How to mine cryptos like bitcoin, ether, and doge: Your complete guide to getting set up and earning profits
Crypto mining is seeing a surge in interest as people scramble to participate in the market.
Mining is key to maintaining the blockchains that record transactions and keep crypto decentralized.
Insider regularly interviews miners of various cryptos to detail their setups, earnings, and costs. You can read all about it by subscribing to Insider.
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The surge in cryptocurrency prices over the past year has spurred renewed interest in the multiple ways to profit from the asset class.
Crypto mining remains one of the most viable ways to participate in the upside of digital currencies without buying them directly. In practice, miners' computers compete by solving complex mathematical equations that help verify digital currency transactions and update the shared ledger called the blockchain. Their reward for solving these problems is a share of the cryptocurrency that’s associated with the blockchain they are part of, such as bitcoin or ethereum.
Since cryptos are decentralized, meaning that no appointed intermediaries are recording each transaction, miners are essential to keeping the crypto ecosystem alive.
But mining is not without current and future roadblocks. The environmental impact of its electricity usage is a hotly contested issue. Miners are fleeing China, a historically important location for facilities, after the government banned mining in some provinces. And the infrastructure bill making its way through the US Congress could introduce more stringent tax-reporting requirements for miners.
Additionally, mining is not a guaranteed golden ticket for crypto: payouts vary and are subject to the volatility that’s synonymous with this budding asset class.
Despite these hurdles, crypto mining could continue to grow as digital currencies stretch further into the mainstream. The global market-research firm Technavio estimated that the market for ASIC hardware and graphic processing units (GPUs) will grow by $2.80 billion at a compounded annual rate of over 7% from 2020-2024.
Insider has interviewed several miners who explained their processes from start to finish. We learned how they initially got smart on cryptocurrencies, the specific equipment they got started with, how they manage electricity costs, the amount of crypto they earn as rewards for maintaining the blockchain, and much more.
Bitcoin
Mining the world’s most popular cryptocurrency is one way to earn it at a potentially lower cost while participating in its upside.
The practice may conjure up images of long LED-lit rows of computers, similar to the high-frequency trading systems that are out of the financial reach of most retail investors. But these facilities do not represent the full spectrum of bitcoin mining.
Insider has interviewed mining experts who run the gamut, from the founder of a company with facilities in three states to a TikToker who went viral for his $875 mini rig.
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Ether
The second-largest crypto by market cap recently underwent a software upgrade called the London hard fork that contained five Ethereum Improvement Proposals, or code changes. The most important one for miners was arguably EIP-1559, which mandated a minimum base fee that all users must pay to execute their transactions. Under the new system, these fees will be burned from the network instead of being rewarded to miners.
In short, the upgrade means that ether miners, whose revenues had surpassed that of bitcoin miners, will be paid less. We’re tracking the unfolding impact of this new development, as well as how ether miners continue to earn passive income.
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Other altcoins: Doge and helium
Altcoin mining has become a hobby for people like Dason Thomas, who became interested after seeing TikTok videos of others and recognizing mining as an avenue to build wealth.
Thomas' equipment includes 12 Antminer l3+’s that mine scrypt algorithms, a type of cryptography used in hashing various altcoins including dogecoin and litecoin. He also has a mini dogecoin miner that he bought for $699. This relatively cheap entry point illustrates how easy it can be to get started earning cryptos without buying them directly.
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What were you doing in grade school? These Frisco kids are making $32,000 a month mining Ethereum
Ishaan Thakur, 14, and his little sister, Aanya, 9, typically ran a lemonade stand each summer that netted them about $100 for their college fund.
But in February, after their dad told them a bedtime story about bitcoin prices spiking to over $50,000, the Frisco duo dreamed up a new money-making idea: mining Ethereum.
“We wanted to invest in it, but we didn’t have the money to buy bitcoin,” Ishaan said. “So instead, we bought the equipment to mine for it instead.”
They started mining in March with an old gaming computer, making $1,000 in their first month. For the past month, they made more than $32,000. They use their earnings to buy more mining equipment for their company, Flifer Technologies, which they created on April 30.
“I thought I wouldn’t be able to do it because it’s too high-level, but we watched YouTube videos and my dad and sister helped,” said Ishaan, a ninth-grader at Frisco High School.
