1. Introduction

Bitcoin is a digital and global money system currency. It allows people to send or receive money over the internet, even to someone they don’t know or don’t trust. The mathematical field of cryptography is the basis for Bitcoin’s security. A secure Bitcoin payment is actually the transfer of a so-called value token between Bitcoin addresses. Value can be a number of different things. It can also be an asset, like stocks or bonds. Bitcoin distributes its lack of a central decision-maker by implementing democracy into its resource structure. What that means is that no one can just decide to create more money, but the community has to agree that the new money is being created for the common good. Since bitcoin consists of a transfer of a token between addresses, transfer data is just an encrypted message specifying the token from one address to another. Bitcoin consists of both a transaction system and a currency. The transfer message is broadcast to Bitcoin nodes, which verify and relay it. Bitcoin still has a few unsolved problems, and it may be a few years before it can become an efficient payment system. Bitcoin has a different vision, one that will take the technological capability of an average person a step further. Bitcoin mining is a competitive and decentralized process. Miners are individuals who run computer hardware to solve difficult and complex mathematical problems. The purpose of mining is probably a little misleading. Most people are unlikely to have much of an understanding of mining, which usually involves hard labor, blood, sweat, and tears. Mining in the cryptocurrency network is a process to secure the network and check/process transactions. It is an act of using computational resources to find a particular value that will open the seal of a new block in the blockchain. The block is an aggregation of several transactions. When the value is found, the new block is created and added to previously created blocks, hence the term ‘blockchain’. Whoever finds the value first gets to decide which transactions are processed and also gets to use a special rule to create new bitcoins to reward themselves. This is also the only way that new bitcoins are created. The aim is to get miners to check transactions rather than give everyone money. With a steady and continuous reward system, Bitcoin delivers both security for the network and a way to gradually release new currency. There is a reward for each block that is added to the blockchain; it involves a portion of new bitcoins and collected transaction fees. Step by step, more of the world’s wealth has become a stream of information in the digital realm. It is the vision of what would increase the internet’s technological capacity as well as improve the life and freedom of an individual that has enabled people to think of a different way to use the internet that is taken for granted today. Bitcoin and cryptography are now changing the paradigm of internet wealth. The level of financial resources being received and transmitted through digital means is increasing. This situation leads to the risk of failure to protect financial resources from things like theft and inflation in some current currencies. This risk can be eliminated by a truly global and irreversible digitization of a currency, and bitcoin aims to do just that.

1.1 What is bitcoin mining?

The main task of bitcoin miners is to make sure that bitcoins are not being double-spent. At its core, the Bitcoin protocol is a secure, global, and decentralized database. Any unit of time or effort put forth by any individual miner may or may not be recognized by the changing reward occurrences of Bitcoin as an incentive to secure the network. Thus, it’s best to think of the miner as one of many individuals racing to be the first to solve a mathematical problem in return for a reward that will compensate for or justify the sum of power and effort extended during the race. Often times, an individual miner might find themselves at the whim of change and uncertainty regarding what he is willing to invest in his attempts to accumulate bitcoins. This could be due to the cost of electricity where he lives, the availability of specialized mining hardware, or the willingness to purchase said hardware at improved shipping speed, all to compete with a growing number of individuals for a comparatively smaller set of rewards. In comparative terms, it’s essentially like the storage and release of potential energy in hopes of being the first to achieve kinetic. Today, ensuring the integrity of this process against the very recent past of centralized mining is essential to security and the continued rate of adoption.

