- Overview on What Is Bitcoin Mining
- What is Bitcoin Mining?
- Different Difficult Levels in Mining
- Constantly Evolving Bitcoin Miners
- What Are Bitcoin Mining Pools?
- Can You Make Money with Bitcoin Mining?
- How to Mine Bitcoins at Home?
- What Are Other Mining Alternatives?
- FAQs on How to Mine Bitcoins
- Final Words – Is Bitcoin Mining Worth Investing?
Probably Bitcoin mining is one of the most common concepts that is talked about among those who are interested in Bitcoin. This concept allows you to create Bitcoins with your computer. In this guide, you can find more information about what Bitcoin mining is and how to mine Bitcoins.
Overview on What Is Bitcoin Mining
What is bitcoin mining? Bitcoin mining allows you to take an active part in blockchains and Bitcoin transactions to create Bitcoins. This procedure should be carried out with ASICs, which are computers with powerful hardware, and you will be competing against other Bitcoin miners in guessing a specific number.
If you manage to guess the number as the first miner, you will receive a ledger of transactions as well as newly generated Bitcoins. As of today, the fixed reward is 6.25 Bitcoins.
Those who are willing to make money with Bitcoin mining must make huge investments in their hardware, storage, and cooling. Unfortunately, a regular PC or GPU will not be sufficient to mine enough Bitcoins to make a profit. You can also visit this Bitcoin mining calculator to calculate your possible profits.
Here are the steps you need to follow to start mining Bitcoins:
- Calculate the profitability of the mining
- Get a Bitcoin miner and wallet
- Determine the pool you are going to mine
- Download any of the Bitcoin mining software
- Initiate your Bitcoin mining operations.
So, let’s briefly talk about how to mine bitcoin is done. If you would like to learn the details of these steps, you can keep reading! Here are some of the headings of this guide
What is Bitcoin Mining?
What is bitcoin mining, Bitcoin is a cryptocurrency that works on decentralized systems. This concept makes it possible to be transferred between two accounts without the need for any central authority such as banks need.
Of course, central authorities make the transferring process easier. All you need to do is requesting the transfer of $100 from your bank to another account. This process will be carried out by your bank, and it will have full control over the operation. Thus, it updates the ledger of both parties that take part in the transfer.
On the other hand, Bitcoins have decentralized ledgers. In this way, it is possible to update the ledgers with a series of operations as a third party, and this series of operations is called Bitcoin mining. We think we have answered the question of what is bitcoin mining.
How Bitcoin Mining Works?
If we think about how Bitcoin mining works, anyone can take part in the process of updating the ledger for Bitcoin transactions, these systems are called blockchains. Basically, it is a quite easy process where you need to guess a specific number that is generated by the system.
Of course, this guess should be carried out through your computer. It is a kind of race where computers around the world compete to guess the number as the first user. This is why you need a powerful computer that can make as many guesses as possible before the number is guessed. Once the number is guessed that ledger will be completed, and the process starts from the beginning in a new ledger on the blockchain.
Although the equation your computer needs to calculate is very complex, it is relatively easier to validate. Just like the Rubik’s cube. You can say whether it is done or not in seconds but solving it can take hours.
Bitcoin Mining in a Nutshell
You got the answers to the questions of what is bitcoin mining and how to mine bitcoin.
If your computer manages to make the right guess, you will have access to a pending transaction that must be transmitted to the next block of transactions on that specific blockchain.
Accessing and compiling the block makes you the intermediator between those transactions and you will be in charge of updating the transaction ledgers of Bitcoins.
Your computer will create the block of transactions and share your solution with the entire network. In this way, other computers on the network will be able to validate it.
Definitely don’t forget to use a Bitcoin mining calculator.
In this way, other computers will receive your solution and process it so that they can update the transaction ledger for that specific block you worked on.
As a result, the system rewards you a predetermined fee for the energy and time you have spent to calculate and solve the problem with your computer. As of now, this fee is 6.25 Bitcoins.
In addition to this fixed fee, you will also receive all the transaction fees that you have passed to the next block.
The transactions you have inserted to the next block are irreversible and they can be confirmed by all the computers on the Bitcoin network.
