How Does Mining Work?
At the time of writing South Africa is the world’s 3rd highest crypto owning nation, but that’s just the tip of the iceberg. In this article, we’ll walk you through the world of bitcoin mining South Africa and help you better see the best way to get involved.
Before we delve headfirst into crypto mining South Africa specifically, let’s start with the basics and take a look at what exactly crypto mining is and how it works.
First of all, the rumours you’ve likely heard are all most probably true; crypto mining is tough, requires technological proficiency and even then turning a profit can be tough and take hours of painstaking computer-based labour. It’s definitely not for the crypto newbie or for someone with a casual crypto interest. If you fall into the above categories, then check out our BitReviews of Crypto Exchange South Africa and Bitcoin Trading South Africa.
Crypto Mining: In a Nutshell
Crypto mining by definition refers to the act of auditing and verifying past cryptocurrency transactions in order to prevent the same coin being used twice, which is known as “double spending” (essentially digital counterfeit…sort of). Once 1MB of transactions in the crypto being mined has been verified, the person mining then has the chance to earn a quantity of bitcoin themselves. We used the term “chance” because it isn’t a guarantee; once the miner has verified 1MB, the second step is to create the right 64 digit hash number, which requires a mixture of mathematical skill and potluck.
Can crypto mining be compared to gold mining?
In some ways, yes, it most certainly can. The similarities between the goldrush in 19th century South Africa and the Bitcoin mining boom of the early 21st century are there in the essence that both attracted people in their droves through the appeal of getting their hands on potential riches through their own hard work rather than a monetary investment. Where trading and investing traditionally require capital, crypto and gold mining were both seen as an avenue for anyone with a can-do attitude to potentially strike lucky and get rich.
Is it true to say that crypto mining requires a smaller investment than trading or investing?
When crypto-mining first properly became a thing back in 2010, it could’ve been true to say that anyone with a half-decent laptop and some software could get into it. Unfortunately today, this is far from being the case.
Crypto mining requires complex hardware & software and consumes copious amounts of electricity. Nowadays, bitcoin mining in South Africa and the rest of the world generally takes place in large warehouses, sometimes known as crypto farms. This means that modern crypto mining requires a heavy investment to even get halfway to guaranteeing a half-decent return.
So why are people still interested in doing it?
The answer to that is easy, and we’ll refer you back to our point comparing crypto and gold mining; people like the idea of finding the pot at the end of the rainbow. It’s not just the quest for gold that attracts, some people are simply keen to hone their technological skills or are so immensely interested in crypto they’re keen to know everything about how it works.
Pros & Cons
Pros of Crypto Mining South Africa
- Popularity: Cryptocurrencies are extremely popular on the African Continent, with South Africa and Nigeria both being in the top 5 countries for crypto ownership per internet user. What this means is that the mining opportunities for domestic crypto are less likely to run out when bitcoin mining in South Africa compared to other countries.
- All under one roof crypto platforms: In most countries, crypto mining and trading are considered completely separate entities, however when it comes to trading and bitcoin mining, South Africa keeps the two intertwined. Affinity Mining is one such example; a platform for crypto mining South Africa that also offers trading.
- Legality: As of 2020, South Africa has pretty sound and clear legislation surrounding bitcoin and other cryptocurrencies.
Cons of Crypto Mining South Africa
- Electricity: Well, not strictly just electricity, but it’s a factor when twinned with the volatile nature of cryptocurrencies. Crypto mining takes a huge amount of electricity, and bil prices have been skyrocketing in South Africa in recent years. In 2019, a rise in electricity prices twinned with a fall in the price of bitcoin made bitcoin mining South Africa almost unprofitable for a short time.
We mentioned above that modern-day crypto mining has been taken over by large scale warehouses that require seven-figure investments to start up, but is home crypto mining South Africa affordable for the everyman?
As luck would have it, South Africa is perhaps one of the leading countries when it comes to buying both new and second-hand crypto mining hardware.
Prices for a Bitcoin mining machine South Africa
To give you an idea of crypto mining hardware prices in South Africa, let’s take a look at Mineshop, South Africa’s leading online crypto hardware store. Looking at their best selling range, the cheapest is the Cheetah Miner F1 24T, which clocks in at R4,400, while the top-end machines come in at around R85,000 and the mid ranges at R25,000-R40,000.
As well as getting the hardware, you’ll also need to download the relevant software and it’s probably advisable to join a mining pool to join forces with other bitcoin mining South Africa experts. Joining a mining pool generally requires a 1 or 2% fee taken from your profits
Prices for Bitcoin Cloud Mining South Africa
If you want to go for a more traditional, hands-on cloud mining service then internationally renowned services such as Genesis are a good way to go. Prices are usually in contract length packages that are prepaid or on a monthly basis.
