Bitcoin mining is a process of digitally adding transaction records to the blockchain. Crypto mining is a record-keeping process that is executed through enormous computing power.
Each of the Bitcoin miners in the world contributes to a decentralized P2P (Peer-to-Peer) network to make sure the payment network is secure and trustworthy.
The blockchain network is basically a decentralized P2P network that contains a shared ledger. The network has no central authority, so the transactions are recorded, processed, and validated in the miner’s network. The data shared over in the network is completely transparent, but the sensitive and personal data regarding the members’ identity is always anonymous.
Here, the miners require validating blocks of transactions to access their blocked rewards. Whenever a new transaction block is added to the system, a new BTC is introduced in the network. So, not only they work to secure the network but also to verify the transactions. In order for the blockchain network to operate properly, miners need to work on the blockchain network.
In this Bitcoin Mining tutorial, you will learn:
- What is Bitcoin Mining?
- Why Mine Bitcoin?
- Factors Affecting Bitcoin Mining Profitability:
- Types of Bitcoin Miners You Can Get in The Market
- Bitcoin Mining Pools
- Cloud Mining
- How to Mine Bitcoin
- Shifting Rewards of Crypto Mining
- Profitability Before and After ASIC
- Comparison of Mining Hardware Profitability
- Bitcoin Mining Best Practices
Here are some important reasons for mining Bitcoin:
- It allows transactions to be executed globally without government delays and restrictions.
- Bitcoin is a currency which is globally accepted.
- Using this cryptocurrency, you can quickly transfer your money to anywhere.
- You can own money without worrying about transaction and tax fees.
Here are the important factors that affect Bitcoin mining profitability:
Miners should own the latest hardware to compute with an increasing need for successful crypto mining. They require specific hardware that can be costly. The popular hardware needed for Bitcoin mining is ASIC (Application-Specific Integrated Circuit) that can cost over $1500 per PC.
Power is the primary operating expense. This cost can float from $0.03 to $0.08 per kWh(kilowatt-hour). A shift in the new century can make a difference in crypto mining profitability. Therefore, it is important that miners use power at a lower cost.
Bitcoin price is vital while crypto mining because miners will receive a certain amount of currency when they accurately solve the math problem. The demand of this cryptocurrency will get higher as the reservoir of available coins to mine shrinks or disappears. If Bitcoin becomes a more adoptable currency, it will be more demanded.
Here are the types of Bitcoin Miners you can get in the market:
This is old Bitcoin mining that was done using a normal PC with a regular CPU chip. This type of mining produces a lower amount of Bitcoins compared to the power cost needed to operate them.
It is faster and more efficient compared to CPU mining. The major drawback with GPU miners is that it cannot be useful in the current environment of Bitcoin. It will heat up too fast before you get any chance to earn your Bitcoin.
FPGA (Field-Programmable Gate Array) is efficient and fast way than CPU and GPU mining. This type of miner consumes less amount of power and provides efficient results. It is good to use FPGA with operating systems like Ubuntu. The full form of FPGA is Field Programmable Gate Arrays.
ASIC mining is manufactured for a specific intention. It was first released in the year 2013. This miner is fast, provides much more hash rates, and consumes less electricity. It can be used in either 32-bit or 64-bit OS.
Gridseed mining is the latest crypto-mining technology and can produce high hash rates in mining than other Bitcoin miners. It has the capacity to mine a single GridSeed unit and SHA-256 that consists of 5 GC3355 chips.
This microchip is capable of mining SHA-256 at around 11.25 GH/s and Scrypt (encryption method) at approximately 350 KH/s. Gridseed gives the best results to miners in this fast-evolving crypto world. It has gained more popularity due to its high speed, affordability, fast delivery time, and low usage of electricity.
Bitcoin mining pools are groups operated and organized by third parties to manage hash power from miners worldwide. They share the resulting Bitcoin in ratio to the hash power that is contributed to this pool.
Miners combine their resources to make the mining process more effective. When pools succeed and receive Bitcoins, then they split the reward. This process depends on the power used by each miner. Therefore, the person that used the most power earns the largest reward, and small miners can help them to be successful.
