Is Crypto Mining a Profitable Side Hustle?
Crypto mining…AKA cryptocurrency mining, bitcoin mining, ethereum mining, etc…has recently seen a massive surge in interest. So I set out to evaluate it and see if it’s an effective, profitable side hustle and passive income stream.
As you may know from my blog and book, stringing together numerous passive income and variable-pay income streams allowed me years ago to not only quit my 6-figure corporate job, but also double my earnings and continuously grow my wealth and freedom.
If you’re serious about making money and not just working for your money, you owe it to yourself to learn about cryptocurrencies such as Bitcoin and Ethereum.
This article contains a ton of very good information, but you can get an update on numbers for 2018 in my post “Will Crypto Mining be Profitable in 2018?”
Here we go…
Is crypto mining a profitable side hustle?
The short answer…huge YES! But, as with anything, there are plenty of gotchas and risks. I personally consider mining a very exciting, rewarding, and profitable project. It’s a modern-day gold rush.
The long answer to this question…read on!
Even if you don’t decide to mine, you owe it to yourself to pay attention to Bitcoins, Ethereum, and the rest of the scene. There are exceptional opportunities.
I like to think about it this way…if I don’t take action now and crypto stays on its years’ long trend, then I will be very upset! If I invest an amount I’m okay losing, and I lose it…then okay. I’d much rather not miss out.
Some dollar figures to put this side hustle into perspective
To whet your appetite, my single $2,000 rig is generating about $1,000 per month cash flow right now (this changes daily). The top dog on my mining pool is pulling in $719,000 per month top line. Hot damn.
Read on for more on those numbers…
Why the Bitcoin, Ethereum, and Crypto Hype?
While I’ve been aware of Bitcoin and other cryptocurrencies for years, they’ve become harder and harder to ignore over the last few months.
A picture will say 1,000 words…here’s a shot of price over the last year from Coinbase.com:
With price increases like this, you have a whole batch of new millionaires popping up. In fact, $2,500 invested in 2012 would put you around $2.5 million today.
I have one such guy in my network.
While this may look like a sudden spike, the reality is, you can dig back into those past spikes going way back in time, and the graph is practically fractal. Plenty of people thought $100 was an insane bubble. Then $200. $500. And so on. The mania has hit mainstream media, but these epic moves up are a historical part of the game.
Why have cryptocurrency values gone up so much?
There are countless reasons for the increased volume of cryptocurrency interest as well as the value. Here are a few key ones:
Mainstream acceptance: Cryptocurrencies are becoming much more of a household name, especially for investors and especially globally. Bitcoin, in particular, is showing that it is in fact an established player that can offer unique diversification in portfolios. Sites like Coinbase.com and Gemini.com allow people to trade crypto just like stocks, making it user friendly.
Government acceptance: In addition to individuals, governments and various authorities have begun opening up formal policies to facilitate Bitcoin and cryptocurrency exchanges. China, Japan, South Korea, and soon India are big names among others. With this comes much more user-friendly platforms and traditional exchanges. This opens huge demand.
Technology revolution: The technology behind cryptocurrencies is called blockchain. Among other things, it allows for data to be decentralized. As far as computing goes, this technology may ultimately be as revolutionary as the Internet. Rather than having individual databases controlled by single entities, data can be distributed and self validated. This has many implications that are yet to be explored, but are very interesting from security, sharing, scalability, and military perspectives. IBM, Microsoft, Russia, and countless other big names in the tech, defense, finance are all actively working on applications outside of currency.
The good news is this means there are real fundamentals driving value, not just speculation. Of course, there is plenty of speculation on top of cryptocurrency, but it’s very exciting to see real value drivers underneath.
Why are cryptocurrencies like Bitcoin important?
Since crypto allows for distributed data, there isn’t a centralized control mechanism that can manipulate it. Said less fancy, governments and banks don’t own it.
This is particularly attractive if you live in a country that could decide to reduce the value of its currency in order to boost exports…leaving you to hold the bag.
- Ethereum blockchain used by United Nations for sending aid to Syria
- Venezuelans are seeking a haven in crypto coins as crisis rages
Or, it could help if you country is piling on huge amounts of debt and simply printing money to keep up.
