Gareth Johnson
Gareth Johnson
Updated on October 5, 2021

For people that want to invest money in cryptocurrencies and specifically in Bitcoin (BTC) as the leader of the crypto market, the easiest way to get hold of coins is to buy them at a cryptocurrency exchange such as Coinbase, Binance, Kraken, and other popular exchange platforms. 

However, there is a solid portion of crypto enthusiasts and investors that decide to get hold of Bitcoin, Ethereum (ETH), Litecoin (LTC), and other popular cryptos by producing them in the process of mining cryptocurrency. 

Crypto mining has proved a very lucrative business opportunity for individuals who are prepared to invest money in putting together expensive, specialized mining computers, called mining rigs. The fact that a computer could work 24/7 and generate value by earning fresh bitcoins sounds great because the owner of the mining rig just has to maintain the computer and watch their crypto portfolio increase.

In theory, mining sounds pretty simple, but actually, it’s a pretty complex procedure that can yield considerable profits if you understand how it works. A lot of people want to mine Bitcoin but haven’t taken the time to understand the process or ensure that it’s cost-effective. 

This guide will take a step-by-step look at what Bitcoin mining is, show you how it works, and help you learn what mining rigs are and whether it’s possible for an individual to build their own professional-grade ASIC miner machine.

The Bitcoin Blockchain

Before diving into the specifics of Bitcoin mining, we want to give you an overview of how the BTC blockchain, the network on which Bitcoin is running, works. Bitcoin was the first cryptocurrency in the world when it was launched back in 2009 by anonymous programmer Satoshi Nakamoto. It was the first decentralized, digital cash in history and it utilized blockchain technology to facilitate fast and secure transactions of funds between any two locations in the world.

After people started gaining trust in the BTC blockchain and its popularity started rapidly growing, numerous developer teams launched their own cryptocurrencies, based on similar blockchains which took all the best aspects of the Bitcoin blockchain.

Bitcoin on green background

The blockchain itself is a sort of digital data storage network that acts as a distributed, public ledger of Bitcoin transactions. This means that all transactions are publicly traceable on blockchain explorer sites such as Blockchain.com and you can always follow the status of your transfer to make sure if it’s processed or not.

Bitcoins never leave the blockchain, they just change virtual blockchain locations when they are transferred between BTC addresses. Since BTC doesn’t exist physically, there has to be some method for proving your ownership over a certain amount of coins. This is why crypto wallets were invented, as a method for storing private keys that are a sort of password which proves ownership over cryptocurrencies. When you have a private key safely stored in your crypto wallet, you have proof that a specific amount of BTC on the blockchain is actually yours and you can manage it as you wish.

When the BTC blockchain appeared, it was quite unbelievable to people that money can be safely stored and transferred in a digital form, without any bureaucracy or paperwork associated with bank transfers. All this is possible because of the state-of-the-art encryption used by BTC and its consensus algorithm.

Proof-of-Work

The consensus algorithm used by the BTC blockchain to make sure there are no scams or fraudulent transactions is called the Proof-of-Work algorithm. Every time you initiate a BTC transaction, it has to go through a complex verification process in order to get validated. This process usually lasts 5 to 10 minutes, but it can last longer if the network congestion is high because of a sudden increase in trading volumes.

Once a transaction is initiated, the transfer data goes to a memory pool, which is a digital location on the blockchain where pending transactions wait to be selected by miners. Once a miner picks a transaction from the mempool based on the transaction fee which is attached to the transfer, he will start searching for the appropriate transaction hash. Every transaction needs to be paired with a corresponding 64-digit transaction hash that proves the validity of the transfer.

Finding the appropriate hash combination is a very complex operation, not because of the mathematics behind the process but because there are so many combinations that have to be tried out. Luckily, there are numerous mining pools where miners from all over the world join their computing power to find transactions hashes faster and this is why a transfer takes an average of 5 to 10 minutes and not much longer. 

When the appropriate 64-digit combination is found by a miner, it is sent out to the rest of the network as proof-of-work for several other network nodes, which will confirm the validity of the hash and finally approve the transaction based on the consensus algorithm.

The network nodes, which are all independent miners that aren’t in any way in contact with each other, are tasked with approving all transactions and checking to make sure that no one is trying to double-spend the same coins twice. This method ensures there are no frauds on the BTC blockchain.

Bitcoin Mining

The role of miners is of key importance for the functioning of the BTC blockchain and any other proof-of-work-based crypto such as ETH or LTC. Miners use their powerful computers to validate all blockchain transactions and the whole network just wouldn’t be able to function if there weren’t any network nodes that are responsible for checking transactions. Bitcoin is a fully decentralized cryptocurrency and there isn’t any central server or other central authority that controls the network. Instead, there are thousands of copies of the whole blockchain on the computers of the network nodes. 

