Everything You Need to Know About Bitcoin Mining
Bitcoin (BTC) mining is a rapidly growing industry, as it provides a lucrative and effective stream of profit for investors. It is a method through which new Bitcoins come into existence. If you are new to Bitcoin or are planning to start your Bitcoin mining facility, then you may face some complexities.
Bitcoin mining is not as simple as connecting your hardware to your machine and powering them up requires technical skills. Besides, BTC price and mining difficulty can heavily affect your profits. This post will explain to you everything about Bitcoin mining, why it is necessary, and how it works!
Table of Contents
- 1 What is Bitcoin Mining?
- 2 How does Bitcoin mining work?
- 3 What precautions to take before starting with Bitcoin Mining?
- 4 What do you need to start Bitcoin mining?
- 4.1 Choosing between the best Bitcoin mining hardware
- 4.2 Using Bitcoin Calculator to check profitability
- 4.3 Choosing between Bitcoin Mining Software
- 4.4 Selecting the Bitcoin Mining Pool
- 5 Is BTC Mining Profitable?
- 6 So, how long would it take to mine a full Bitcoin?
- 7 In Conclusion
What is Bitcoin Mining?
When we hear the word mining, one can think of workers digging inside the ground to extract valuable commodities, such as gold. But BTC isn’t physical, so why do we still refer to its creation as mining? It is because extracting Bitcoin is akin to gold mining since it exists in protocol design.
Bitcoin mining is a process which involves minting new Bitcoins using high-end ASIC hardware. Before Bitcoin’s release, the protocol consisted of 21 million Bitcoins, but the numbers steadily began to decrease with time. Wondering how these number keeps declining?
Well, all thanks to BTC mining, involving several miners validating transactions on the network. Another reason is the way the Bitcoin protocol is designed by its developer. The protocol comprises Bitcoins that are not even mined and exists inside the software. In other words, they are yet to make it to the Cryptocurrency market via the process of mining.
How does Bitcoin mining work?
Bitcoin mining is a strong pillar in the overall Bitcoin Network. In fact, without the BTC mining, the network could easily come under attack and disintegrate. It is a process by which miners secure the entire Bitcoin network and validate the transaction on the blockchain.
The process is done by using powerful ASIC miners that compute complex algorithms to solve hashes. In return, the miners are awarded newly generated Bitcoins that come from the Bitcoin protocol. In the future, when the protocol runs out of all the 21 Million Bitcoins, the Bitcoin mining will solely become attractive for transactional fees.
What precautions to take before starting with Bitcoin Mining?
Bitcoin mining might seem a cushy deal, but there are some considerations investors should take care of. This primarily includes the mining difficulty, total network hash rate, and block reward.
Considering the Cost of Bitcoin Mining
As a rule of thumb, every investment involves risk! Similarly, setting up a Bitcoin mining rig can be risky if you are not paying attention to the cost of electricity and hardware maintenance. Moreover, the profitability of your mining farm entirely depends on the cost of your electricity bill.
Also, you might need cooling fans or systems to regulate the temperature of the area. This is not a onetime investment to reap passive returns, but you regularly need to keep a check on your electricity bill and adjust your mining hardware accordingly. In other words, the more energy efficient your ASIC miner is in converting energy into Bitcoins; the higher are your chances of profitability.
Bitcoin Mining Difficulty- What exactly it is?
Bitcoin mining difficulty is the measure of how complex it would be to find a valid hash on the network. The Bitcoin has a global mining difficulty, and it changes after every 2016 blocks to keep the block generation time at an average of 10 minutes.
The Bitcoin difficulty target is a Sha-256 bit number that the Bitcoin protocol adjusts to absorb the increasing Bitcoin mining activity on the platform. The mining difficulty decreases if it takes longer than 10 minutes to mine a block and vice versa. The difficulty started at 1 when Satoshi Nakamoto mined the first Bitcoin block and has since exploded in terabytes.
There isn’t any limit to cap the rising difficulty, and it entirely depends on the number of Bitcoin miners. Bitcoin mining difficulty is directly related to the aggregate network’s hash power. Hence, as Bitcoin price increases, it becomes more lucrative for BTC miner to get into Bitcoin mining, in turn, increasing the global hashrate.