This is the basic operation principle of Bitcoin mining. The reason why it is referred to as mining is you create new Bitcoins in the Bitcoin ecosystem. However, in fact, it is a kind of reward for your contribution to transaction confirmation of the system. Although people engage in mining to make money, the main goal is the update the ledgers without the need for a centralized authority.
Each calculation in the process is unique and you will be working on a totally new equation on each update of the blockchain. As a result, you can never guarantee that your high-end computer with high processing power can make the right guess all the time. Your chances will be high but statical probability rules the success rates.
Different Difficult Levels in Mining
Many people think of Bitcoin mining as a piece of cake and start to mine as soon as possible to make huge profits with minimum effort.
However, there are details you need to know before starting. Satoshi Nakamoto, the investor of Bitcoin, set certain rules for mining operations. The math problem and difficulty of guessing will increase in line with the mining power of the network. This means that the process will be more challenging as the network has to process more mining power. This concept is called mining difficulty.
How Is the Difficulty Adjusted in Bitcoin Mining?
Apart from the question of how to mine bitcoin, another confusing question is how to adjust the difficulty in bitcoin mining? This is the biggest trick in Bitcoin mining since the difficulty is self-adjusted to control the generation of new Bitcoins in the system. This helps the system have full control over inflation. On average, a new block is created once every ten minutes. In other words, it takes about ten minutes to guess a new number.
However, it will be worth noting that ten minutes is the average period. A new block can be added right a minute after the first one and there may be 20 minutes difference between the fifth and sixth blocks.
The system is designed to adjust the difficulty in every 2016 blocks, and this corresponds to 2 weeks on average. Once the 2016th block is completed, the system will evaluate the average block time and adjust the difficulty. If the average time is lower than 10 minutes, the system will automatically increase the difficulty.
Constantly Evolving Bitcoin Miners
There are different Bitcoin mining methods and tools you can prefer, which we have shared in the following:
How to mine bitcoin with CPU? CPU mining was the first mining method in the history of Bitcoin. Bitcoin mining was not popular during the early days of this cryptocurrency and only a bunch of people including the investor of Bitcoin Satoshi and his friend Hall Finney were mining Bitcoin with their computers.
CPU is the brain of your computer, and it means central processing unit. This was a sufficient method in 2009, in which the number of miners was really low. As Bitcoin mining became more popular, miners began to invest in better mining solutions.
How to mine bitcoin with GPU? GPU stands for graphics processing unit, and it carried out more complex calculations on your computers. Most of the gamers already know the functionality of these units, which are mainly used for intense graphics requirements.
It used to be one of the most popular Bitcoin mining tools around 2011 and is widely used in the cryptography area. It will be worth noting that one GPU is 30 times more powerful than a CPU.
FPGA is additional equipment that is attached to a computer so that it can run a set of calculations. In general, an FPGA is 3 to 100 times faster than a GPU. They are not widely used in Bitcoin mining due to the fact that it is quite challenging to configure for many users.
ASIC miners were introduced in 2013 for improving mining operations. ASIC means Application-Specific Integrated Circuit.
They are not used in any other field than mining and are made of a series of hardware. Due to their design, they are the best option when compared to GPUs, CPUs, and FPGAs. They also do not need additional hardware to operate.
As of today, ASIC miners are the most preferred hardware in Bitcoin mining. In addition to this, you can also find some ASIC miners in the form of a USB, but they are not manufactured anymore. Although they were first introduced in 2013, huge investments were made in them, and a new model used to be introduced every six months.
As of 2016, we have reached the limits of our current technology and although new models are still released, no major improvements are introduced in these units.
What Are Bitcoin Mining Pools?
Bitcoin is very popular and has intense competition. Unfortunately, individual miners always have a great setback in the competition due to the fact of professional Bitcoin mining farms in the world. As a result, a new concept called mining pools emerged.
This concept is quite simple. A group of Bitcoin miners gathers together to for a pool. This pool allows them to combine their mining power. As a result, they have a chance to compete with professional facilities. Miners who make up the pool will be shared between the pool members depending on their contribution rates.
This is the only way for individual miners to stay in the game and make money by mining Bitcoins. They cannot earn the whole award but still, it is better than getting nothing.
