How to Make Your Bitcoin Miner More Effective
The Economics of Mining
To optimize a mining operation, we first have to understand its economics. This allows us to look at each of the relevant components individually and improve them if possible.
A mining operation is mainly dependent on these factors:
- Block Reward/Transaction Fees/Bitcoin Price
- Electricity Costs
Block Reward, Transaction Fees, and Bitcoin Price
Electricity is the only input needed to “produce” Bitcoin. Its price is therefore of utmost importance for all miners, especially because it is the only factor that truly differentiates individual miners from one another. Miners are in a worldwide competition for the cheapest energy. Energy costs directly influence the profit margin and determine at what BTC price miners can mine Bitcoin profitably. While all miners can purchase the same hardware, the cost of electricity is dependent on their location and the contracts mining farms have with electricity producers.
To make Bitcoin mining more profitable and efficient, you may need to consider placing your miner in a different jurisdiction. In some countries, Bitcoin miners have special contracts with electricity producers, which gives them access to cheap energy. Another option is to set up your miner at a mining farm. Some farms located close to cheap energy sources offer all-inclusive services that allow miners to place their mining machines into their mining farm. The farm then takes care of the setup and running of the devices against a fee. An example is this farm in Paraguay.
To calculate profitability with varying electricity costs, you can use a Bitcoin Mining Calculator.
Putting It All Together
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The efficiency of mining hardware is, to a large degree, predetermined by the manufacturer of the mining devices. Optimal conditions and cooling help to get the maximum computing power (hashrate) out of your devices. At least as important are electricity costs. Here, miners stand in a worldwide competition for the cheapest energy. Thus, it is important to be fully aware of your as well as your competitors’ costs for electricity when investing in mining hardware.