Among other things, crypto is a hedge against the cost of living rising faster than earnings. Depending on your situation, this may be more or less of a personal impact. But regardless, there are massive parts of the global population that do have these concerns, which gives crypto value.
There are many other revolutionary concepts that crypto brings to the table, which you can explore on your own.
Why do cryptocurrencies need people to mine?
Alright, so you have a concept of what’s going on. But what is mining and why do cryptos need miners?
In order for the concept of distributed data and blockchains to function, you need a big, wide network of computing power. You cannot allow big companies to centralize this power into their data centers either.
You need individuals to participate.
So how do you do this? You reward them by paying them for contributing computer power. This is your opportunity.
Mining is simply contributing computing power to the networks that run these cryptocurrencies.
I have started Ethereum mining, which you’ll see as the focus for the rest of the article.
I’ll recommend you choose the currency you feel best about mining. You can see a pretty good list of currencies by profitability here, but there are many other factors to consider than just current profitability.
What is Ethereum, Eth, and Ether?
Ehtereum is a blockchain technology like Bitcoin. Its “coin” is called Ether. You can roughly consider it an alternative to Bitcoin. But it’s also much more. Its technology has far wider reaching applications than just currency.
The reality is there are many altcoins (Bitcoin alternatives), but few have gained the acceptance of Bitcoin. Ethereum is one of those altcoins. Exchanges like Coinbase.com and Gemini.com allow you to freely trade dollars for Eth and Bitcoin, just like you would with traditional stocks and FOREX.
Because Ethereum has broader potential than Bitcoin, its growth has been mind blowing.
There are definitely plenty of other altcoins that might be more profitable to mine than Ethereum, but I believe Eth has the right mix of being young while also having stable footing and a disruptive potential.
Look…Ethereum’s vision is massive. To me, it is the potential of blockchain realized. It spreads computing seamlessly across the globe for to-be tapped use cases.
“Ehtereum: Rise of the ‘World Computer'” ~Silicon Valley Data Science
Just the way we all knew the Internet was huge, but had no idea how it was going to become so integral in our lives…Ethereum is set to do the same. It’s a potential complete revolution in computing.
Here’s a shot of Ethereum over the last month! That’s right, one month. This is also from Coinbase.com.
This 10-minute video is a great overview of how Ethereum works:
Don’t want to watch a video? Check out this article: Okay, WTF is Ethereum?
How much money can you make from mining Ethereum?
This is a loaded question. First, as you contribute computing power, you are paid by receiving Ethereum. Now, we can dissect from here.
In my article 13 Real Small Business Ideas, I talk about whether or not each idea can make you rich. How do we know?
- Is it passive?
- Is it scalable?
- Is it sellable?
The answer for all 3 is YES. Crypto mining can make you rich and it has made many people rich.
But consider, if you get paid in Eth:
- Do you convert that Eth every month into dollars and take profit? If so, at current (today’s) prices, a single rig (which cost me about $2K) is tracking to make me about $1000 per month. Awesome.
- Do you leave the earnings as Eth and let them grow? Each of today’s $300 Eth might be worth $2,000 by the end of the year. Don’t forget…value could go down too.
- Do you take a blended strategy? Some profit and some holding.
Mining pools are groups of people who mine together to receive payouts more quickly and consistently. I use nanopool.org.
You can look at current output and see the top earner is making somewhere on the order of $719,000 per month at current price, output, and difficulty.
What are the risks of mining Ethereum?
Alright, everything sounds great so far. Here are just a few of the risks:
- Eth price could drop. If you have huge holdings, your value goes down. If you’re using mining as monthly income, your income drops too.
- Mining difficulty increases over time. As cryptos mature and more people participate in the network, the more the “difficulty” goes up. That means it takes more computing to earn the same. This has been a pretty predictable incline and is accounted for in good profitability calculators.
- Ethereum mining will stop at the “Proof of Stake.” Eventually, mining Eth will no longer be an option. No one really knows when this will occur.
Is this all really that bad? There are risks, but I obviously don’t think they’re that bad.
- First, a single rig will set you back about $2K. Compared to buying real estate, that’s nothing. Now if you go nuts and buy 1,000 rigs…you may disagree with this. Spend what you’re okay losing.
- Second, I can mine other currencies if one becomes unprofitable.