There are more than ten great pools that you can join to increase your chances to mine Bitcoin by updating the ledger. Recent reports state that China is the number one miner in the world. The country carries out 65% of the total Bitcoin mining in the world due to low manufacturing costs, cheap electricity, and optimum weather conditions.
Can You Make Money with Bitcoin Mining?
This is a very tricky question to provide a realistic answer. As an individual, your chances are slim but never zero. Moreover, the answer depends on many factors.
Below, you can find some headings that you need to consider to determine whether you can make money with Bitcoin mining or not.
Hash Rate (Processing Power of Your Miner)
Hash is the concept that defined the mathematical problem that you need to solve to earn Bitcoins. Hash rate defines the performance of your miner, and it corresponds to the number of guesses it can perform every second.
Just like regular measurement in computers, hash rate is also measured with the same terms;
- Mega Hash (MH/s)
- Giga Hash (GH/s)
- Terra Hash (TH/s)
- Peta Hash (PH/s)
This refers to the number of Bitcoins you are going to receive when you successfully solve a block. It was 50 Bitcoins in 2019. In every 210,000 blocks, this reward is halved. This corresponds to four years on average. Today, the number of Bitcoins you are going to receive for solving a block is 6.25.
In May 2020, the reward was halved, and it will be halved again to decrease 3.125 in 2024. This is called block-halving. Until 2024, you can earn 6.25 Bitcoins for updating ledgers.
Difficulty of Mining
This is a number that defines the difficulty level of the mining operations going on right now. The difficulty is adjusted by the system depending on the accumulated mining power in the system.
This is one of the important aspects that you need to consider before starting to mine Bitcoins.
No one would like to pay more electricity bills than they make from Bitcoin mining. This would be senseless. Mining operations consume high electricity, and you also spend electricity on cooling them. It will be a good idea to check your first electricity bill to make calculations for your future operations.
Different miners require different power consumptions rages. This is why you need to know the exact power consumption of the miner you are going to use in your operations to calculate your possible profits. This is measured in watts, and you can easily access detailed information for any miner model on the internet.
Fees to Enter Pools
Although you can mine on your own, you can join a pool to increase your chances of winning the calculation. Every pool has its own entrance fees for rendering its services. In general, most of them charge you around 2% of your revenue.
Price of Bitcoin
Predicting the future price of Bitcoin is impossible and this is why you will never know whether mining will still be profitable in the future. Those who are planning to exchange their Bitcoins with other currencies should think twice before mining.
Increasing Difficulty Every Year
This may be one of the most important factors you need to consider for mining. This totally depends on the number of miners mining all around the world. As a result, it is impossible to predict the difficulty of the next operation. The difficulty is re-adjusted in every 2016 blocks, which takes about two weeks.
However, Bitcoin mining was a profitable operation since the release of Bitcoin. It experienced a few drops throughout its history.
Among all the above-mentioned factors, difficulty and price are the two important factors that provide uncertainty for the answer to the question Can You Make Money with Bitcoin Mining?
You can visit this Bitcoin mining calculator and type the values of the above-mentioned variables. In this way, you can easily calculate the number of Bitcoins you can make in a month. In case you cannot receive a positive result with this calculator, this means that you will make a loss under these circumstances. In this scenario, it will not be a good idea to invest in mining.
How to Mine Bitcoins at Home?
Here is a step-by-step guide on how to start mining Bitcoins at home.
Make Calculations for Profitability
First thing first, you need to study your homework well before starting to mine Bitcoins. As previously mentioned, the Bitcoin mining calculator can be an ideal choice to make these calculations.
You should not forget that mining requires investment. It may not be a good idea to start mining without investing in the right miner and you are charged with expensive electricity.
Buy A Miner
If you have made your calculations and mining is profitable for you, then now it is time to buy a miner. We have shared a detailed guide in our Bitcoin mining hardware reviews article. You can check this guide and determine the best option for yourself. Some of the popular miners in the world include Antminer S19 Pro, M30 S++, and Antminer T19.
As you can directly purchase this mining hardware from their manufacturers, you can also find plenty of them on the second-hand categories of popular eCommerce platforms such as Amazon and eBay.