1.2 How does bitcoin mining work?

Bitcoin is a decentralised virtual currency. This currency is not printed in the traditional sense but is discovered by a process known as “mining” and can be traded on the internet. To the present day, it is the only form of currency that can be created in this way. Mining is also the mechanism used to introduce Bitcoins into the system. Miners are paid any transaction fees as well as a “subsidy” of newly created coins. This both serves the purpose of disseminating new coins in a decentralised manner as well as motivating people to provide security for the system. To get a little more specific, what miners are actually doing is trying to be the first to generate a 64-digit hexadecimal number, or “hash,” that is less than or equal to the target hash. In other words, it’s a raffle. The number of tries that a miner makes per second is called the hash rate. This hash is created by applying the SHA256 function to the new block that is being mined. If the hash rate of the network is high, which it recently was, then this hash will be very hard to get and will require a lot of processing power to obtain.

2. Factors to consider before mining

To become a currency like the dollar, Bitcoin has to be both a store of value and a consistent measure of value. It is failing on the second measure by a long shot due to its extreme price volatility. In fact, the price of Bitcoin has shown much more volatility over a given period than gold, silver, or other precious metals did during their adoption as a medium of exchange. This would have to change for any serious consideration as a currency. However, volatility is a trader’s paradise, and Bitcoin has been a great tool for trading. That is not to say that it has proved any of its critics wrong by showing this. Bitcoin’s price rise was propelled by retail mania, driving the price to astronomical levels before retail FOMO turned into retail panic with the burst of the bubble. Bitcoin then began another monster run due to COVID and the money printer going bad. In this period, you have seen deep drawdowns and incredible gains. There are winners and losers in this game based on the price at the time of acquisition. Volatility can allow a miner to stack stocks faster or go completely bankrupt on a short-term trade. Back in 2015, when I first researched mining, I found that electricity cost and mining difficulty were the two most cited factors when determining expected gains from mining. Neither of these factors has any effect on the overall total supply of Bitcoin; therefore, they are incentives for miners to either enter or exit the market. An increase in either will reduce miners’ profitability, but other miners with lower costs due to new efficient hardware or cheaper electricity may not see reduced profitability. This may lead to some miners calling it quits, but it will also lead to the removal of weaker miners, making the environment less saturated. In the long run, while maintaining a certain level of decentralization, we would hope that these factors don’t prevent even the small guy from running a one-man home mining operation but rather discourage mega mining farms that muck up the network effect by immediately selling rewards to pay expenses, increasing downward price pressure.

2.1 Cost of mining equipment

The cost of mining equipment is relevant for those who are considering a long-term mining operation or are serious miners. Mining equipment has been one of the most influential factors in the success of new miners. This is partly due to the learning curve of the mining process. It is quite easy to find out how much profit you will make mining and whether mining is going to be profitable once you have mined for 1 to 2 months. A good way to work out the long-term cost of equipment is by considering the price and energy consumption of the equipment when it was new. Take, for example, an old GPU that used to cost around $200 and used to pull 150 watts. Compare this to a new GPU, which costs $200 but uses only 75 watts. The old GPU consumes too much power for the performance it provides, so when the difficulty of mining increases, the old GPU will become unprofitable and will need to be shut off, leading only to a partial ROI. There are many factors to consider in the cost of equipment; however, the most relevant one is whether the equipment will be an efficient long-term investment. A business-minded miner would take into account the opportunity cost, which is that the money spent on the equipment could have been invested in bitcoin, which may provide a better return.

2.2 Electricity costs

However, if you have a low cost of electricity, your key to success is efficient cooling. Bitcoin miners generate a substantial amount of heat, and this heat is not easily cooled. As a result, the use of fans and air conditioning units to cool the miners would add to the electricity costs. If you are mining in a country with a high necessity for cooling, such as India, then it would increase the electricity costs. Gear towards the use of green energy. The future of bitcoin would be bright if more energy-efficient mining hardware was developed. It is predicted that 21 million bitcoins will have been mined by 2040. With the increasing difficulty and reducing block reward, completion would result in a significant loss unless the efficiency of mining was increased. A step towards a greener future for bitcoin has started. A recent news article stated that development has begun on a chip that is capable of hashing 100x more than the standard hardware using the same level of power.

