Solo and lottery Bitcoin mining explained, from $35 USB sticks to hosted rigs
A conversation between Digital Asset News host Rob and guest Andy about home Bitcoin mining options, from entry-level USB lottery miners to hosted industrial machines.
Summary
Rob hosts Andy, an experienced Bitcoin miner, for a walkthrough of the full spectrum of home and hosted Bitcoin mining options. Andy explains the distinction between pool mining — where participants share hash rate and split block rewards proportionally — and solo or lottery mining, where a single miner claims the entire block reward of 3.125 Bitcoin (approximately $250,000) if they solve a block alone. Andy presents several physical devices ranging from a $35 USB miner to a $250 screen-equipped unit, discussing electricity costs, profitability, and tax advantages available through LLC structures and bonus depreciation. The conversation also covers hardware flipping as a strategy across bull and bear cycles, alternative coins such as Zcash and Bitcoin Cash as more accessible lottery targets, and the fundamental hardware difference between Bitcoin ASIC miners and AI GPU compute, which prevents cross-use between the two.
Key Takeaways
FULL TRANSCRIPT
Overview of Bitcoin Mining and Its Critics
Andy: Bitcoin mining is an interesting subject and certainly a very controversial one. Some people think it's a waste of electricity, some people think it's a waste of money, some people think it's causing global warming, some people think it's melting Antarctica — the list goes on.
The reality is that whenever somebody says, "This is clearly not profitable, why would you ever do this?" I like to mention that the Bitcoin mining global hash rate right now is the highest it's ever been. There are more miners than there have ever been before, more hash rate online. It only keeps growing, only keeps getting bigger and bigger, and more companies decide to dip their toes into this world and start mining. So there must be something there if all these companies are spending millions upon millions of dollars to invest in it. That's the large, scaled end of the spectrum.
I do dip my toes into that portion with some big machines hosted at a facility — I do that whole thing. Then there's the other end, which is what you mentioned: home mining. And home mining runs the gamut. It depends on what you're going to do, depends on your situation, depends on your electricity rate. It can be just money you're spending every month, it can be profitable, or it can be something in between.
The Hardware Spectrum — From USB Sticks to Screen Miners
I brought some visuals. This right here is about as far on the small end of the spectrum as you can get. This is what's called a USB lottery miner. The chances of you ever making money with this are very near zero, but they're not zero — just very near zero.
Then you can work your way up to a larger style, more efficient lottery miners like this, which is a Bitaxe, which is very popular. You can buy one of these for around $60 to $100. And then it keeps scaling up. You can get something like this, which is a Canaan Avalon Nano 3S, which a lot of people use under their desks at work as a little foot heater — it mines Bitcoin. And then we have some fancy ones with screens that tell you the price of Bitcoin while they mine it.
Pool Mining vs. Solo and Lottery Mining
Most home miners like these are all going to be in the solo or lottery mining category, and I think that's the big distinction to make: there's pool mining and then there's lottery and solo mining.
Pool mining is what the vast majority of people do. You join a mining pool, you contribute your hash rate to that pool along with a bunch of other people, you all pool together your hash rate, and collectively you try to solve a block. When that pool of combined hash rate solves a block, you split it proportional to the amount of work your individual miner did. So you're getting little consistent payouts — or if you have a lot of hash rate, bigger consistent payouts on a regular basis. But you're not getting the whole block — 3.125 Bitcoin, or $250,000 — just for yourself.
On the other hand, you can solo mine, which means you by yourself, with nobody's help, just your miner or your collection of miners, are trying to solve a block on your own. And if you do solve a block, you get the entire 3.125 Bitcoin plus any transaction fees — $250,000-plus today — delivered immediately directly to your wallet, no questions asked.
That's the full spectrum. The solo mining, though, depending on how much hash rate you have, the chances can be quite low. But the exciting part is that unlike the actual lottery — where you pay $10 or $20, buy a couple of tickets, wait for Friday to roll around, wait for the numbers to get picked, don't win, and it's over — with a Bitcoin lottery miner, those tickets repeat every 10 minutes, 24/7, as long as you're running the thing. And machines like this, while the chances are quite low, did hit about 20 to 25 blocks just in the past year. So people who ran one of these things woke up one day with 3.125 Bitcoin in their wallet. Very unlikely, but not a zero chance.
The Appeal of Risk and the Tax Angle
Rob: There are a lot of people out there who invest in the safe stuff — just the S&P 500, that's it. Then there are people who want a little bit of risk and get into more traditional equities. Then there are people who want a lot of risk and get into Bitcoin, which I don't think is that bad. And then there are people who want the most amount of risk and get into the hottest meme coin of the day. I think it's inherently human to want to gamble just a little bit, but there are different levels. I can see the allure of getting into these miners, especially the one with the screen.
The question I had — and I think we actually talked about this before — is, let's say I like the foot warmer one. What kind of price ranges are we looking at for these devices? And if we made some profit somewhere else — say we got into something like Trump Coin and made a little bit of money — can we offset those capital gains by buying a Bitcoin miner?