Buy a Bitcoin Wallet
You need to keep your Bitcoins in your Bitcoin wallet. Actually, you need the Bitcoin address of any wallet, which consists of a series of letters and numbers.
Different wallets have required different methods to obtain this Bitcoin address. In general, most of them are quite simple and easy to get. Please note that you will only need your Bitcoin address but not a private key. The private key is used to access your wallet while the Bitcoin address allows you to transfer currencies to your wallet.
Find a Mining Pool
Participants of the mining pools share the math problems among themselves. In this way, all the participants can solve the original problem in parts and save time to compete with professional mining facilities. Once you solve the problem, all pool members will receive Bitcoin rewards and transactions fees. The amount you are going to receive depends on your contribution to the pool.
Mining pools are the best options for mining since you can receive more consistent income and enjoy your return on investment shortly.
There are certain questions that you need to ask yourself before joining any mining pool. Some of these important questions include how stable is the pool, what can the pool provide for you in terms of stats, can you easily withdraw your earnings, how often the pool manages to solve the problem and find a block, how much you will be charged for joining the pool, how much you will have to pay for withdrawing your earnings and that is the reward method? Is it pay per share, PPLNS (we will cover this in the following), score-based or proportional?
You can learn more about these in detail in our Bitcoin mining pools review. For more sources, you can also refer to this BitcoinTalk post. Another source you can refer to in this regard is the mining pools comparison available in the Bitcoin wiki.
You can easily join a pool by creating a username and password and we are going to provide detailed information on this soon.
Get a Client (Mining Software)
It is important to benefit from dedicated software to control and monitor the hardware you use for mining. This software may vary depending on the brand and model of your mining hardware.
In addition to this, some pools offer a unique software that is specially designed for that pool. Those who are not sure which software they need to prefer can refer to our Bitcoin mining software guide. In addition to this, you can visit this link to check the comparison of different mining software.
Time to Start Mining!
Once you are done with all these steps, you can connect your miner to a power outlet and run it. In general, your miner should be connected to your computer via USB so that you can access it through your mining software. First thing first, you need to provide the mining pool’s address as well as your username and password.
After this, you can actively take part in the operations and do your duty to finding the next block to make money. Do not forget to provide your Bitcoin address in the required fields. Otherwise, you will not be able to receive your share when the pool wins the Bitcoin award.
What Are Other Mining Alternatives?
Below, you can find more about the mining alternatives that can be preferred for mining.
Instead of buying real hardware for your mining operations, you can hire computing power from any mining service provider in cloud mining. You will need to pay in line with how much mining power you would like to pay.
It may seem quite a great idea to mine like this since you do not have to invest in physical hardware, worry about storing and cooling it as well as high electricity bills.
On the other hand, if you make calculations, you can notice that it is almost impossible to make money by receiving services from these sites. Moreover, most of these systems are Ponzi schemes, which do not own any hardware. They are nothing but a scam.
This is why we do not recommend preferring these cloud mining websites. However, in case you would still like to invest some to see how they work, you should not forget to make the right calculations before investing lots of money.
In recent years, some mobile applications began to claim that you can mine Bitcoins on your smartphone. Although this is possible in theory, your smartphone cannot compete with any ASIC miners due to its low processing power. Of course, you can make some Bitcoin in return but the cost of charging your batter may cost more than your revenues. Needless to say, it will drain your battery quickly too.
These mobile applications serve as mining pools and share the coins among participants according to their contributions.
In fact, you can carry out mining operations with any computer too. Even old computers can do the work for you. However, it will not be cost-effective in terms of the electricity bills. Moreover, low processing powers mean low chances of winning a reward.
IBM made research and tested this theory with a 55-year-old computer. They managed to mine Bitcoins with it, but their efforts were not worth the revenue.
In 2017, the web mining concept was introduced, and it is also named cryptojacking. Cryptojacking is a process that hijacks the CPU power of website visitors and uses it for mining Bitcoins. However, this is not ethical.
The website owner can use the CPUs of its visitors without letting them know and mine Bitcoins. As you can remember, mining Bitcoins with CPU is not profitable now and therefore most of these websites use web mining to mine Monero. As of now, more than 20,000 websites use web mining.