Bitcoin Mining hashrate – What is it?
When you kick-start your ASIC hardware and attach it to a mining pool, your machines add to the global Bitcoin mining hashrate. This hash rate is the total number of computations being performed by BTC miners at a given time. You can also take a peek into the global mining hash rate using Blockchain.com Hashrate Graph.
In simple terms, the hashrate is the speed at which an ASIC miner operates. Bitcoin blocks are all puzzled with complex math, and the machine needs to solve millions of puzzles every second to find the correct answer. If you are looking to get started with Bitcoin mining, then paying consideration to Global Hash rate along with the hashrate your ASIC miners can generate.
As more miners connect their hardware to the network, the 10-minute block creation rate goes down. This triggers Bitcoin mining difficulty adjustment to pull back the block creation time back to 10 minutes.
As a matter of due diligence, an investor should also pay attention to Bitcoin block rewards that halve after every four years. For now, the current block reward is 12.5 Bitcoins and is estimated to halve somewhere around 2020.
Block reward refers to the generation of new Bitcoin by BTC miner. These new Bitcoins are either held by the miners or make their way to Bitcoin exchanges. From an investor perspective, you should also consider Block halving to have a significant impact on your profits. The block reward is a variable measurement in Bitcoin profitability and change during block halving, making your statistics invalid.
Block reward halving likely cut your earnings in half unless the Bitcoin price increase to compensate for the effect. Block halving also decreases Bitcoin’s overall market supply, and this means you will have fewer Bitcoins to sell. As a fact, after having 64 halving the block reward will ultimately turn zero and Bitcoin mining will largely exist because of fees!
What do you need to start Bitcoin mining?
If you think Bitcoin mining is just buying and firing up your hardware, then you are certainly wrong. In fact, BTC mining involves installing compatible mining software and choosing between several mining pools. Besides, it can also be affected by Bitcoin price and the overall market sentiments. Below are the things you typically need to start Bitcoin mining.
Choosing between the best Bitcoin mining hardware
To start with BTC mining, you need to buy an ASIC miner to generate valid hashes. These are specialized hardware specifically designed to mine Bitcoins. This means that these machines can’t come handy for any other purpose except mining. For starters, here is a short detail about some best BTC mining hardware.
Bitmain Antminer T9
This is a very efficient BTC miner and can be your best choice if you are looking to set up a BTC mining rig with high hashrate. This ASIC miner gives an average hash rate of 12.5 TH/s and consumes 1600W of electricity. Antminer T9 is a highly reliable ASIC miner and contains high-end nano-chips. It is highly profitable if you have access to cheap electricity.
Ebang Ebit 11++
This is one of the latest and most profitable ASIC miners in the market right now. Manufactured by Ebang Company, the machine can easily give a hash rate of 44 TH/s with a power consumption of 1980W! In comparison with many mining machines, Ebang seems like the likely way forward for many individuals planning to start Bitcoin mining with higher profitability.
Once you have purchased your desired ASIC hardware, it is time to connect it with a mining pool. But you shouldn’t rush this procedure as it is always better to take some precautionary steps before making any investments decision.
Using Bitcoin Calculator to check profitability
Before we jump to fire up our ASIC miner and earn Bitcoin and sell them on exchanges, it is always better to check the profitability. There are several online Bitcoin calculators available, which can help you give an idea about your profits. Here are some of the best Bitcoin mining calculators you can effectively make use of. You can also skip reading about this and try our on-site Bitcoin Mining Calculator.
Cryptocompare is one of the most GUI friendly Bitcoin calculators. You don’t need any expert knowledge or any technicalities to work around with this tool. It is a powerful Bitcoin calculator and integrates several API’s to give you a better insight about profitability. Just fill up the required fields such as your Bitcoin mining hardware hash rate and your cost per kWh to conclude. You can check your Bitcoin mining profit with this calculator here.
