TL;DR: Buying BTC and storing them is nice, but you’re leaving money on the table by doing that. The Bitcoin network has a couple of ways you can participate in and earn extra revenue on your BTC coins.
In this article, we’re gonna explore the best ways of putting your BTC to work and what’s required to make sure everything functions properly.
How do you mine Bitcoin (BTC)?
So, you have a PC that’s sitting idle and you want to put it to work.
You’ve scoured the internet and saw that one of the ways to earn more crypto would be through mining, but how does that work? Can you mine Bitcoin on your PC?
Mining is a process that can be done using different parts of your computer. These can be either the CPU, GPU or even your Hard Disk.
You heard that right, on networks such as Filecoin or Arweave your HDD is used to earn coins. What component is used for mining depends on the consensus mechanism of the specific chain.
The consensus mechanism dictates how transactions are validated on a blockchain such as Bitcoin. Generally, the primary components used for mining are the CPU and the GPU.
The term CPU stands for “Central Processing Unit”. It is considered the brain of the computer because it does most of the computations. The GPU aka “Graphics Processing Unit” is more powerful than the CPU. This makes it more suitable for mining coins like Bitcoin or Litecoin.
How does mining work?
Mining is a process first implemented in Bitcoin’s Proof of Work consensus algorithm. During the first years, you could mine coins using a home computer or even a laptop. Today, that situation has changed.
Since its inception, mining has rapidly evolved and requires dedicated hardware that’s much powerful than a PC. As more computers join a network the hashrate increases, which means more processing power is needed to validate blocks. This is the case with the most known PoW chain — Bitcoin.
Because of this, miners have switched from using normal computers to highly specialized hardware called ASICs. ASIC is an abbreviated term and means “Application Specialized Integrated Circuit”.
This gives us little information about what they actually are, so let’s dig in. It may sound confusing at first, but the difference between a computer and an ASIC is quite simple.
A computer can do many different operations, but ASICs are built only for mining-specific computations. They are expensive, hard to configure, do not have a screen, and you can’t game on them.
That’s a bummer, so what does an ASIC actually do?
ASICs are noisy, ugly looking boxes that can only perform tasks for a specific chain based on the algorithm they were created for. The specific tasks we refer to are the ones necessary for mining blocks and getting coins. They are also power hungry and consume a lot of energy.
Take Bitmain's Antminer S19 Pro for example, considered to be the best mining rig currently on the market. What does it do? It sits there and makes you money, or Bitcoin to be specific.
In short, a Bitmain Antminer plugs into your wall socket and prints BTC by mining blocks. Buying such a behemoth will add 3.25 kWh to your electricity bill.
If you leave it running daily for 365 days one single device will consume around 28,470 kWh in a year. That’s triple the average annual electricity intake of an 🇺🇸 household. Now imagine thousands of machines running around the world and you get the electricity consumption of an entire country.
So you’re telling me that mining crypto consumes a lot of energy, but how much exactly? Well, it shouldn’t make you surprised to hear that the whole Bitcoin network consumes more energy than countries like Norway, Greece or Switzerland.
This is the reason why many Proof of Work blockchains such as Bitcoin and Litecoin have received backlash for their environmental impact.
Thankfully, the mining industry is integrating more renewable energy sources like wind, solar and hydroelectric. It is estimated that Bitcoin’s use of renewables range from about 40% to almost 75%. These numbers are expected to rise over the next years as renewable energy becomes cheaper.
On top of massive energy requirements, miners are faced with another challenge. ASICs have to be upgraded each year and they become obsolete very fast. The price for such mining devices starts from $2,000 and can easily reach $17,000 if you want the most powerful ASIC hardware.
Due to electricity costs it’s tough to remain profitable while mining, and even the best miners have trouble in that aspect.
Nevertheless, mining Bitcoin (BTC) is much simpler nowadays. If you’ve used a computer before then you should have the technical knowledge needed to configure a miner at home. The steps involve plugging it in, connecting the miner to a pool, and then waiting for your Bitcoin (BTC) coins to pile up.
