Mining Bitcoin or any other cryptocurrency actually is no easy task. The mining industry has changed into a competition and this competition is really serious for many people. Also, there are a lot of factors that will decide who wins in the competition so you need to consider all of them before you set up a mining system and build up your facility.
This guide aims to teach the fundamentals of mining Bitcoin to anyone who is completely new to this process. If you are someone looking to mine casually and as a hobby or you want to make a lot of money from your work, then this is the right place. Read on and we will teach you everything you need to know to become a Bitcoin miner as soon as possible.
Now, let’s get back to our beloved Bitcoin. The reward for mining Bitcoins is the cryptocurrency itself. As we successfully mine a block of the currency, we reach a certain number of Bitcoins. While transferring Bitcoin is done by a simple act of digitally signing it over to the next owner through a transaction (like endorsing a bank check), its creation is not that easy. We use the term Bitcoin mining for the process by which new Bitcoins are entered into circulation. This mining is not like gold mining, at least the action is not the same. It’s more like doing a puzzle.
As we know all clients connecting to a server have to correctly solve a mathematical puzzle before establishing a connection, so those clients that try to simultaneously establish a large number of connections would be unable to do so because of the computational cost (time delay). So, this is like Google reCAPTCHA with a difference, it is the computer that solves the problems.
We’ve already covered this in the last section that with each new block that is mined, the miner is given a “block reward” plus all the transaction fees. When Bitcoin mining first started in 2009, the reward for each block was about 50 BTC. However, for every 210,000 blocks that are mined, the reward gets halved. Usually, it takes 4 years for this to occur. There have been 3 halving events during these years with the reward being halved to 25 BTC, 12 BTC, and finally 6.25 BTC in the years 2012, 2016, and 2020 respectively. The next halving event is predicted to occur in 2024. As of May 2021, Bitcoin miners can earn about $300,000 with each block.
Still there are a lot more factors affecting this matter so evaluating how much profit you can gain from mining is not that accurate. You should also take into consideration the speed at which your mining rig is able to mine blocks. There is also the measure of hash rate which is the equivalent of computational power. So, in simple words, the more hash rate your rig has, the faster it can earn you Bitcoins.
We all know by now that Bitcoin is an open source and decentralized platform so anyone is able to start mining on their own. Well, years ago, when bitcoin was still new, you were able to mine blocks with just your ordinary personal computer but now, the mining difficulty has increased so much that anything less than a powerful machine simply cannot cut it for you.
Theoretically, it is still possible to use personal computers in order to mine Bitcoin and earn new blocks but your chances of successfully getting the block is quite low. In fact, it might be near to zero for all I know. Of course, it is relatively fast to compute the hash function but we are talking about a significant amount of random inputs. This is going to need a beast of a machine to work through quickly. Otherwise, it is going to take a whole day to mine a block and even then, another miner with more computational power will probably get it before you have the chance. More on getting special hardware in the next section. Keep on reading.
What You Need to Mine Bitcoins?
So, if you wish to take up mining yourself, you need to first own a mining rig. In the start of the history of Bitcoin, miners utilized ordinary computers and later down the path, this got upgraded to graphic cards. Nowadays, these machines cannot cut it for this process since it is going to take a lot of time which is highly inefficient.
Once you are set with a proper mining rig, you will need to set up a wallet for your Bitcoin. This is where you can manage all the crypto assets you own as well as the Bitcoin address which we have already covered in the last section. If you don’t know which wallet to choose, we recommend either Bitcoin Core or Exodus. Both options are really efficient and optimized for beginner use as well.
Even if you have the best mining system, it is near to impossible to gain bitcoins with the large number of miners at work today. A single computer is not going to be enough to compete against the many huge mining farms built all over the world. Besides, mining bitcoins as an individual is not always profitable. This is why most miners offer their computational power to a group. This way they have a higher chance to earn the block reward and will divide their earned blocks among the members.
Last but not least, you will need a mining program to complement the hardware, wallet, and the mining pool you got. This program will connect you to the Bitcoin network where you will be competing with other fellow miners to validate transactions. There are a lot of programs you can use for free. Also, some of the mining pools have their own program software. One of the mining software that beginners tend to use is the Nice Hash Miner which is easy to use, chooses the most profitable algorithm for you and can mine multiple cryptocurrencies.
Now that you’ve got everything you need, you can connect your miner to a power outlet, install the mining software, set up an account for your wallet, join a mining pool and let the mining begin!
Now that you know about mining, Bitcoin, how cryptocurrencies work and you recognize the role of these systems in our future; you can imagine what happened when Satoshi Nakamoto mined the “Genesis Block”. As Bitcoin is a famous cryptocurrency, He simply began a revolution using a CPU. It actually was so much easier back in time when one could mine with a single person’s equipment.
These days you must use mining pools or farms. There are some places called farms in which several computers are constantly mining in hope to get the block reward. A farm should have good air conditioning and the computers need a lot of energy for the process. The concept of a mining pool actually began with difficulty. Off course, every good idea comes to the human mind in difficulty. At that point it could take centuries for a miner to generate a block, so miners began to pool their resources and share their power over a network to mine more quickly and therefore, get constantly rewarded.
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