Cloud Mining is a good option for you if you are interested in mining but not ready to buy costly equipment. It allows you to buy time duration on other people’s mining equipment. The most popular mining option is to lease other people’s processing power at remote data center. This type of mining operation generally uses cloud computing so that software, servers, and storage can be accessed from any place and anywhere.
Here are the Steps to mine Bitcoin using ECOS:
Step 1) Open https://mining.ecos.am/en/ website in your browser.
Step 2) Then calculate your mining profit by selecting the contract parameters in the calculator.
Step 3) Click on “Buy now” button.
This will enable you to purchase and mine Bitcoin.
Step 4) Adding Order information.
- Add Order information
- Payment method
- Click on “Buy now” button
Step 5) You need to fill the Sign-up form.
- Enter your email, mobile phone number, and password.
- Click on the “Next” button.
Step 6) Verifying mobile number.
- Enter the verification code you have received in your mobile number.
- Click on “Create Account” to create your account Login into ECOS.
Step 7) Login into your account by clicking on the Sign In button. It is available at the top right corner of the website.
Here is how mining rewards are shifting:
- The network of Bitcoin is restricted at 21 million total cryptocurrencies.
- It has been a basic requirement of the ecosystem since this digital currency was founded. The only limit is placed to attempt to control the supply of digital currency.
- The new Bitcoin halves the number of Bitcoin rewarded to miners for finishing a block every four years. Initially, the number of Bitcoin miners received was 50.
- In year 2016, the reward halved again to 12.5.
- In May of 2020, it halved to 6.25, which is the same as the current reward.
Prospective miners must be aware that the reward size can be decreased in near future, even as the difficulty is likely to increase.
In the old days, miner’s were mining Bitcoin by just using their personal computer. They were able to earn profit for several reasons:
- First of all, these miners had their own computer, so the cost of equipment was NIL. They could change their PC to run Bitcoin mining process effectively with less stress.
- Second, those were days where professional Bitcoin mining centers with good computing power can be initiated to start mining cryptocurrency. The early miners just only had to compete with miners with their own computers.
- The electricity costs varied depending on geographical region. Therefore, the difference was not enough to stop individuals from mining.
When ASIC came, the Bitcoin mining world changed. You can now have to compete against mining rigs that consume more computing power. It also becomes difficult to continue mining as you have to pay for high energy costs for running new equipment.
Look at the real-time mining hardware aggregator. The filter here is set to $0.06 kWh (kilowatt-hour), and the web portal shows only profit today, a maximum $173.58 per day. This earning is possible by consuming high computing power of 2500W.
There are many websites like AsicMinerValue, Nicehash, and CryptoCompare that enable you to calculate the profitability of a mining device. It is also possible to check the profit manually using the following formula:
This formula can be represented as the overall share of hash rate divided by the total issuance of the network in dollars. The input value required here is either fixed parameters, or they can be found on websites like Coin Metrics and Blockchain.com. You also need to subtract the electricity cost to find profit. The equivalence between kilowatts and kilowatt-hours is simple as multiplying the usage of device power electricity price.
Here are some important best practices while mining Bitcoin:
- First, you need to do detailed research for the mining process and specific coins that you want to mine.
- It is crucial to know that the mining ability depends not only on computing power but also on hardware to maximize your mining ability.
- You need to know what the best Bitcoin miner is. It is good to understand the investment needed to make Bitcoin.
- Compare the cost of Bitcoin miner you have chosen, time to tend it, stability, and the total number of hashes it can do for given time and electricity cost.
- You need to be aware of the scammers because there are many sites selling Bitcoin miners.
❓ What is Hashrate?
Hashrate is a measure of your computational power that is used to mine and process transactions on blockchain like Bitcoin and Ethereum. If you want to earn maximum Bitcoin, you require good computing power.
In 2009, the hash rate was measured in H/s (Hash per Second). It was pre-fixed due to the exponential mining growth.
Here are the SI units (International System of Units) that were prefixed:
|Kilohash||Thousands of Hashes/second (KH/s)|
|Megahash||Millions of Hashes/second (MH/s)|
|Gigahas||Billions of Hashes/second (GH/s)|
|Terahas||Trillions of Hashes/second (TH/s)|
|Petahas||Quadrillions of Hashes/second (PH/s)|
⚡ How to choose mining software?
