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How to Mine Cryptocurrency

Sam Ingalls
Last Updated August 6, 2021 7:30 am

This guide looks at what cryptocurrency mining is, the most popular method of mining, steps for how to start, and how long it can take to break even. 

People don’t realize how feasible it is to mine cryptocurrency. Without a computer science degree or technical experience, anyone with internet connectivity and a source of funds can participate in the crypto economy. 

This method is known as cloud mining. Organizations and personnel with the physical space, power capacity, and know-how can offer their miners and mining ability to investors for a piece of the reward. For people interested in mining cryptocurrency but don’t want to take on the risk of buying, assembling, and maintaining high-powered rigs – this guide is for you.

What is cryptocurrency mining?

Cryptocurrency mining is the process of verifying transactions on a coin’s blockchain for which miners receive a reward.

Every cryptocoin has a blockchain that maintains records of every transaction in its history. Because there is no central authority, a network of computers (also called nodes or rigs) are responsible for verifying and therefore confirming the transaction on the blockchain. The decentralized network of miners has a financial incentive to verify transactions because their proof of work pays them in cryptocurrency.

For a digital frontier, cryptocurrency mining is the process of using hardware, software, and a source of energy to participate in a cryptocoin’s decentralized, global network. In five steps, onlookers can become cryptocurrency miners.

A graphic showing five steps one can take to start mining cryptocurrency, from buying a mining rig to joining a pool of miners and earning coins in your wallet.
Designed by Aubri Ziegler. © Webopedia 2021.

How does crypto mining make money?

From washing dishes to coding software, traditional economies incentivise work through paying workers. What makes mining cryptocurrency different is that the human isn’t compensated for their work – the mining rig is. 

Through proof of work, a mining rig competes with nodes to solve hashing algorithms that verify transaction details and parties involved from exchanges occurring globally. The node’s computing and processing power is known as the hashrate. A higher hashrate means better performance and a stronger chance of winning more blocks and earning more rewards.

What is cloud mining?

Investors and tech enthusiasts can participate in cryptocurrency mining in two ways:

  1. Do-It-Yourself: buy and assemble equipment, continually maintain and operate
  2. Cloud Mining: outsource or rent mining capabilities from a third-party provider

For thousands of dollars or hundreds per month in upfront costs, interested parties can dive into purchasing equipment, assembling, and maintaining their mining node. Cloud mining, by comparison, are platforms that offer contracts tied to part or all of a rig’s mining capabilities for a fraction of the cost. 

For the fastest route to mining cryptocurrency, cloud mining is the way to go. Cloud mining vendors offer farms of rigs that consumers can rent to mine cryptocurrency on their behalf. As the crypto economy developed in the last decade, specialization enabled consumers to still participate in cryptocurrency mining without the equipment and resources. 

Contracts enable investors to buy into only part of the mining capacity, also known as the hashrate. A higher hashrate means stronger performance, while a lower hashrate on a contract translates to smaller rewards.

Pros of Cloud Mining 

  • No technical knowledge or experience required 
  • No operating costs like electricity and cooling
  • No hardware expenses such as the CPU, GPU, FPGA, or ASIC chips 
  • No excess heat or noise

Cons of Cloud Mining

  • Low earnings relative to DIY approach of building and operating a mining rig
  • Usually limited to mining one type of cryptocoin
  • Unsuspecting investors can fall victim to malicious actors like piracy
  • Consolidates the decentralized network making it more vulnerable to central authority influence

How to start crypto mining

1. Select a Cloud Mining Platform

The first step to mining cryptocurrency fast is selecting a cloud mining platform. We used ECOS for this how-to guide but included several popular platforms later. ECOS is one of the top platforms and offers customers hashrate contracts or entire devices that mine Bitcoin (BTC).

Once you have a medium, head to the webpage’s “sign up” button to register.

2. Register and Validate Your Account

Submit your personally identifiable information. For ECOS, all that’s required is an email and phone number. Then, while still on the registration page, investors will confirm their identity via SMS phone code. Similarly, investors need to verify their email through a verification link.

3. Access and View Your Dashboard

After registration and email verification, investors can log in to access their account dashboard. Immediately in view are four boxes with quick data like total mined, daily mined, daily gains over time, and user contracts. On the left-hand side, investors have a general menu for account management. The three primary pages for investors are:

  • Buy Hashrate: Consider contract options for a hashrate-based purchase
  • Add device: Purchase a rig or supply details for your mining machine
  • Transactions: A list of all user financial activity, including purchases and daily cryptocurrency gains

To emphasize, a hashrate contract is only tied to part of the mining power of a rig while adding a device enables users to buy or rent an entire rig or register their own rig.

4. Navigate to Hashrate Calculator for Pricing Consideration

Investors have the option of purchasing a managed cryptocurrency mining rig, but the investment is orders of magnitude higher. 

In this example, we consider the purchase of a contract tied to the performance of part of a mining rig. By toggling the four fields for Service Fee, Contract Duration, the expected cryptocurrency Price Forecast, and hashrate Price, the platform can offer a contract and data on expected profit. While toggling, the graphic representation in the right section shows the predicted yield relative to investment. In contrast, the bottom section shows how cost-efficient mining the cryptocoin is opposed to buying it.

5. Confirm Your Order Details

With contract details selected, investors have the option of paying with their credit card of choice or from a handful of cryptocurrencies. For card payment, your transaction should be instantaneous with email confirmation.

In this example, we use Ethereum (ETH) for payment, requiring an additional step. With the order confirmed and intent to pay with a selected cryptocoin, an investor has a limited period to send payment to the provided address. 