Genesis’ packages and prices are as follows:
- Gold: R3,437.75
- Platinum: R16,432.10
- Diamond: R81,732.84
Cryptocurrencies & Technology
Bitcoin Mining South Africa
Bitcoin mining in South Africa still remains the most popular form of crypto mining as it’s still best known and most widely circulated bitcoin. However, with thousands of other cryptocurrencies now in circulation and bitcoin being the most popular to mine, some reports suggest that bitcoin is now being mined faster than it can be spent. Bitcoin and other cryptocurrencies all fluctuate, so this could change in a very short time and bitcoin spending could very well take a surge, however, it’s worth taking a look at alternative crypto mining South Africa as well as bitcoin mining.
Other cryptocurrencies to mine in South Africa
In 2019 some reports suggested that almost 80% of the world’s bitcoin had been mined and in 2020 bitcoin was left out of the top 10 of several lists for best cryptos to mine that year. Other high profile coins such as Ethereum Classic (ETC) Litecoin (LTC) and DASH (DASH) have all been cited as good alternatives to mine as well as some smaller, lesser-known coins.
As you’ll have seen in the pricing section, the top end hardware technology required for bitcoin mining in South Africa can be very expensive for the average citizen, which is why modern-day crypto mining tends to be done through syndicates back by big money investors. You can find cheaper machines, however, they will make the process extremely slow and difficult in today’s market.
The most popular software for bitcoin mining South Africa are BFGminer and CGminer, which can be downloaded for free. What the software does, in a nutshell, is provide a link between the miner and the blockchain. If you’re going down the avenue of joining a mining pool (which we do recommend) then it’s better to wait and see what software the pool uses, as most pools require their miners to use the same software and some pools even have their own.
We mentioned above that modern mining is generally done in warehouses back by large scale syndicates or one heavy investor. If you go down this avenue of bitcoin mining in South Africa, then you’ll essentially be an employee and paid in bitcoin.
Can I still go it alone?
Yes you can! While it may be much tougher and riskier than it has been in the past, it is still possible to set up your own one person crypto mining operation. Below we’ve provided you with a step by step guide on how to do it.
Bitcoin Mining South Africa: A Step by Step Guide
- Get the hardware. We mentioned Mineshop above, but hardware can also be obtained through Amazon or second hand via Gumtree. The aim when purchasing hardware is to get the best hash per second rate and electricity efficiency available for your budget.
- Join a mining pool. You can either join a South Africa specific mining pool (just beware of scams!) or join a global crypto mining pool with a solid track record. The oldest and most well known mining pool in the world is Slush Pool.
- Get the software. Once you’ve joined a mining pool, download the same software that all other miners in the pool you’ve joined use.
- Get a Bitcoin Wallet. Since anything you earn off the back of mining will be in bitcoin or another cryptocurrency, you’ll have to establish a bitcoin wallet if you don’t have one already. Check out our guide to the Best Bitcoin Wallets South Africa.
From a legislative standpoint, bitcoin mining in South Africa is completely legal as long as you stick within the guidelines. To be completely on the right side of the law you need to run SHA256 double round hash verification procedures and also provide the security for Bitcoin network’s public ledger.
In order to ensure that your bitcoin mining experience is as safe and secure as possible, make sure you join a reputable mining pool with a solid track record or subscribe to a reputable cloud mining service. You should be especially careful if you’re choosing to join a syndicate or work for a warehouse run crypto farm as there have been reports of exploitation and scams in South Africa.
If you are setting up your own crypto mining operation from home, it’s worthwhile spending a little more and buying brand new hardware from a reputable crypto mining dedicated retailer, such as Mineshop. Buying second hand from websites such as Gumtree can appear to be an attractive option, but the condition of second hand machines can compromise quality and longevity. If you’re buying second hand, buy from a seller who lives close enough that you can go and inspect the hardware yourself before purchase.
Bitcoin mining in South Africa, and the rest of the world, may not be the lucrative and enticing option that it was back in 2017 and early 2018 (before the bitcoin price crash), but it can still be an attractive option for the right type of person.
Who should get into crypto mining?
Crypto mining can produce plenty of profits, but requires a heavy upfront investment, a lot of patience and can result in potential heavy losses. Crypto mining is for the technologically proficient cryptocurrency enthusiast who has a genuine fascination with the process. If you’re simply looking for a crypto investment opportunity, consider buying some currency as an investment or have a look at getting into trading.