Electricity costs would be the next big factor to consider. The cost of electricity in your area will govern the profitability of your mining operation. Despite the potentially high earnings that can be garnered from mining, the upfront and upkeep costs can be quite high. If the price of bitcoin continues to increase, this will continue to attract more miners, and thus the difficulty will increase, necessitating a higher hash rate to mine successfully. Can we make money from mining bitcoin? Yes, if you live in a country where the cost of electricity is low, such as China, and you have solar panels that generate free electricity.

2.3 Mining difficulty

When the Bitcoin network was first launched, its users could mine coins relatively simply by using their home PCs. As time has gone on and the difficulty of mining has increased, this is no longer a sensible tactic. The reason for this is the increase in the difficulty of the mathematical problems that must be solved in order to earn bitcoins. These problems can only be solved through brute force, and as such, the method is time-consuming and requires a lot of processing power. Mining difficulty is a measure of how difficult it is to find a new block compared to the easiest it can ever be. It is recalculated every 2016 block to a value such that the previous 2016 blocks would have been generated in exactly two weeks had everyone been mining at this difficulty. This will yield, on average, one block every ten minutes.

2.4 Bitcoin price volatility

If the value of bitcoin tanks, then mining cryptocurrency may not be worth it since the opportunity cost will be high. Energy expended during mining could be used towards other ventures, and if the rate of mining does not yield a profit, then these ventures could have been potential opportunities forgone. This may be the case for new miners who have to make an initial investment in mining equipment. In contrast, if the price of bitcoin increases, then mining will become more profitable, thus incentivizing more miners to participate. This has potential negative consequences, as the increase in mining activity can lead to an increase in mining difficulty and a level of centralization for the process because of large-scale mining operations.

Bitcoin price volatility is a very important factor to consider when deciding whether to mine cryptocurrency. The price of bitcoin has gone through various cycles of appreciation and depreciation, and recently the price has soared. With each cycle of appreciation, the reward incentive for mining new coins is diluted, and the increase in mining reward will eventually cease to make up for the decrease in value of the coin. This is mainly due to the fact that the supply of bitcoins is predetermined, and the rate at which new coins are mined is halved every 4 years in an event known as the bitcoin halving. This means that the amount of bitcoin generated by the mining network is reduced, and it has been projected that the final bitcoin will be mined in the year 2140. When this happens, miners will be rewarded for validating transactions using fees alone.

3. Potential profitability of bitcoin mining

Implementing the blockchain has a lot of difficulty due to the battles to change the network and people holding back their BTC. The mining industry and market are fraught with risk; the profitability of mining can be very uncertain due to the rapidly changing nature of bitcoin. This is one of the reasons why we have seen a recent trend of shutdowns and cutbacks on large mining farms globally. Despite the prospect of earning bitcoin, miners would rather take USD salaries from blockchain companies than risk salary volatility in BTC, given the uncertain future pricing.

In a decentralised system, the fees and possible earnings on a computing resource cannot be easily forecasted. With the recent drastic drop in the value of a BTC coupled with boosted difficulty and a high electricity price, mining has become more downbeat than before. Medium-sized mining operations are expected to make BTC from mining and then sell their BTC to pay for electricity costs. This can create a sort of downward spiral in investment, as the best source of income for a miner is to invest in more mining equipment to bring down the electricity cost and increase computing efficiency.

Bitcoin is the first to be paired with computing power and external resources to form a network. This mode of network worked well until all 21 million bitcoins were generated. Back in the day, when bitcoin was still in its infancy, miners would be able to extract BTC relatively quickly using their home PC. However, over time, the mathematical complexity of the bitcoin algorithm has increased massively, and people are now using specialised hardware known as ASIC’s that have been specifically designed for mining. In order to increase the speed of generating BTC, the method of the self-mining server was raised from 6% to 50% to enable more bitcoins to trickle into the economy over time.