Connecting your miner to a pool requires you to sign up on the pool’s website and confirm your account. After that you’ll receive a URL address to input on your miners’ configuration screen. This address allows the device to connect to the mining pool and work in tandem with other miners.
If you have access to cheap electricity mining Bitcoin (BTC) is a good way of putting it to use. Otherwise you’ll quickly find out how much power any of these mining devices consume.
While the setup is simple, the maintenance isn’t such a breeze — and a lot of problems can appear. It is a bit harder than advertised and definitely not a passive way of making money. You can easily see yourself spending a day or more browsing the web and fixing random issues. Device maintenance, electricity costs and developer updates are something you need to constantly keep track of if you want your mining rig to function properly.
In time, the hashrate of the Bitcoin (BTC) network will grow as more people start mining, and your devices will become obsolete. There isn’t much you can do with a Bitcoin (BTC) miner after its lifetime has ended besides throwing it away in the trash and buying a new one that’s more powerful.
Fortunately, this is not where the story ends. We are long past the days of having walls of mining rigs in our home, and nowadays mining is not the only way to earn more coins.
Specialized business have been developed to find new solutions and additional yield sources in the market. This was possible due to the meteoric growth of crypto, which resulted in more people being financially interested in it — especially institutions. For that reason we now have simpler ways to earn more Bitcoin (BTC) without the hassle.
Let’s see how to lend out Bitcoin (BTC) and what details you need to know to avoid any surprises. Follow along to learn more!
How do I lend or stake my Bitcoin (BTC)?
We’re now getting to the good part, making money on your Bitcoin (BTC) tokens. Let’s examine how you can earn additional yield on your coins without buying or setting up miners.
First and foremost we need to clarify some terms. Staking can have different meanings depending on the blockchain we are referring to.
Bitcoin’s consensus algorithm is based on Proof of Work and therefore secured by mining. This means that staking works differently from Proof of Stake blockchains where staking is done on-chain to secure the network.
In the context of Bitcoin, staking means lending it out and earning interest on your BTC tokens. Luckily this is not something you have to do by yourself. There’s specialized platforms that handle everything for you, from gathering borrowers to safeguarding your coins. They are referred to as as lending platforms.
The best lending platforms in the world are legally registered with the government and insured by a couple of different third parties. This means that in the case of a hack or other unfortunate event you don’t lose the crypto that you’ve lent.
The most trusted platforms are Nexo and YouHodler. The first one is the Fort Knox of crypto lending, while the second offers a simpler interface that’s more suitable for beginners. Both offer a suite of advantages, all detailed below.
What is crypto lending?
Lending in the cryptocurrency industry has a similar meaning to its counterpart in the general financial sector.
There’s 2 sides to the system, the lenders and the borrowers. Borrowers hold various assets in their portfolio and want to temporarily lend some Bitcoin (BTC) using their current assets as guarantee. These assets can be dollars, euros, or other cryptocurrencies. The other side is represented by lenders, who put up Bitcoin (BTC) on their favorite lending platform and earn additional interest when a borrower wants to use them.
This concept is known as lending. It is a simple mechanism that allows people to borrow Bitcoin (BTC) against a deposit (guarantee). A lending platform sits in the middle of this process and keeps all the crypto safe in cold storage, ensuring no incidents happen.
The deposit borrowers have to make is frequently called “collateral”, and it’s required for anyone that wants to take out a crypto loan. You cannot take a loan without locking part of your assets as collateral. This ensures you can’t just take the money and leave — a practice that would be ineffective anyways if you’re using a trusted platform.
Why is that? Everyone that borrows has to register their personal information and do KYC. On top of that, most borrowers are large institutions, not regular people. Institutions or large venture funds use this extra capital to have more volume on their trades.
At the end of this cycle borrowers have to pay back their deposit plus an extra amount, this is the interest that lenders like yourself earn.
Is lending my Bitcoin (BTC) legal?
Good question, better to be safe than sorry!
In case you are wondering if crypto lending is allowed, that depends on the country you’re from. Lending is a financial concept that has existed long before crypto, but each country has the power to regulate it differently.