The authority to check transactions, validate them, and process them is delegated to miners. Since validating transfers and fighting appropriate hashes requires a lot of power and expensive hardware, miners don’t do this for free. Each BTC transaction has to have an added transfer fee, also called a miner fee, because when a miner processes a transaction, they take the added portion of satoshis as a fee. Transactions with lower than average fees take much longer to process than those with average or above-average fees because they aren’t attractive to miners.

Row of GPUs in mining rig setup

However, the main miner incentive for validating transactions aren’t the fees, but the freshly mined bitcoins which are awarded to miners after the creation of each new block of the blockchain. 

When a new block of the blockchain is filled with 1MB of transaction data and a miner finds the appropriate hash to verify a transaction, the new block is added to the rest of the chain. At that moment, the miner who contributed to the creation of the new block gets a block reward of newly mined BTC. This is the real reason why people invest large amounts of cash in expensive equipment for mining Bitcoin.

Mining Pools

Even with a strong computer configuration, specifically built for mining BTC, it’s very difficult for an individual miner to quickly find the appropriate 64-digit hash for a transaction on the blockchain. This process can take minutes, hours, or days and there are no rules to when an individual miner will successfully find the corresponding hash that acts as proof-of-work for a transfer. Also, the competition is very strong, because there are thousands of miners worldwide who are using the computing power of their mining rigs to validate transfers and potentially receive block rewards in the form of fresh BTC.

In order to make Bitcoin mining more accessible and profitable, most miners join forces in so-called mining pools. A mining pool is a digital network of miners that share the computing power and hash rates of their mining rigs into one single entity. This entity uses that accumulated hash rate to try out thousands upon thousands of 64-digit combinations until the right one is found for each BTC transfer that was selected by miners from the mining pool.

Once a correct combination is found and the block reward is awarded to a miner, that reward gets split between members of the mining pool. This way, pool members earn BTC much more often compared to a solo mining operation, where a miner could possibly earn a much higher reward of BTC since the whole amount would go to them, but it’s much more difficult to be that exact miner who found the appropriate hash.

There are different types of mining pools. The most common type are proportional pools where a miner is awarded according to the power share they are contributing to the pool. There are also pay-per-share pools that pay out regular periodic rewards for contributing to the power supply of the pool.

CPU Mining

Back in the early 2010s, when Bitcoin was still new and there weren’t nearly as many investors and crypto enthusiasts as today, it was fairly easy to mine BTC. The Bitcoin mining difficulty is automatically increased every four years and the block reward is halved to make BTC more scarce. Since BTC was launched in 2009, during the first years, people were able to efficiently mine bitcoin using the CPU of their PC or laptop computer.

An average CPU had enough processing power to mine Bitcoins and bring block rewards to miners, even if they weren’t members of mining pools. However, this situation didn’t last long, because as soon as people started realising how trustworthy and secure the BTC blockchain is, its popularity exploded and a mass of people wanted to become BTC miners.

CPU chip on computer hardware

This resulted in the exponential growth of the BTC network, along with the mining difficulty and mining competition. An average computer and CPU weren’t able to keep up with the expansion of the BTC community and the mining difficulty which started requiring much more processing power to efficiently mine coins.

Crypto enthusiasts then searched for an alternative way to improve their BTC mining capabilities and soon shifted towards GPU mining.

GPU Mining

Graphics processing units (GPUs) proved to be much more efficient for mining BTC and other cryptocurrencies. The hash rates of GPUs are much higher and multiple graphics cards can be connected into a single system, a mining rig to combine their hash rates. 

The hash rate of a GPU symbolizes the number of 64-digit combinations a GPU can try out in a set period of time. Hash rates are measured in hashes per second, as well as in megahashes and terahashes for larger mining operations of whole mining pools. 

A GPU is the single most important hardware element of a professional mining computer and the choice of GPUs will determine how efficiently you can mine a cryptocurrency. Keep in mind that graphics cards can be quite expensive and buying several high-quality GPUs is a serious investment that can take quite some time to pay off once you start mining. 

Also, the mining efficiency of GPUs drops quickly. A set of GPUs which are now regarded as great for mining BTC can become outdated and efficient just a year later. 

Mining Rigs

Mining rigs are the most popular way for mining BTC, besides using ASIC miners, which will be described in detail in this guide. As far as rigs, the key components are GPUs. A good mining rig has anywhere between 2 and 8 GPUs. Depending on your budget and choice of GPUs, the rig can have a quite impressive hash rate, which can yield serious amounts of BTC, once you pay out the initial investment.

Besides a strong set of GPUs, you need a good CPU and motherboard to connect the GPUs. Also, you need to create an efficient cooling system for the rig. Mining rigs generate a lot of heat, especially given the fact that they need to be operational 24/7 to be profitable. You need to carefully evaluate how many coolers you need for your rig and you need to put all the rig components in an adequate frame. The frame needs to have enough space for each GPU to have its own separate airflow for efficient cooling. 