3.1 Mining rewards

According to the Bitcoin protocol, each miner is rewarded for every block mined. Each block is sequenced onto the previously mined block, which leads to a sequence of blocks in chronological order—a blockchain. This blockchain is important to the Bitcoin network for it to be able to verifiably display transactions—to determine if they are valid or an attempt to double spend. Every block must have a proof of work established on it—a mathematical function that takes time and resources (the miner’s electricity for running the function on their hardware). Demonstrating a proof of work is a random process with low probability, so usually a lot of trial and error is required for a valid proof of work to be generated. When it is solved, a block is generated, and all transactions are confirmed on the blockchain.

3.2 Transaction fees

This is the sum of all the fees that have been paid while doing transactions that have been confirmed. The rate is an incentive for a miner to include the transaction in their block. This is a newer feature that was included in the later stages of bitcoin trading around 2009. Earlier on, there was no incentive to include transactions as the reward was solely a new coin. This system has been a slight problem for a while, as after all 21 million coins have been mined, there is no longer an incentive for miners to continue to put effort into securing the network through confirming recent transactions. Eventually, the declining incentives should not matter, as the value will increase and decrease in the future due to market conditions. At today’s rate, including ƀ1 (about 10c AUD) per transaction, this calculates to a potential ƀ130,000 per year. Although this is included with the previous reward, it is an alternate source that should secure the mining industry for a longer period of time. In conclusion, the incentive to avoid double spending with the two transaction methods is far more efficient for the company accepting the transactions. This is due to the fact that a chargeback from credit cards takes around 6 months; if the transaction is not confirmed, the sender has the ability to ask for the money back any time in the future. The $130 million annual incentive should allow this to be a secure income in comparison to today’s requirements.

3.3 Mining pool participation

The purpose of this case study is to analyze the impact of the recent changes in Bitcoin mining pool fee structures, in which many pools have moved from the traditional PPS (Pay Per Share) model to the newer CPPSR (Capped Pay Per Share with Recent Backpay) model. In the simple PPS model, the miner would receive a share of the block reward (currently 12.5 BTC) and the transaction fees for each block that the pool successfully mined, based on the predefined PPS rate. However, due to the recent prevalence of transaction fees now being larger than the block reward itself, these new models are aiming to share more of the transaction fees with the miners. This is to maximize the revenue of the more profitable pools, particularly to cover the higher electricity costs and initial investment in mining hardware such as ASICs.

A few years ago, most miners would contribute their hashing power to a relatively small mining pool, with the most popular at the time being Slush Pool, which has been around since 2010. This began to change in 2016, when a significant number of miners moved to the Antpool mining pool, which is run by Bitmain. At this point, each Antminer S9 is generating around $13 per day in mining revenue.

Initially, Bitcoin was mined only by a few enthusiasts. It was only used as a reward for mining a block, which was 50 BTC. Life was simple, and it was easy to mine using your old laptop. But it is not possible today. The competition among miners, as well as the unyielding increase in difficulty level, has made it a different ballgame altogether.

4. Risks and challenges in bitcoin mining

Energy consumption and environmental impact One of the great economies of scale to be had in Bitcoin mining is that the vast majority of miners are located in China, primarily because of the sheer amount of electrical power available to them. It is estimated that the People’s Republic has over 3 GW of excess capacity, spread across 100 plants in 40 provinces. Electricity can be obtained at industrial prices in China and India, ranging from $0.05 to $0.08 per kWh. As power is the major ongoing cost of Bitcoin mining, this is the single most important factor in determining whether or not a miner is profitable. It is widely believed that the price of $0.06 per kWh is the break point for most miners, some of whom will go offline if the price dips just a few cents. Most industrial mining is located in regions with an excess of 4 cents per kWh.