- Third, these are great computer parts–not specialized machines. I can use or resell this equipment. In fact, Ethereum mining is done on GPUs, which are just gaming graphics cards. Whereas Bitcoin, Litecoin, and others require specialized equipment, Ethereum utilizes every-day computer parts that can be repurposed and resold.
- And last, mining is a fantastic hedge. If price drops, I’ll buy. If price goes up, I mine. It allows me to build my portfolio effectively.
This side hustle, just like with others, is about finding work for your rig that is out of balance. Eventually more people will mine Eth, the price will drop, or something else will change and it will become less profitable. But for now, it’s something most people won’t do and there’s a big demand for it. So get what you can while it’s good.
What’s an Ethereum miner made of and look like?
Depending on what you mine, your rig will be made of different components. Ethereum (and many other cryptos) is mined with GPUs (standard gaming graphics cards). Apart from that, you have a huge power supply, a motherboard capable of hosting as many GPUs as possible, some RAM, a CPU, and either Linux or Windows running it.
Here’s a peak at my rig as it was coming together. In my basement, I have a very large storage room that stays nice and cool. It’s the perfect spot.
This rig is much bigger than it looks in the photos, so I added an everyday 72-lbs iron gorilla head for easy size comparison.
And here’s a good-looking GPU rig used for mining Zcash from /u/TheBigGame117.
How does crypto mining compare to real estate investing?
I love real estate investing. It’s my go-to strategy for cash flow and wealth, but it’s not always easy getting deals. Since I like it so much, I generally choose to benchmark other side hustles and investments against it.
- A single mining rig costs me about $2,000. That’s cheaper than a house…by a long shot.
- I earn (currently) about $1,000 per month per rig in cash flow. That’s better than most single-family rentals.
- My main expense with the rig is electricity. Things are more complicated with a rental property.
- With a rental, tenants give me monthly profit, pay down my mortgage, and I get to watch my house appreciate. If I keep some of my earnings as Eth, I can expect some of the appreciation too.
- I can be leveraged in real estate. I can put some down and take the rest with a loan (then let the tenant pay your loan off for you). I suppose you could do this with mining too.
All of that is great, but real estate is much more established and stable than crypto. Crypto has the potential to be extremely rewarding, but it also has the potential to waste a lot of my time and money. It is risky simply because there are so many unknowns and it is relatively young.
For me, the right portfolio includes both real estate and crypto.
What are the Ethereum mining pitfalls?
Information is changing fast! So watch your sources. If you look at articles from a couple of months back, you’ll probably find people stating that Ethereum mining won’t be profitable.
You’ll also find recommendations for hardware that is no longer available. This can be very frustrating. Many of the guides and equipment lists will lead you to dead ends.
The only way to deal with this is to dive into active communities and watch the conversations until you feel comfortable. A couple of keys for me were:
Bad advice is everywhere! Here are some issues I see…
- Advice from last year (when price and difficulty was lower) doesn’t apply today.
- People are in different situations and countries than you.
- Comments may be from very young people or people who aren’t really mining.
- Some people are over zealous.
- Some people don’t want competition.
So how do you overcome these obstacles? Take in as much information as possible until you can discern the good from the bad. And like any business, rely on your network first and foremost. I have 3 trusted people in my network who are actively mining. Their advice and experience is gold. They help me cut through the clutter.
Is Ethereum mining right for you?
If you have the slightest bit of technical inclination and can work your way through online guides for setting up Ethereum Mining, you owe it to yourself to dive in and see if this something you can pull off.
Here is what you’ll need:
- The ability to dig through online information and chat rooms to figure out how to make computer hardware do things it wasn’t designed to
- About $2,000
- A basic degree of comfort using either Windows or Linux command line
- The willingness to learn how to put a computer together
- The patients to troubleshoot, troubleshoot, and troubleshoot!
As I said, you’re asking gaming components to do something they weren’t designed to do. You will run into problems and challenges. But if you enjoy that sort of challenge and like getting your hands dirty, this is for you.
How do you get started mining Ethereum or other crypto?
Here are some great places that I found exceptionally helpful:
Personally, I dove in and read up on mining. I immersed myself for 2 weeks straight. Dive deep, then decide to pull the trigger or not.
And of course, if you have any questions, hit me up in the comments below!