Mining rig setup on white table on white background

If you just pack several GPUs next to each other and put a couple of coolers next to them,  there is a high chance that your rig will malfunction because of overheating. This is why you need to carefully plan the cooling system.

Mining Profitability

Once you have an idea of what type of components you would like to use in a mining rig, you shouldn’t buy them right away. It’s highly recommended that you first make a thorough plan and calculate the potential profitability of your mining operation. 

The initial amount of cash invested in the mining equipment, along with the rig’s hash rate, power consumption rate, and how much the electricity costs are all factors that need to be taken into consideration when calculating how much you will potentially earn from mining BTC or any other cryptos.

It’s a good idea to use a website such as Nice Hash or Crypto Compare to accurately calculate your mining profitability.

ASIC Mining

Apart from mining Bitcoin or other altcoins with the use of GPU-powered mining rigs, there is one additional mining method that is quite expensive but it also grants the largest amounts of cryptos. ASIC mining is crypto mining with a specially designed machine with only one purpose, to mine a specific crypto such as Bitcoin. ASIC means Application Specific Integrated Circuits, which symbolizes that it is a machine with only one programmed purpose. The application for which an ASIC is designed is to mine digital currency and an ASIC can only mine one asset because the circuits are programmed to follow just one set of instructions.

The hardware in ASIC miners is far stronger than any single GPU in mining rigs. While the hash rate of GPUs is usually displayed in megahashes per second (mh/s), an ASIC miner’s hash rate is displayed in terahashes per second (th/s) which illustrates the sheer superiority of an ASIC compared to a GPU. An ASIC is even stronger than several state-of-the-art GPUs combined together in a single mining rig.

However, this comes at a very high price. An ASIC miner can cost anywhere from a couple of thousand USD to $10.000 or more, depending on how efficient and new it is. This is much more than the cost of some of the best Nvidia or AMD Radeon GPUs which are used in mining rigs.

ASIC miner machines are usually used by large-scale Bitcoin mining operations that are run on mining farms by mining companies that invest millions of dollars specifically in BTC production. Individual miners far more often use classic mining rigs and participate in mining pools.

Can You Build Your Own ASIC Miner?

The key question at hand is can you build your own ASIC miner? 

Well, this question doesn’t have a simple answer, because, in theory, it is possible to build an ASIC machine. However, that’s if you have access to ASIC components, as well as very advanced programming knowledge, both in terms of the specific mining software script used to programme these machines and in terms of hardware that is built into an ASIC computer for efficient mining. 

Row of GPUs with wires in mining rig setup

So theoretically, you can create an ASIC but it is highly unlikely for an average crypto enthusiast to have sufficient programming and technical knowledge to put together an ASIC. 

What is even more unlikely is to have access to the core components for making an ASIC miner, because the hardware itself isn’t available for sale independently from a complete ASIC machine. The companies that manufacture and sell ASIC miners don’t sell the separate components of these machines. In fact, if you have an ASIC and it malfunctions, these companies are the only ones that can manually replace your malfunctioned components and fix the machine. 

Basically, you can build a highly advanced mining rig with some very advanced GPUs and manually tweak the graphics cards to overclock them to work even harder if you have an adequate cooling system, but creating your own ASIC is very unlikely. Even if it’s possible in some cases to buy all the components of an ASIC miner along with the special application software which has to be integrated with the hardware, the price for obtaining all those components will be more expensive than simply buying a trusted ASIC model from a professional manufacturer.

Popular ASIC Mining Rigs

If you have a considerable budget that you want to invest in Bitcoin mining and aren’t satisfied with the hashing power and performance of GPUs, you can invest money in buying an ASIC miner. These machines are much more expensive than mining rigs but they also produce much more BTC, which is very profitable because of the high Bitcoin price on the market.

These are some of the most popular and trusted ASIC mining machine models on the market and they are usually available for sale on Amazon and eBay:

Antminer S19 pro

The Bitmain Antminer S19pro is a very strong ASIC miner with a 110 th/s hash rate. Its standard power voltage is 220 V while the wattage is 3250 watt_hours. The miner also comes with a power supply unit (PSU) when bought.

MicroBT Whatsminer M31s

The Bitcoin Miner MicroBT Whatsminer M31S is another highly popular ASIC miner model that also runs on a standard 220 V voltage with a 3256 W wattage. The main difference from the Antminer S19 pro is the hash rate which is 74 th/s and this is why this model is more affordable than the S19 pro. However, it is still much stronger than GPU-powered cryptocurrency mining rigs.

A Few Final Words…

Mining Bitcoin or other cryptos can be very profitable if you create a good mining plan and take into account all the factors that might impact your profitability. If you have the budget for a Bitcoin ASIC miner it is definitely worth it but keep in mind that besides costing much more than a mining rig, it also consumes a lot more power.