Andy: Yes to all of those things. The little tiny USB miner is $35, uses one watt of power — you'll never notice it on your electricity bill. Again, you'll almost certainly never win a block, but it's at least a fun way to play around, figure it out, and have a conversation starter. The way I run one of those is in a hub with seven of them — they all light up, they have screens, they look cool. I usually have them in the background of my videos. It's just a fun crypto nerd toy.
The Bitaxe, which is one of the most popular lottery miners on the market, you can buy for around $60. It uses somewhere in the neighborhood of 15 to 18 watts of power, which for me in Texas means I'm adding one or two dollars to my bill a month — you'll probably never notice it. Normal fluctuations in your bill anyway.
Then ones like this, the Canaan Avalon Nano 3S, are somewhere in the neighborhood of $200 to $220. This one uses 140 watts of power and is going to cost you, depending on your power rate, five or ten bucks a month to operate. But a lot of people take these to work and plug them in at the office for free, because it's totally normal at a lot of jobs to have a little space heater. You just say this is a space heater and now you're mining at the office — and some offices just don't care even if they did know it was a Bitcoin miner.
And then the ones with a screen are around $250. This one has basically a souped-up version of the internals of the Nano 3S inside. It's whisper quiet and has a screen that shows you the Bitcoin price and all that good stuff. So in terms of electricity, anywhere from a non-existent charge to your monthly bill up to five or ten bucks for these types of units.
As you get more serious, there are bigger units you can run at home that are obviously going to cost more — maybe a couple hundred dollars a month if you're running several of them. But most of my serious units I don't run at home. I run them at a hosting facility. The one I use is called Musk Miners, and their electricity rate is half of what my residential one is, which makes a huge difference. My machines are profitable at even lower Bitcoin prices because of that.
Tax Advantages of Bitcoin Mining Through an LLC
You mentioned eating away at capital gains taxes — can you get some relief from that if you're mining Bitcoin? The answer is yes. One of the beautiful things about Bitcoin mining is that if you buy machines within an LLC — and this depends on which state or country you're in — but here in the US, generally if you buy these inside of an LLC, because of the tax code changes that happened, you can qualify for 100% bonus depreciation. There's also regular nominal depreciation you can do over time, and your hosting rate, electricity rate, and maintenance costs are all deductible. The cost of running the business — there are a bunch of other advantages too that really help the tax burden overall.
There's also the beauty of buying at the right time. If you buy a bigger machine that's profitable even now, coming out of a bear market, and you keep running it into the bull run — Bitcoin goes back to $126,000, $150,000, $250,000, wherever it goes — the miner is making even more money per month. Then you can turn around and sell that machine for a portion of what you paid, as much as you paid, or more than you paid. There are all kinds of really fun tips, tricks, and optimizations you can do around this stuff that go beyond just the price of Bitcoin minus your cost.
Andy's Background in Mining and the Appeal of the Unknown
Rob: That's an interesting proposition — going from a USB stick, to the foot warmer, to the one with the screen, and then to the hosting platform where you can reduce your electricity cost and eventually sell the machines. So Andy, how long have you been doing Bitcoin mining and what brought you to it?
Andy: I've been in the crypto space for 10 years now. I was in the world of Bitcoin — buying it, stacking it, learning more about it — until 2022, when I decided I wanted to stop just stacking it and start getting some skin in the game when it comes to mining. I was mining other cryptos long before that. My first ever mining was in 2014 — I was mining Litecoin. I built a rig in my house to do that.
But 2022 was when I first started mining Bitcoin, and I have not stopped since then. I now mine a bunch of other things as well. What got me into it was the question of variability. When you buy Bitcoin on the regular, you know exactly how much you're going to get. The price of Bitcoin might change and the value of that stack would change, but the actual amount of satoshis you're getting when you purchase — that's locked in stone. You bought it, it's done, you know how much you're going to get.
With mining, you can do some guesstimation, but you really have no idea. When we get into bull runs and Bitcoin's price is pumping and people are transacting on the chain all the time, all of a sudden the transaction fees can go up 10x and now your miner is making twice as much as it was the day before, just instantly. This has happened to me many, many times. I like that wild card of not knowing exactly how much I'm going to stack. Plus, I've made a lot of money over the years and cycles with flipping the equipment — not just Bitcoin mining stuff, but altcoin mining stuff and just components and various things. I love that other angle with it too.
Hardware Flipping as a Strategy Across Cycles
Rob: That's something I've never even thought about, but it makes a lot of sense. We steer more towards the real estate sector, and there are different things — short-term rentals, medium-term rentals, and then flipping actual real estate. I never thought of what you just said, which is flipping mining equipment or flipping the operation as it becomes profitable.
When you got in around 2022, was flipping machines a common idea, or was it a new type of era? And what's going to happen moving down the road five years?