High initial investment Bitcoin mining requires a large upfront investment. Miners are already struggling with the loss of block rewards, making profit even more elusive. This could ultimately put a great deal of downward pressure on the price of XBT. A rational individual would not undertake mining if they did not expect to at least recover the cost of their investment in mining equipment and electricity. It is safe to say that the days of easily mining Bitcoin with a CPU or GPU are long gone. A single Bitcoin today is worth well over $8,000, which is too expensive for most people to afford without foregoing other basic necessities. Even with the advent of relatively cheap and consumer-friendly off-the-shelf ASICs, many potential miners are deterred by the high price of entry. If the price of Bitcoin continues to increase in the future, it is likely that mining will become more expensive and out of reach for the average person.

4.1 High initial investment

The best strategy for making good money in mining is to obtain good hardware that gives us better mining performance. One must use an ASIC microchip that provides several GH/s and goes on increasing the speed and productivity of mining. These pieces of hardware are costly, no doubt, but they are quite beneficial for the miner because, at present, that person will be able to mine effectively and earn more. But in the future, these hardware will have MHL (minimum hash life), i.e., they can be used for 6 months or 1 year. After that, a similar or upgraded product has to be purchased. Now, this is the crucial stage where we need to analyze the Bitcoin rate and difficulty, and a decision has to be taken whether to mine or directly buy bitcoins, and there are chances we can get a better return. Also, during this mining process, if the hardware gets damaged or does not give performance as expected, the miner has to incur a loss, and a new product has to be purchased. This shows that investing in Bitcoin mining is not so simple. During mining, the miners are paid an incentive, which is a sum of newly released coins and the transaction fee. The incentive is dynamic in nature and usually increases in the long term. Primarily, miners show continued interest in mining for this incentive only. But it is observed that at many times, mining becomes less cost-effective, and the incentive is not sufficient enough to cover electricity and hardware costs, so there is a possibility that some miners can stop mining, leaving it midway.

We have many options: a person can use their own PC, gaming console, or maybe a gaming graphics card. But it is advisable not to use the existing system for mining, as it can affect the mining or the life expectancy of the system.

There are many areas where we need to be careful when making investments, and Bitcoin mining is one of the riskiest investments. Most people are looking to invest in this and get involved in mining, as it is the best time to start and earn the most from it. But it is not so easy. Bitcoin mining is a peer-to-peer process in which a network of computers is used to approve Bitcoin transactions by including them in the blockchain. During this process, the miners are rewarded with transaction fees and newly created bitcoins. This is the most crucial time to make a mistake because investing in hardware is not a small thing, and if anything goes wrong, then you will be losing your money and your confidence. People might be thinking that investment refers to easy money, and we are maybe strong or maybe weak financially.

4.2 Energy consumption and environmental impact

Mining farms, pools, and cloud miners have gathered in an era where they no longer avert to the dollar-to-btc exchange rate but to the rate of bitcoin creation from mining. This is where Bitcoin production has been deployed away from many Bitcoin miners. In a time before specialized hardware became the be-all and end-all of Bitcoin production, many creative individuals were able to run nodes regularly and receive tens of thousands of Bitcoin from mining a block solo with a simple CPU. It is unfortunate that the days when more people could get involved in Bitcoin mining are well and truly over, and now it is the sole dominion of large companies with access to cheap electricity and dedicated hardware. This has implications on the centralization of Bitcoin. Now that the majority of Bitcoin production is done in large-scale industrial manners, the businesses that convey this production comprise the majority of the network. This could theoretically cause a 51 percent attack and would be a change of confidence in the concomitance in Bitcoin.

Energy consumption and environmental impact are the most pressing issues out of all the risks and challenges regarding Bitcoin mining. This was touched on in the last section, but in many ways, these two issues are even more limiting to the profitability of mining than a high initial investment. The days where one could mine Bitcoin on a simple desktop PC are well and truly over. The costs of the electricity needed to run a computer that is no longer CPU-efficient but GPU-efficient in terms of hash rate far surpass the value of the generated Bitcoin. This is particularly an issue in a time where electricity costs in many western countries now exceed the cost of the electricity subsidies many solar panel users sell back to the grid. The only miners who are able to turn a profit are those with access to cheap electricity and highly efficient, custom-built hardware.