Here are some basic aspects while choosing mining software:
- Operating system: You need to find the mining software that supports multiple operating systems.
- Support of algorithm: Bitcoin utilizes the SHA256 mining algorithm. Your software should support it to mine digital currency.
- Hardware support: You have to check the hardware needed to mine Bitcoin. Many programs support GPU, CPU, FPGA, and ASIC, while others only support particular hardware.
- Efficiency: It is preferable that you choose low resource miners as they are quite efficient. However, they are hard to use.
- Additional functionality: You have to look for some additional and good features like coin switching, remote access, and mining schedule from mining software.
🏅 How to choose mining hardware?
Here are the important selection criteria to choose mining hardware:
- Purchase ASIC devices: You need to purchase ASIC device to successfully mine Bitcoin.
- Common to advance hardware: Common hardware like CPUs, GPUs, and FPGAs are slow to mine Bitcoin. Therefore, it is better to avoid it and use advanced hardware.
- Electricity consumption: Check the electricity consumption in Watts. Assuming two devices have the same hash rate, one must select the device that consumes lesser power.
💲 How are Bitcoin miners paid?
The network recognizes the work of miners and provides rewards for generating new blocks. These rewards can be of two types: 1) a new Bitcoin that is created with each block, and 2) Fees paid by the user for the network transaction.
🚀 Solo mining vs. Pool mining, which one can be more profitable?
Pool mining can produce a constant revenue of smaller values. On the other hand, solo mining can be inconsistent and takes years to mine a single block.
Pooled mining can generate 1-2% higher income through long polling provided by the pools. While Solo mining wastes your time due to the support of only getwork pull.
❗ Is Bitcoin mining legal?
It depends entirely on your geographic location. The concept of mining Bitcoin can threaten government control over the financial markets and fiat currencies. Therefore, mining Bitcoin cryptocurrency is completely illegal in some countries like Egypt, Morocco, Bolivia, Nepal, etc.
👉 What is Proof-of-Work?
Hashes are an excellent mechanism to prevent tampering. Still, computers these days are high-speed and can calculate hundreds and thousands of hashes per second. In a matter of few minutes, an attacker can tamper with a block and then recalculate all the hashes of other blocks to make the blockchain valid again.
To avoid this issue, blockchains use the concept of Proof-of-Work. It is a mechanism that slows down the creation of the new blocks.
A proof-of-work is a computational problem that takes a certain effort to solve. But the time required to verify the results of the computational problem is very less compared to the effort it takes to solve the computational problem itself.
In the case of Bitcoin, it takes almost 10 minutes to calculate the required proof-of-work to add a new block to the chain. Considering our example, if hackers changed data in Block 2, they would need to perform proof of work (which would take 10 minutes) and only then make changes in Block 3 and all the succeeding blocks.
This kind of mechanism makes it quite tough to tamper with the blocks, so even if you tamper with even a single block, you will need to recalculate the proof-of-work for all the following blocks. Thus, hashing and proof-of-work mechanism make a blockchain secure.
🏅 What determines the difficulty while mining Bitcoin?
The difficulty of mining Bitcoin increases or decreases according to the ease of mining within the protocol. Bitcoin needs a consistent block time of 10 minutes means a new Bitcoin can be injected for supply every 10 minutes.
If the mining difficulty increases, miners can easily mine Bitcoin, and if it decreases, it will be harder for miners to mine Bitcoin. Bitcoin network has universal block difficulty where all valid blocks must have a hash below the target.
🔒 What are the safest ways to store Bitcoin?
Here are the safest ways to store Bitcoin:
- Cold Wallet: It is the safest option to store Bitcoin. These types of wallets are not connected to the Internet, and therefore, it has a lesser risk of being vulnerable. A cold wallet stores your IP address and a private key that comes with Bitcoin software so that you can see your portfolio without any risk.
- Backup: You need to back up your wallet often as possible to recover the currency in case of computer failure
- Software Update: The wallet running on the non-updated Bitcoin application can be a target for hackers. Therefore it is good practice to keep your software up to date. The latest version of the software will provide you better security for your Bitcoins.
❓ What are the top 3 ASICs you can buy today?