Andy: There's clearly every single cycle people who see those opportunities and try to chase after them. When I first jumped into this whole world, the idea of buying hardware to flip it wasn't really a big idea. The last two cycles that became a much, much bigger idea — last cycle especially, it was many factors larger than I had seen in previous years. Just before this last bull run in 2024 and 2025, I was watching people specifically buying hardware just to put it on their shelves and wait until the bull run rolled around, not even operating or using it.
So yeah, that's catching on. I think there's some science to it but a lot of art to it as well, which is the tricky part. I've certainly been wrong about some of my purchases when it comes to specific hardware and whether it was going to flip. But I think as long as Bitcoin keeps climbing in price and continues being the monolith it is in the space, especially around Bitcoin mining hardware, there's no reason why there wouldn't continue to be opportunity there in the next five-plus years.
Audience Q&A — Pool Mining, Solar, and Which Pools to Use
Rob: Let's go to the questions. Rusty asks: can you pool mine with the foot warmer?
Andy: Yeah, you can pool mine with any of these. It just comes down to whether it's worth it for you. The foot heater one and several like it — if you're going to be running it at work where you're not paying for power, yes, absolutely stack some sats every single day for free. You can definitely do that. Or a lot of people who have cheaper electricity at home will pool mine with them. These are all so low power that a lot of people with solar setups run these at home and pool mine with them. When you have solar, you've got again 15 watts — you will not notice that on your solar panel load, and you can just stack a few sats every single day for free with the power of the sun. There are lots of really creative ways you can do this stuff.
Rob: CR asks: who does your guest suggest you point your miner at?
Before you get into that — I have 37 solar panels and the power is being diverted to Luma, which is our power company here. I think I could use some of that for mining but I never thought of it. But going back to the question: who do you point your miners at, and is it multiple pools?
Andy: The main pool I use for a lot of my stuff is Powerpool. The reason I like Powerpool is I mine Bitcoin, but I also have Scrypt miners, which mine Litecoin and Dogecoin and about 15 other cryptos — merge mining is a whole other topic — and I also mine Zcash, which is my other big one. Those Zcash machines are incredibly profitable right now. They've been a huge win for me.
I don't really care about Zcash itself — I just like the profitability. And I have a stack of Dogecoin that I'm happy with and don't need any more of. So both of those sets of machines are all on Powerpool. One of the cool features of it is they mine whatever is profitable and automatically convert every day to the currency of my choice. So I get paid out in Bitcoin and USDC and I stack those things. I can use the USDC to buy other altcoins that I see opportunity in.
Powerpool is the main one. For the solo ones, you can use CK Pool or you can run your own Bitcoin node at home and solo mine on your own.
One more thing I want to mention about the lottery aspect: I'm talking about these as Bitcoin miners, but a lot of people also operate these and solo mine them on Bitcoin Cash. Bitcoin Cash gives you 30 or 40 times better odds of hitting a block than Bitcoin. The payout is around $700 or $800 versus $250,000, but the chances are significantly higher. I know lots of people who have hit blocks on devices like these on Bitcoin Cash. You spend $60 or $200 on a machine, and even just one payout of $800 puts you in the green. That's gold.
ROI Timelines and Most Profitable Machines
Rob: Mike asks: what is the time frame for ROI? Which machine has the most profitability for you?
Andy: All the small ones — thinking about them in terms of ROI is the wrong way to think about them. They're predominantly lottery miners, hobby miners, learning-how-to-get-into-Bitcoin-mining types of setups. The ROI is never, or one day if you have free power or something like that.
For big machines — like having a Bitcoin hydro miner — a one-to-two-year payback period is pretty good. Of course, as soon as a bull run rolls around and the price appreciates a lot, that could be six months. Zcash machines right now are at about nine months until you break even.
Rob: Nine months. Interesting. But as you said, as time goes on and we start to see more of a big run-up into the next bull run, they could be extremely profitable. It's about making the sacrifices now rather than later.
Can AI Machines Become Bitcoin Miners?
And then this last question: will AI machines become miners as they age out and technology improves? Can they do both? I thought it was either chips for mining or chips for AI — how does that work?
Andy: Bitcoin miners have what's called an ASIC chip in them — an application-specific integrated circuit — meaning it does one thing and one thing only: mine the SHA-256 algorithm, which is what Bitcoin uses to create all the blocks and continue the chain. That's all they can do. You can't repurpose them for AI.
Conversely, if you're running a data center full of high-powered Nvidia GPUs for AI compute, those technically can mine Bitcoin, but they'd be so inefficient at it that it would not be worth your time or money. One of these specific ASIC chips is so much more efficient at doing it. So they're totally separate jobs.
That said, many publicly traded Bitcoin mining companies are now dipping their toes into the world of AI, and there are some AI data center companies expanding with some Bitcoin mining operations. So there are definitely lots of dual-use facilities — but you can't use the one type of hardware for the other.