4.3 Hardware obsolescence

ASIC obsolescence: An ASIC (application-specific integrated circuit) is custom-built hardware made solely for the purpose of bitcoin mining and is several magnitudes more efficient than any of its predecessors. A mining ASIC was typically six to eight times more efficient in GH/j than that of an FPGA. The increase in efficiency soon rendered other mining hardware nearly obsolete. The continuous difficulty increment combined with increasingly efficient hardware resulted in the need for regular reinvestment to stay competitive. It also created less risk for mining hardware manufacturers, as they could presell their ASIC batches, knowing that with current cryptocurrency values and mining rates, customers would see a return on their investment. This described scenario can be seen as both a blessing and a curse. On one hand, a more efficient means of mining reduces the environmental impact of bitcoin mining, but on the other hand, an individual’s mining expedition became somewhat of a rat race and a continual buying cycle as old hardware inevitably became obsolete.

Hardware obsolescence (FPGA obsolescence): The nature of hardware is to become obsolete, and as newer models are produced, companies must seize the opportunity. This is the case with FPGAs. An FPGA is a Field Programmable Gate Array, and it was a great improvement from the GPU and took power efficiency from 600 MH/s per joule to around 50 MH/s per joule. However, this came at a price. FPGA has a short shelf life due to the nature of its production. The design process of a new chip takes around 6 months, and the lifespan of an FPGA is roughly only a year or two. As FPGAs are an intermediate improvement from GPU to ASIC, which will be explained later, the production of new FPGA models soon ceased as companies looked to design their ASICs. This left the individual small-scale miner who initially invested in an FPGA system at a disadvantage, as they were outcompeted by those with newer models, and eventually made their function as an unprofitable venture. With no resale value for used FPGAs on the market and only the option of costly continuous reinvestment, this left a bitter taste in the mouths of many miners, who gazed with envy at their FPGAs left lying and collecting dust.

4.4 Regulatory and legal considerations

Taxes are another issue facing miners. An individual miner can be considered to be operating a business and will be subject to business income, which can be used to tax the value of the coins mined. This is cumbersome and difficult to keep track of but failing to report such earnings can result in audits and legal action. Failure to pay taxes is similar in scope to tax evasion for traditional income and is not a charge to be taken lightly. In comparison, any increase in scarcity and value of a digital currency will result in capital gains tax when said currency is exchanged for other forms of currency or other goods. This may kill the fungibility of Bitcoin and make it more similar to owning gold or a foreign currency, which is subject to the same forms of taxation.

There are a number of major regulatory and legal concerns facing a mining operation. Mining for the creator of Bitcoin is legal because they are taking transactions and making a new transaction with a higher fee but no one is certain if this is actually legal. This new transaction is called a coinbase transaction and is the only way (currently) that bitcoins are issued. Anyone with computer power can register by paying transaction fees and coinbase transactions. Because the issuance of bitcoins is decentralized and incurs no cost besides CPU power, it is a safe assumption that the majority of miners are in the clear. However, laws often have unintended consequences and a legal attack can be made towards the software used for mining and the process for which coinbase transactions are conducted. This can potentially result in a felony charge because of the nature of coinbase transactions and the fact that they are exchanges between less and more valued coins. This kind of regulation is very unlikely, but it’s there. In contrast to this complex issue, some countries may explicitly ban or permit the mining of digital currency, and it may or may not be enforced.