Here are the top ASICs you can buy today:
1) Innosilicon A11 Pro ETH (2000Mh)
This ASIC consumes power of 2500 Watts. It uses hashing algorithms like Etash, Ethereum, etc. This ASIC offers a hash rate of 2000 MH/s. With Innosilicon A11 Pro ETH, you will get associated power supply.
2) Goldshell KD5
Goldshell KD5 is an ASIC that contains a high-performance computing microchip to consume low power. This equipment can help you to improve your computing efficiency. It is good for you to get higher profit with fewer efforts. This ASIC is safer, convenient, and has integrated body design to save space.
3) Goldshell CK5
Goldshell CK5 is an ASIC machine that is safer and convenient to use for mining Bitcoin. It accurately displays the real-time hash rate statistics. This ASIC enables you to easily view the operating status with ease.
👉 What is the function of a 64-digit hexadecimal number in mining Bitcoin?
Miners use specialized PC and cooling fans in guessing the target hash. They can randomly do this work by producing nonce (Number Only Used Once) quickly.
It is a primary key to generate a 64-digit hexadecimal number that can be used only once. In mining Bitcoin, a nonce has a size of 32 bits that is way smaller compared to a hash which is 256 bits in size. If you are the first whose nonce can generate a hash less or equal to the target hash, you will be awarded 12.5 BTC credit as your hash can complete a block.
🌟 What are the advantages and disadvantages of Bitcoin Mining?
Advantages of Cloud Mining
Here are the pros/ benefits of Cloud mining:
- Avoiding high electricity costs: Mining equipments are expensive to acquire and run. Cloud mining can help to avoid the high electricity cost for mining.
- Less clutter for your home: It helps you to avoid other disorganization of your home with mining equipments. You also don’t have to worry about overheating issues.
- No need to sell any equipment later on: If you have decided to leave mining, then you may want to sell your equipment. This can take some time and effort to find people interested.
- In many cases, this equipment also becomes outdated as the mining technology rises. Therefore, you can use cloud mining to solve this problem.
Disadvantages of Cloud mining
Here are the cons/disadvantages of Cloud mining:
- More susceptible to fraud: It is easy for scammers to perform cloud mining scams. This generally involves taking your earned Bitcoins. So you need to research this platform by reading blogs and reviews before using it.
- Earning less money: You make less money with cloud mining because the Cloud mining services and equipment operators have to cover their expenses, so you get a very little amount out of it.
- Having less control: Investing in the cloud does not require you to manage hardware. However, you may lose some control over financial investment.
🚀 List the Software and Hardware requirements for Bitcoin Mining
Bitcoin Mining Software Requirements
Here are the important software required for Bitcoin mining:
You need to have any one of the following operating systems to start mining.
- Windows OS: Win 7/ Win8/ Win 10
- Mac OS
- Linux OS
Other Software Required:
Here are the other software required for mining Bitcoin:
- Standard Bitcoin Client: Standard Bitcoin Client will enable your computer to connect to the Bitcoin network via the Internet. It also allows the system to interact with other Bitcoin clients.
- Bitcoin Mining Program: It is needed to start bitcoin mining.
- Mining Pool: It is necessary to join a suitable mining pool (group of cryptocurrency miners).
- Bitcoin Software Wallet: It is essential to store your Bitcoin earnings.
- Mining Calculator: It helps you to calculate your profit in the mining process.
Bitcoin Mining Hardware Requirements
Here are the important hardware required for Bitcoin mining:
- Mining Motherboard: It is needed with enough number of PCI Express slots.
- CPU: Intel Core2Duo, Pentium, Core i3/i5/i7, etc.
- RAM: You need 8 GB of RAM and above.
- HDD: You must have a minimum Hard Disk Drive of 320 GB and above.
- Keyboard, mouse, monitor: It is a basic hardware requirement. You need at least one piece of each.
- Ethernet cable and nylon tags: You can use them as per your requirement.
- Graphics Processing Unit (GPU): It is good to use GPUs of high hash rate.
- Power Supply Unit (PSU): 1500Watt and above for GPUs and 1000Watt for Motherboard.
- PCI-E Riser cables: It should be the same as the number of GPUs you are using.
- Cooling fans: Depending on your computer size and number of GPUs.
- Enough space to set up a crypto mining rig.
- Solar panel electricity generator or power supply at cheaper cost.
- Fast broadband connection.