There are many debates about web mining. The website owner uses the computer of his visitors without their consent. In addition to this, CPU overheating can cause severe and permanent damage to visitors’ computers.
On the other hand, most website owners use this method to monetize their assets without placing too many annoying ads. Moreover, the owner can control the percentage of the CPU to be allocated for the mining operation so that he may not abuse the hardware of his visitors.
FAQs on How to Mine Bitcoins
Here are some frequently asked questions on how to mine Bitcoins.
How Much Should I Invest to Earn 1 Bitcoin with Mining?
In 2020, you can mine 1 Bitcoin by investing around $7500 when you prefer the Antminer S17 Pro miner. Below, you can find more about the calculation.
Antminer S17 Pro has a 56 TH/s hash rate and costs around $1900. This model consumes 2212 watts. The electricity cost in our region is $0.1 for KwH. We are currently in a mining pool that charges a 2% mining fee.
With the help of the above-mentioned values and Bitcoin mining calculator, we can earn 1 Bitcoin in three years on average. During this 3-year period, our costs will be as follows:
- Electricity Cost: $5600
- Hardware Cost: $1900
- Total Cost: $7500
We would like to note that we did not include the storing, cooling, or shipping costs of the miner.
How Many Bitcoins Can a Miner Mine in One Day?
Considering the previously calculated data in the previous question, you can mine 0.0008 Bitcoins in a day on average.
What Is Going to Happen When Miners Mine All the Bitcoins?
Many miners worry about what is going to happen when we mine all of 21 million Bitcoins and there will be no reward left for mining. According to current calculations, the rewarded Bitcoins will be mined until 2140. However, most of them do not think about the Bitcoin mining fees.
Besides the Bitcoin rewards, you also receive transaction fees of that block with your mining operations. This is why you can still make money by mining even all Bitcoins are already rewarded. As more people start to mine Bitcoin, the rewards are decreasing in the same portion. As a result, Bitcoin mining fees become more appealing for miners.
Is Bitcoin Mining Legal?
There are not many regulations on Bitcoin and Bitcoin mining. So far, Bitcoin mining is completely legal, but it will be better for you to check the regulations in your country in advance. In countries, which have regulations for the use of Bitcoin, such as Ireland, Bitcoin mining is completely legal.
On the other hand, many countries still do not have any regulations about Bitcoins. Most of them do not know what to do with it. Some of these countries have a friendly approach for Bitcoin mining and you can closely follow them to predict future regulations in your country.
Is Bitcoin Mining Considered to Be an Electricity Waste?
Considering the large energy consumption all around the world, there are many debates about this topic. However, since you make money with this energy consumption and return it to the economy, Bitcoin mining can be considered as other investments such as building a factory that consumes much more energy than you do.
What If Google Starts Mining Bitcoin and Dominates the Competition?
Of course, Google has the capacity to do so but it is not cost-effective for them. Google Servers are not designed for mining Bitcoin, but ASICs are.
To provide you a more detailed insight, we can tell you that Google can mine less than 0.001% of Bitcoins in the world even if stop all their services and allocate their process power to mining. This is why there is nothing to worry about unless Google starts building professional Bitcoin mining facilities.
Do Some Chinese Companies Centralize Bitcoin Mining?
This is a complex question, but the short answer is yes. However, the technological barrier in miner development is in favor of us. Thanks to this barrier, many companies operating outside of China can still find a place on the market and get their share.
Final Words – Is Bitcoin Mining Worth Investing?
We have come to the end of our guide, and we believe you know more about Bitcoin mining now. Bitcoin mining is a profitable concept with the optimum expenses and the right hardware.
Moreover, Bitcoin mining is not the only option to make money from cryptocurrencies. In fact, there are plenty of other alternatives you can prefer.
Buying Bitcoins is a lot more profitable when compared to mining due to its increasing trend in price. In addition to this, some of the popular cryptocurrencies such as Ethereum, Zcash, and Monera can still be mined with GPUs.
Please feel free to ask your questions by leaving a comment on this article. We will be replying to your questions as soon as possible. Good luck in your mining operations!