NiceHash Bitcoin Calculator
Nicehash is a famous company in Bitcoin mining. The platform serves as a great way for miners to buy or sell excess hashing power. Additionally, you can also connect your mining hardware to the site and start mining with one-click installation, thanks to their application.
To calculate your profitability, choose the Bitcoin mining hardware from the dropdown list and select your cost per kWh. Well, that’s it! The program will automatically determine your Bitcoin profits using its powerful algorithm.
Choosing between Bitcoin Mining Software
As of now, you already have an estimate of your potential profits and are ready to connect your ASIC hardware. Moving forward, you need compatible software to connect your BTC mining hardware. There are a couple of freeware mining softwares available on the market. However, you should only download them from the official site, as many copies might contain malware or exploits. Here is some of the best Bitcoin mining software you can choose from.
This is by far the most popular Bitcoin mining software. This software was originally developed for CPU mining, back in the days when it was a feasible option. But with the constant development around Bitcoin mining, the software now supports several ASIC miners as well. Cgminer is written in C language, and it is a cross-platform application. It means you can run it on Mac, Linux, and Windows OS.
As the name suggests, it is a user-friendly mining software and can be the right choice for many novice miners. The software combines the functionality from different open source software to provide an optimum solution for its users. Having features, which many of the traditional mining software lacks, EasyMiner would be the perfect companion to begin your Bitcoin mining journey!
There are several other Bitcoin mining software in the market. However, before choosing a software, make sure it is consistent with your device to avoid any disruption during your mining operations.
Selecting the Bitcoin Mining Pool
This is the last hurdle before you can successfully deploy your ASIC mining hardware. To being the mining procedure, you can either go for solo mining or pool mining. Solo mining is an activity where a miner doesn’t share his computational resources with other miners to bag all of the block rewards. The current Bitcoin block reward is 12.5 Bitcoins.
Thus, in case a solo miner can pick and validate a block on his own, he will be awarded 12.5 Bitcoins which equates to $65000 at the time of this post! This sounds very remunerative, but sadly solo mining is largely dead, and you can’t compete with large Bitcoin mining pools with your ASIC hardware or powerful mining rig.
The situation above only leaves you with the latter option, which is pool mining! In Bitcoin mining pool, several miners combine their resources to create a gigantic hashrate and mine Bitcoins. This results in a more effortless way to find Bitcoin blocks and solve complex algorithms and is significantly faster than solo mining. Upon successful block validation, each miner receives a share from the newly generated block reward on the basis of their hashrate contribution.
There are several Bitcoin mining pools you can choose from, each having its own fees. After choosing a Bitcoin mining pool, we have all the necessary equipment needed to start Bitcoin mining. All you have to do is connect your ASIC hardware to your desktop computer, then link to your favorite mining pool and fire up your Bitcoin mining hardware to start generating BTCs while sitting at your home!
Is BTC Mining Profitable?
Many Millennials and early investors want to know about the profitability of mining and whether it is worth the time and cost. BTC mining is highly profitable if you have access to cheap electricity. In fact, countries, such as Canada and Iceland, are termed havens for mining because of the economic benefit it provides concerning electricity cost.
However, the answer to the above question can’t be a simple yes or no. You need to perform some calculations to determine the optimum electricity your ASIC hardware will consume during the process and the cost you will probably incur. Maybe, this measurement about electricity pricing between several countries can assist your computations.
So, how long would it take to mine a full Bitcoin?
To mine one full Bitcoin it can take anywhere between a few days to a couple of months. Mining a single BTC can vary is because it totally depends on your hashing power. The more hashing power you have, the higher are your chances to mine one full Bitcoin within a few weeks. Besides, that is not all. The constant mining difficulty fluctuations and global hash rate can also impact the time it would take to mine a single BTC.
Wrapping up, as of now, you might already be familiar with several aspects of BTC mining and the technicalities it involves. For novice investors, it would be a little difficult to get started with mining. Selection of pools, picking your hardware and software would likely consume most of your time.
However, make sure you are not in a hurry to deploy your Bitcoin mining rig as it can produce results you might not expect. Also, perform some extra diligence while picking your resources, so you don’t have to work around the second time!