When cryptocurrencies first launched, it was relatively easy — albeit expensive — to set up a mining operation in your home and earn as much as 50 bitcoin every 10 minutes. Today’s miners earn just 6.25 BTC every 10 minutes or so due to halving over the years. But you can still earn passive income while crypto mining.
How Does Crypto Mining Work?
When people mine crypto, they set up a powerful computer with hardware and software designed to validate transactions. This is done by solving complex math problems. Each mathematical puzzle they solve is called a “hash.”
Solving a hash creates new coins, which miners receive. Bitcoin mining specifically uses “proof-of-work” validation and tends to use a lot of energy. As BTC mining has progressed, miners have purchased more powerful and more energy-efficient computers in an attempt to keep operational costs down and profits high. But, as BTC becomes harder to mine, it becomes less viable for hobbyists to earn money mining it.
Startup Costs for Crypto Mining
In cryptocurrency’s early years, people could mine from their home computers. That’s because crypto mining didn’t require that much energy. Today, people need a graphics processing unit or application-specific integrated circuit rig to mine efficiently.
You might think the more rigs you have, or the faster and more powerful your machines are, the more profitable your mining operation will be. However, if the rigs are not affordable and energy efficient, you won’t make a profit even if you can mine BTC quickly.
In addition to the GPU or ASIC board, you’ll need a few other components:
- Motherboard to connect all the components in your rig
- RAM for storage
- A central processing unit
- A power supply
- Various hardware and software
You will also need a fast and reliable internet connection, affordable electricity since your machine uses so much power and a crypto wallet. Most rigs for home-based mining run between $1,000 and $4,000 in 2023, according to Bybit Learn.
Is Crypto Mining Passive?
Crypto mining is passive in the same way that affiliate marketing or book publishing can be passive. Once you’ve established the income stream, you don’t have to spend a lot of time managing it. However, there are other ways to mine coins with even less effort on your part.
Crypto Mining Pools: Share the Costs and the Profits
If you have your own crypto mining rig but haven’t had much success finding blocks to mine, you can join a mining pool. As the name suggests, you will “pool” your computer’s resources across a network with other miners. This increases the odds of finding and mining blocks faster. You will have a group of people working toward a common goal and then will split the profits for blocks mined.
When you choose a mining pool, make sure you understand the expectations and how you will make money and how much it might cost to participate.
Some mining pools dole out rewards based on the percentage of processing power you contribute, measured in shares. You won’t get paid until you mine a block, but you will be locking up shares as you contribute to the mining efforts. These are the most common.
Other mining pool structures exist. These include decentralized, or peer-to-peer mining structures, which minimize malicious attacks or bad actors in the pool and may lead to more uptime for mining.
Advantages of Mining Pools
- Sharing risk and costs with other miners
- Prices could rise, increasing your profits
Disadvantages of Mining Pools
- You need expensive crypto mining equipment
- Sharing profits with other miners
- Threats of hacking or theft
- Crypto prices may fall, reducing your profits
Cloud Mining: Fewer Costs, Less Risk
If you want to earn passive income from mining crypto but don’t want the expense and hassle of setting up and maintaining a mining rig, you can try your hand at cloud mining. Cloud mining uses other people’s equipment to mine and — much like if you were to invest in a company — you will earn a portion of the profits.
When you’re choosing a cloud mining operation, make sure it is a reputable company. Take a look at the payouts compared to the commission the cloud mining company takes. You might also consider bonus offers or affiliate programs that pay you extra money when you introduce the cloud mining service to friends.
Advantages of Cloud Mining
- Lower upfront costs
- Someone else builds, maintains and houses equipment
- No electricity costs
- Crypto prices could rise, increasing your profits
- Earn additional money from affiliate programs
Disadvantages of Cloud Mining
- Lower profits
- Upfront investment required
- Some cloud mining companies are scams
- Prices could fall, reducing your profits
Bottom Line: Is Crypto Mining Worth It?
If you are looking for a way to passively mine crypto, you might consider a cloud mining pool. With relatively low upfront costs and no equipment or electricity required, you could earn thousands in a few weeks with your investment in cloud mining.
FAQHere are the answers to some of the most frequently asked questions regarding crypto mining.
- What are three ways to earn passive income in crypto?
- You can earn passive income in crypto by investing in BTC, ETH or other cryptocurrencies. If the value rises, which it has done traditionally, you can sell at a high profit.
- You can also earn money in crypto by setting up your mining rig and mining BTC or ETH. If you want to split the operating costs, you can join a mining pool and split mining efforts and profits with other miners.
- One of the easiest ways to earn passive income in crypto is to sign up for cloud mining. Pay a small upfront cost and earn a profit whenever the cloud mining company you chose mines crypto. Some cloud mining companies have guaranteed payouts.
- What is the best way to passively mine crypto?
- If you are looking to passively mine crypto and do not want to invest in, maintain or house a mining rig, you can join a cloud mining operation. By investing your profits back into cloud mining, you can establish a solid passive income stream.
- Is crypto mining profitable?
- Crypto mining is not as profitable as it once was but it can still make you money.
Information is accurate as of June 20, 2023.
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- Analytics Insight. 2023. "Best Way to Generate Passive Income in 2023 – Cloud Mining to Make Money Online."
- Bybit Learn. 2023. "What's a Crypto Mining Rig & How Do You Build One?"
- Medium. 2023. "Cloud Mining Vs Mining Pool."
- Cointelegraph. 2023. "How to mine Bitcoin at home."
- Buy Bitcoin Worldwide. 2023. "Is Bitcoin Mining Profitable or Worth it in 2023?"