Frisco resident Ishaan Thakur, 14, expains how he is mining cryptocurrency with computers in his garage to make money for college. (Stewart F. House / Special Contributor)
Bitcoin is the largest cryptocurrency in the world with a value of around $44,455 per coin and a market value of $835 billion, according to Coindesk.com. Ethereum is the second-largest with a value of around $3,055 and a $357 billion market value. They decided bitcoin had become too competitive so they chose to mine Ethereum.
Building a cryptomining rig came with one major COVID-19-era complication: a chip shortage.
Ishaan and Aanya, a fourth-grader at Spears Elementary, signed up for supply updates from Best Buy and Micro Center. When they got an evening email alerting them to parts, they’d line up hours before the store opened the next morning.
“There’s usually hundreds lined up but most are looking to resell the parts online for a higher price,” Ishaan said.
Other times, they’ve been able to find deals on eBay. Their dad, Manish Raj, a former Wall Street investment banker, took out a loan to help them purchase supplies to start.
The main equipment needed is graphics cards, which use software to guess the right code to get a bitcoin. They have 94 processors mining and mainly use Nvidia RTX 3090 graphics cards. When the computers guess the right code, they get a bitcoin.
It’s a guessing game, and their current setup makes about 9 billion guesses per second.
“Crypto mining is just like mining for gold or diamond,” Ishaan said. “Instead of using shovels, you mine with computers. Instead of finding a piece of gold or diamond in the mine, you find a piece of cryptocurrency.”
While YouTube videos showed them step-by-step directions, they estimate it takes about 10 hours per rig to set up. But once the rigs are set up, it becomes a passive income maker.
They have 14 rigs comprising 82 processors mining for Ethereum and five small rigs with 12 processors mining for Raven Coin (because those processors weren’t optimized for Ethereum). They’ve ordered four additional rigs from China with built-in processors.
“We want to grow this into a big thing,” Ishaan said.
Ishaan and Aanya’s portfolio in mid-August 2021.
A whirring sound is constant in their garage, where some of their rigs are kept for building and testing. Ishaan estimates they have about 30 cards in their garage setup, costing about $90,000 total, or $3,000 per card. Their main operations are now in an air-conditioned data center in downtown Dallas because the heat and noise were too great to keep confined to a garage.
Ishaan and Aanya said it was important for them to use renewable energy, which costs about 12 cents per kilowatt-hour versus traditional energy that costs about 10 cents.
The difference in cost is insignificant compared to what they make, especially because mining for Ethereum is more efficient than bitcoin. Last month’s electric bill, including their home and the data center, was $2,500. A typical home electric bill in the summer is $500 for them; with mining, it increased to $850. The downtown data center electric bill was $1,650.
This isn’t Ishaan’s first entrepreneurial pursuit. He also created a hat with a solar-powered mini fan on it to help keep people like construction workers cool in the heat. He and his dad applied for a U.S. patent for the product and plan to sell it. Outside of his business pursuits, he plays the saxophone.
The Thakurs are hoping their profits will help them pay for college. Ishaan hopes to go to the University of Pennsylvania and become a doctor. Aanya wants to go to New York and become a doctor as well. They’re equal partners in the company.
Some investors are wary of cryptocurrencies because of their volatility. But the brother-sister duo said they don’t have concerns about finding a buyer for their Ethereum when the time comes to pay for college because the market is very good. It has a larger market value than the largest companies, like Irving-based Exxon Mobil, which has a market value of $243 billion, they said.
So far, they’ve sold small amounts to pay for expenses such as the electric bill, graphic cards, software and the data center.
Cryptocurrency has grown in popularity this year, leading lawmakers to think more seriously about how to regulate it. Recently, Texas enacted HB 4474, the Virtual Currency Bill, which allows the 216 Texas state-chartered banks to provide safekeeping services for virtual currencies. This week, the U.S. Senate passed the $1.2 trillion infrastructure bill that requires more tax reporting for cryptocurrency transactions.
Ishaan said he tries to keep up with news on the cryptocurrency world. But neither he nor Aanya have told their friends about their latest venture.
“Most kids like to play games on their computer,” he said. “We like to build them, I guess.”