5. Alternative ways to participate in bitcoin mining

Mining on a smaller scale refers to constructing your own mining rig at home. Mining software is available for free online, and there are several programs available, some for a small fee, that can help optimize the performance of a rig. This method can still be cost-effective, provided that electricity can be supplied at an all-in price of around 20 cents per KWh, making the use of efficient hardware crucial to offset the electricity costs. An example hardware setup that can achieve around 500 MHash/s would involve a single GPU, such as the HD 5830, along with a low-end CPU. Overclocking both the GPU and CPU and using an aggressive power-saving configuration on the GPU can increase performance while saving power, although there is wide variation between setups.

However, the consumer needs to be careful when it comes to cloud mining contracts, and currently, in the industry, GigaHash.io is viewed as one of the more suspect operations. As Bitcoin is still relatively volatile, this can end up providing the consumer with a loss if the dollar value of Bitcoins received at the end of the contract is less than the total cost to the buyer.

Cloud mining services involve a customer purchasing a set amount of processing power, and in turn they will receive an equivalent amount of Bitcoins. This can be an attractive option for some due to the ease of setup and potentially reduced start-up costs, as well as being the only option for those who are not technically minded and do not want to run their own hardware.

5.1 Cloud mining services

Cloud mining offers a practically lower cost of entry with minimal risk and expense, which is opposite to traditional mining models involving procurement, maintenance, and hosting services.

For the currencies that we listed, an ASIC can still be acquired and these still have the potential to generate a higher net profit than GPU or, say, CPU mining. The high-end rigs mentioned above that are able to generate sufficient amounts of bitcoin can run up to £5000. This becomes a huge investment with a huge cost of entry. Even with a rig purchased with a lesser quality at a cost of around £500, it’s still a spending spree that you may or may not wish to take on with the currency you’re experimenting with.

The idea of cloud mining is very simple. Instead of spending thousands of pounds on your own hardware and managing it yourself, you are basically paying to rent the hardware and electricity of a large data centre. It’s often a one-time payment and can work out cheaper in the long run, depending on the currency’s current value.

Cloud mining services often don’t have the best reputation for honesty, and it’s undeniable that the field is rife with scams, but there are some reliable companies out there and ways to make a profit from cloud mining contracts. Ultimately, though, we’d advise against investing time in cloud mining and would still suggest that it’s more profitable to simply buy the cryptocurrency in question.

5.2 Mining on a smaller scale

At this stage, the profitability of mining has dropped to the point where it has become a high-risk venture, and the only possible way to make a profit is through speculative investment. This is where the “prospect theory” contingency is significant. The marginal cost of mining increases, and the only justification for it to continue is if the price of 1BTC is significantly higher than it is now. Holding off on selling the BTC that you have mined will result in a long BTC position and a short mining position. Therefore, it would probably be more rational to just buy and hold BTC in the first place.

It is possible to mine on a smaller scale by setting up a few miners in your garage or even just employing your personal computer. If you can set up, configure, and maintain your own hardware, then it will continue to provide you with a steady flow of BTC. It is also possible for you to join a mining pool for greater returns, and CoinShares states that “today, the large majority of miners are mining as part of a pool.” With this option, the most significant risk is buying hardware and not breaking even. If there was no market for your hardware, then it may be better to have just bought BTC.

5.3 Investing in mining companies

Investing in the stocks of companies is one way to participate in Bitcoin mining. The investor mainly buys the Bitcoin mined from these companies. Additionally, they buy the stocks of the company with the hope that the stock price will rise if the company is able to mine more Bitcoins. The price of Bitcoin and the stock of the company are highly correlated. One public company engaged in Bitcoin mining is U.S. Silver Corp. This company is trying to change its name and stock symbol to reflect its new business and increase its share price. In Canada, there are several penny stocks exploring or getting involved with Bitcoin or similar cryptocurrencies. Although this may not be a direct play in Bitcoin itself, it may be worth considering. On the other hand, it can be an advantage for the company because stock prices are highly correlated with the price of bitcoin during the same period. If the price of Bitcoin goes down, the company can use its expertise to mine Bitcoins and increase its net income. Lastly, investors can always invest in a private company, but it involves a high risk of failure.