Below, you see the contract details, including the amount owed (.05823000 ETH or $149 at the time), address details (QR and numeric), and the remaining time before the order cancels.

6. Payment Processed

If paying with a card, investors will promptly land on a transaction confirmation page. For crypto transactions, confirmation usually takes no more than 10 minutes upon sending payment. For safekeeping is the payment ID located towards the bottom of the webpage. Additionally, investors will receive a confirmation email also verifying the successful transaction.

7. Return to Account Dashboard

Once confirmed, the user can return to the dashboard, where a change should be visible. In the bottom section entitled “Contracts,” the user now has a mechanism for mining at work. 

8. View Contract Details

By clicking on the contract, investors can look into the agreement details. This data includes the hashrate, days remaining on the contract, mining pool, service fee, mine total, and total profit.

For this example, we created a contract for $149 that offers Bitcoin mining rewards at a hashrate of 0.62 TH/s. The contract length is 50 months, or 1550 days, and includes a $0.05 service fee. For this contract, we forecasted a BTC price of $50,000. With a long wait ahead, the forecasted profit is 58.5%.

9. Wait, Mine, Withdraw

With the minimum contract lasting several months, cloud mining investors with contracts can sit back and watch their hashrate produce daily rewards. Like long-term bonds or risk-averse stock market investors, cloud mining investors that are patient reap the greatest benefit. As rewards are collected and the cloud mining wallet grows, investors can withdraw the coins at their discretion.

How long it takes to break even

Breaking even is the business idiom for when revenue meets the cost of goods sold. In mining for cryptocurrency, every method involves an initial investment. How long before the coin rewards meet or surpass expenses is influenced by factors like:

  • The underlying price of the cryptocoin mined
  • Pooled rewards allocated to groups of miners
  • Cost of energy to power mining
  • Hashrate; processor and rig specs

Because of the volatility of cryptocurrency, the value of mining rewards is specific to the cryptocoin and susceptible to quick changes. 

Breakeven Example for Mining Cryptocurrency

The breakeven point is different for all investors with differentiation between contracts in hashrate, service fee, and mining period. In Step 4, investors see these details while using a hashrate calculator to consider contract options. For the pre-set example, contract details are:

Contract VariableDetails
BTC Price Forecast$70,000
Service Fee$0.05
Contract Duration30 months
Hashrate3.15 TH/s

For an upfront investment of $613.80, an investor obtains a contract that – like a bond – for a period of time. While not available on every platform, the calculator application shows an expected profit of 74.7% to a total reward of $1072.29 at the term’s end of 30 months. Because the hashrate delivers a regular daily return, one can calculate an expected breakeven point with the details provided by dividing the total expected gains by the term. 

If today is Day 0, the contract ends in 30 months on Day 900. When the total expected reward ($1072.29) is divided by the number of days (900), the average daily gain comes to $1.19. Thus, at $1.19 a day, the investor will gain back the amount invested ($613.80) and breakeven in approximately 516 days — a bit more than halfway through the contract term.

Important: With the hashrate and service fee locked in, the price of the cryptocoin holds the most significant influence over the accuracy of this calculation. With cryptocurrency volatility, the above analysis offers an incomplete forecast. And like most other investments, there is no guarantee that mines will earn back their initial investment. 

Cloud mining considerations

For cloud mining, the market of vendors is still relatively young. Several popular platforms used over the years have disappeared or gone bankrupt, while others continue to struggle with availability or remain down for maintenance. Important considerations for selecting a cloud mining vendor include:

  • Does the platform have a proven track record and a good reputation?
  • What cryptocoin contracts does the platform offer? (e.g., BTC, ETH, LTC, etc.)
  • What mining equipment does the vendor use for mining?
  • Where is the platform physically located, and how does that affect the price of energy?
  • What is the range of contract terms available?
  • What do service fees cover, and how do they affect the contract?

Choose a cloud mining vendor carefully, knowing that not all platforms are created equal, nor can they promise to exist in 5 years. 

Selected Cloud Mining Vendors

  • BeMine
  • CryptoUniverse
  • ECOS
  • Genesis Mining
  • HashGains
  • HashNest
  • IQ Mining
  • Shamining

Contract considerations

Buying Cryptocurrency vs. Mining Cryptocurrency

Depending on the cryptocoin price over the mining period, it is more than possible to lose money when mining. Some cloud mining platforms offer helpful insight into when mining cryptocurrency is optimal. The DIY method for mining is time-exhaustive and expensive, while cloud mining reduces some of this risk by cost-sharing with other investors. 

With a fluctuating cryptocoin price, sometimes buying the cryptocurrency is more profitable than mining when considering the added costs. Buying cryptocurrency ensures instant access, with a transaction fee being the extent of the cost. The principal sits in the investor’s wallet at the value of the fluctuating cryptocoin.

Unfavorable Contracts for Mining Cryptocurrency

In the screenshot below, we offer an example of an unfavorable contract that leaves the investor with an expected total reward less than their investment. At the lowest contract price of $149 on ECOS and a BTC price forecast of $50,000, the contract duration makes a big difference. At 19 months, the investor is close to breaking even, but not quite.

Impact of Time on Mining Contract

To make this contract more profitable, the investor must commit to a longer contract term. Every increase in the number of months correlates to a higher expected profit. For example, at the exact upfront cost, all other details remaining the same, 19 months results in a -0.91% loss while a 50-month contract delivers a 58.5% return. 

Paying for More Hashrate

Alternatively, an investor could increase the price point of the potential contract and expand the hashrate. In this example,contracts ranging from $1,390 – $15,500 at 19 months are profitable for the given data. While the investor pays more and will receive more in rewards – the extent of profitability is still limited by the contract duration – providing a maximum return of 1.78%.