If the lending website that you’re using lets you deposit your coins that means you are safe. Major lending platforms as the ones listed in this article have strict rules in place and won’t allow you to make a deposit if you’re from a country they cannot serve.
Now that we got the theoretical side out of the way let’s move on to some practice.
What’s the best place to lend Bitcoin (BTC)?
There’s a couple of different websites that offer crypto lending services. The offering for such services has grown exponentially in the past years. This is why it’s important to pick one that is secure, offers the best returns and has stood the test of time.
The benefit you get with lending your Bitcoin (BTC) is that you don’t earn dollars — you earn more of the token you are lending, in this case BTC. There’s no extra fees for lending because the platform takes only a very small cut of the profit, not the deposit.
If you want to earn interest on your Bitcoin (BTC), the best places are currently Nexo and YouHodler.
Nexo has been in business since 2018 and has earned the trust of customers worldwide through its security and excellent customer support. It is the world's leading lending institution in the digital finance industry.
YouHodler on the other hand is a relatively new contender that’s geared towards newbies. They offer the same services and quality as Nexo but in a simpler interface. If you just got into crypto last week, YouHodler is the best option to lend your Bitcoin (BTC).
Lending sites, especially major institutions such as Nexo and YouHodler have an insurance policy that protects all funds in case of hacks or other events. Coins are also never stored on the platform, they’re kept safe in cold storage.
Both platforms offer similar APYs (returns) on your Bitcoin (BTC) and the process of lending your coins is mostly the same. If you’re a new user Nexo also offers a $25 bonus in BTC when signing up with them.
The steps are straightforward: creating an account, depositing your coins, and then frantically checking on it every day to see how much Bitcoin (BTC) you earned.
Lending your crypto on a trusted platform is the best solution if you want to earn more Bitcoin (BTC) without the hassle of setting up mining rigs.
Bitcoin Lending FAQ
How to lend Bitcoin (BTC) on Poloniex?
Poloniex is a standard crypto exchange and currently does not offer Bitcoin (BTC) lending services. It’s suitable only for buying and trading different cryptocurrencies.
However, specialized lending platforms such as Nexo and YouHodler offer globally trusted BTC staking services.
How to lend Bitcoin (BTC) on Kraken?
Kraken is a crypto exchange and currently does not offer Bitcoin (BTC) lending services. It’s suitable only for buying and trading different cryptocurrencies.
However, specialized lending platforms such as Nexo and YouHodler offer globally trusted BTC staking services.
How to lend Bitcoin (BTC) on Bitmex?
Bitmex is one of the post popular crypto exchanges for leverage traders and degens.
Unfortunately, it does not offer offer Bitcoin (BTC) lending services at this time.
It’s suitable only for buying and trading different cryptocurrencies.
However, specialized lending platforms such as Nexo and YouHodler offer globally trusted BTC staking services.
How to lend Bitcoin (BTC) on Binance?
Binance is the world's biggest crypto exchange and does not offer Bitcoin (BTC) lending services at the moment. It’s suitable only for buying and trading different cryptocurrencies.
However, specialized lending platforms such as Nexo and YouHodler offer globally trusted BTC staking services.
How to lend Bitcoin (BTC) on Coinbase?
Coinbase is the most trusted exchange in crypto and does not offer Bitcoin (BTC) lending services at the moment. It’s suitable only for buying and trading different cryptocurrencies.
However, specialized lending platforms such as Nexo and YouHodler offer globally trusted BTC staking services.
How to lend Bitcoin (BTC) on Bitfinex?
Bitfinex is global a crypto exchange and currently does not offer Bitcoin (BTC) lending services. It’s suitable only for buying and trading different cryptocurrencies.
However, specialized lending platforms such as Nexo and YouHodler offer globally trusted BTC staking services.
Are there any legit Bitcoin (BTC) lending platforms?
The most trusted platforms are Nexo and YouHodler.
The first one is the Fort Knox of crypto lending, while the second offers a simpler interface that’s more suitable for beginners.
The advantages of each one are detailed in the article above this section.