverage your profitability. Knowing which miners will work for you the smoothest without interruptions. Having a brilliant understanding of all the components can better help you get the ball rolling quicker from the get-go.