Bitcoin mining received a lot of attention when Bitcoin first emerged, and it remains a topical issue. Of course, things have changed quite a bit since 2009, when Bitcoin first saw the light of day, and Bitcoin mining is certainly no exception.
As you may know, bitcoin mining is the process by which new bitcoins are generated and put into circulation, but that doesn’t stop there. Mining is also critical to maintaining and developing the blockchain. Bitcoin mining uses sophisticated computers that solve incredibly complex math problems. But how does bitcoin mining work?
The central theses
- Bitcoin is the world’s first cryptocurrency; It is a virtual currency as there are no physical bitcoins, only balances that are kept in a decentralized ledger.
- Bitcoin would not be possible without the introduction of the blockchain; The decentralized online ledger records Bitcoin transactions in a network. All transactions in the ledger are transparent and cannot be canceled or edited. The approved transactions are grouped into a block and then tied together to create the blockchain.
- Since Bitcoin is a form of currency, its uses are varied and include paying for online services and products. You can also exchange Bitcoin for other cryptos, hold Bitcoin as an investment, or bet on your favorite sport at an online casino that accepts Bitcoin as a deposit method.
How to mine bitcoin
Miners effectively act as verifiers checking the legitimacy of bitcoin transactions and receiving newly minted bitcoin as payment. But it is not that easy; Verifying transactions requires enormous computing power, expensive hardware and a lot of electricity.
Not all miners manage to add a block and earn Bitcoin because the first miner to solve the math problem has the right to add the block to the chain and receive compensation.
Before you start mining bitcoin, you need to know how to mine bitcoins:
- First of all, you need to buy special mining hardware. The best type of hardware is application specific integrated circuits (ASICs), although graphics processing units (GPUs) will work for other types of cryptocurrency mining too, especially if you can get the best mining cards for Ethereum mining. Keep in mind that a new ASIC device is expensive, ranging in price from hundreds of dollars to tens of thousands of dollars. But that’s not your biggest expense in mining – ASICs consume an insane amount of electricity, which can skyrocket your electricity bill and soon overshadow the cost of the device that uses them.
- You will then need to select the Bitcoin mining software to connect to the Bitcoin blockchain and mining pools. You can find free software and paid versions online.
- After all, you need a bitcoin wallet in which to safely store the bitcoins you have mined. You have a choice between hot and cold wallets. The latter offers more security because your Bitcoin wallet is offline and you keep the keys on the hardware, while hot wallets store your Bitcoins in the cloud.
Is it hard to mine Bitcoin?
As mentioned earlier, mining Bitcoin requires miners to verify Bitcoin transactions. The verification of transactions takes place through a process in which the solution to a complex hashing puzzle is found.
The hashing puzzle (proof-of-work) requires that the hardware and software rig (mining rig) of a miner provide a “hash” that is less than or equal to the target hash. A hash is a 64-digit hexadecimal number, where each digit can contain a value from 1-10 and a-f. The first miner to solve the puzzle is eligible for Bitcoin.
To make matters even more complicated, those with the most mining power on the network are more likely to solve the puzzle and receive Bitcoin in less time than those with less mining power. The miner gets 6.25 bitcoins for every block mined, but if your mining rig only includes one mining card (GPU), you’re making up less than 0.001% of the network’s mining power.
Because of this, many miners join mining pools to add their resources to a group, and when that particular group completes a puzzle, they split the bitcoin earned between all pool members.
You need to be familiar with the blockchain before you start mining, and then you need to spend a sizable amount on a ming rig that can handle the intense calculations. A decent GPU mining setup that you can build yourself consists of:
- A motherboard, approximate cost $ 450
- A central processing unit (CPU) costs about $ 125
- RAM (Random Access Memory), approximate cost $ 65
- An SSD for storage, approximate cost $ 95
- A power adapter (power adapter), approximate cost $ 100
- A PCI-e riser, approximate cost $ 60
- A graphics processing unit (GPU) costs between $ 550 and $ 1,100.
This mining rig only has one GPU, and you’ll find yourself on an average cost of around $ 1,695. You won’t get very far with just one GPU, however, as most mining rigs use a maximum of 19 GPUs, which can drive the price up to around $ 21,000.
If you decide to buy an ASIC instead of a GPU mining rig, you will still see a minimum price of $ 2,000 to five digits. In addition, an ASIC is not enough if you want to dismantle yourself.
Is Bitcoin Mining Dangerous?
The main risk with Bitcoin mining is that your income cannot cover your expenses. For this reason, it is wise to use a mining calculator to see if you can amortize your initial and ongoing costs before you begin. Your electricity bills will also be extremely high as mining rigs consume a lot of processing and electricity.
You also need to ask yourself the question, “Is Bitcoin mining legal in my country or jurisdiction?” Since several countries prohibit blockchain mining due to financial regulations and restrictions, don’t forget the environmental impact of Bitcoin mining.
Are Bitcoin miners worth it?
Bitcoin mining is a highly specialized industry and it is unlikely that you can make bitcoin on your own. Because of this, a mining pool is a viable option. However, profit is not guaranteed as the profit share of a mining rig can be accepted or rejected based on several factors.
Several factors play a role in making a profit and many people choose to buy Bitcoin after discovering the financial implications of mining. If it were that easy to make 6.25 bitcoins at the current price of $ 36,200 per bitcoin, individual miners could make $ 226,407 every ten minutes, but they certainly don’t.
In this article, we’ve looked at various questions ranging from “How does Bitcoin work?” to “How can you mine cryptocurrency?” We highlighted that mining Bitcoin is a resource-intensive process with a high start-up cost and that there are no guarantees that your mining rig can compete with pools with more mining power. How do you get bitcoins and how can you make money with cryptocurrency? The simple answer lies in buying crypto on an exchange; You can hold or trade your investment from here. But remember, like mining bitcoin, investing in crypto is a risky proposition and there are no guarantees in this volatile market.