Bitcoin Mining: Explained
November 26, 2019
What is Bitcoin (BTC) Mining?
Bitcoin mining is the virtual mining of coins on computers, which allows miners to receive cryptocurrency without exchanging it for any form of payment. This is how BTC comes into circulation, which makes mining a critical process to the existence of cryptocurrency. It is not simply free money, but significantly more than that. Mining is essentially the solution of complex hashing puzzles on powerful mining rigs, and whoever is the first to discover a solution, receives a certain amount of cryptocurrency. It is a process that both generates cryptocurrency and ensures that bitcoin owners’ transactions are secure. In simple words, the network would not work properly without bitcoin miners and may become a security risk, since the transactions would remain unverified and dishonest miners may engage in double-spending their digital money.
Mining for bitcoins is conducted on superior computers. The miners’ main objective and duty are to provide a secure network for every bitcoin transaction process. This is done via a highly specialized algorithm by solving a computational problem. This computational program allows the miners to build a chain of transaction blocks. Each block contains 1 MB of information. This is called blockchain technology. In return for their services, miners are rewarded with the transaction fees corresponding to the amount of newly created bitcoins.
Apart from bitcoin mining, there are other types like Monero and Ethereum mining, among others, but the basics of any type of coin mining are the same.
High-powered computers solve the computational math problems, which is how bitcoin mining is conducted on the networks. These mathematical problems are indeed unsolvable manually due to their level of complexity. These problems are sometimes difficult to solve even for computers. Proper techniques and tools are required to do the job efficiently. Also, there is a matter of luck. It is just like the miner is searching for gold in a mine with some tools, using personal assessment of where the gold may be and then is lucky enough to find that gold. The chances of the computer to solve these problems at this time are 1 in 13 trillion, and it decreases with time. The more powerful a mining rig is, the quicker it may arrive at the right solution.
At this point in time, individual miners are hardly likely to be successful, due to the complexity of the problems involved and the need for incredibly powerful equipment, so they often join their efforts and form mining pools, sharing both mining resources and the bitcoin rewards.
There are two main functions of bitcoin mining. Computers generate new bitcoins in the bitcoin network after solving complex math problems, providing security to the bitcoin networks by verifying transaction information.
How does Bitcoin mining work?
Bitcoin mining works by providing a Bitcoin mining work reward. Every miner earns bitcoins as their service fees for securing networks and providing transaction support. Miners receive these rewards with an interval of 10 minutes. To know how bitcoin mining works, we have to consider the concept of blocks and how these blocks are involved in bitcoin mining in the form of a chain. This is how blockchain technology works.
Many bitcoin transactions are being processed at the time. These could be thousand to millions. The transactions happening at similar times are put into the groups. These groups are what we called blocks. The bitcoin miners have to work with these groups to verify them. So, they need to work for the group of transactions instead of individual payments. Once the block is verified, it is added to the verified section of blocks.
Bitcoin Mining Explained
Let’s suppose you have to buy a bet through bitcoins. You want to conduct a transaction worth $300. The bitcoin miner will convert the $300 into bitcoins which would amount to almost 0.045401 Bitcoin. Meanwhile, other people are also buying different things thorough bitcoins during your purchase. The bitcoin miners’ computers are the bitcoin mining nodes. They receive the application for these transactions to be carried out. At this stage, the bitcoin miner will verify the transactions to complete these purchases. Once verified, the purchasers will be able to buy their goods.
The transaction does not end at this point. From there, the software on the bitcoin miner’s computer starts to solve mathematical problems in the form of puzzles and jigsaw. These puzzles and problems are different for each block of transactions. This provides ultimate security to the transactions involved in the process.
From this point onwards, a competition starts among the miners. Once a transaction request is received, many bitcoin miners start to solve the problem at the same time. But the one gets the reward in the form of bitcoins who solve it first. This is the race of miners. The miners also keep the data of old transactions that they have completed in the form of a transaction ledger. This old database provides an extra layer of security. When you send a transaction request to purchase your goods, the miner runs the transaction amount against the old transaction ledger to make sure that the amount is different in each transaction. The miners also check if you have a sufficient amount of bitcoins to process your transactions. If you have the fewer bitcoins than your required transaction amount, your request for the transaction will be denied.
We can replicate the transaction here. In the first step, a miner will solve the mathematical problem, and tell the rest of the miners who are working on the same puzzles that their computer had already solved it. The rest of the miners will check if the first miner solved it correctly. When over half of the miners agree with the solution of the first miner, the transaction is finally completed. The minimum transaction verification time is 10 minutes. But under typical circumstances, it usually takes 35-40 minutes to complete a transaction. After the verification of your transaction block, you will be able to receive your goods.
To become the best miner, you don’t have to be a good problem solver or a mathematician. Do don’t need to solve these puzzles by yourself. You just need a strong set of tools, such as a powerful computer and special software. Bitcoin wiki provides all the necessary information about bitcoin mining.
How to mine Bitcoins?
You must know what to mine and how to mine before you start. As you may now realize, bitcoin mining is not difficult to learn. You can find out how to do it in no time and start on your path to becoming a successful miner. You have to learn and follow the steps.
The first thing in mining is the hardware. You need to have a proper computer and related tools. So, start with the purchase of bitcoin mining hardware. Selecting the right hardware for the job is vital, just as selecting the right gear for a sport. It will become one of the leading factors in your success in bitcoin mining. Let’s look into what the best available hardware for this virtual mining is.
Bitcoin miners (equipment)
Bitcoin was launched back in 2009. At the time you could have performed well in mining with a very basic computer. It could have been your personal computer or a laptop. Due to barely non-existent competition at that time, these computers could solve the problems fast and earn significant rewards.
But things turned around in 2019. As we know, the popularity of bitcoin had increased a lot, which also boosted the competition among the miners. So, now you need to have a more powerful computer to achieve the same goals. Those bitcoin mining computers are also known as bitcoin mining rigs. These computers generally have a faster central processing unit than a regular computer. Fast processing means fast problem solving and a high probability of getting the reward.
Nowadays, a fast GPU or CPU is not sufficient, because miners have lunged forward with the specialized bitcoin hardware known as ASICs (Application Specific Integrated Circuits). So, to stay in the race, you will need to have a powerful ASIC along with the high-speed computers. ASICs are specialized devices to accompany the mining process in a fast and powerful way. Bitmain is one of the leading manufacturers of mining hardware.
Before buying an ASIC, you need to compare the different technical characteristics of these devices. You can compare the price first. You must also know what is hash, you need to check for the hash rate, which is a number defines the power of the ASIC. The higher the hash rate, the faster the ASIC. Cheap electricity requirements are also an important factor you need to consider when buying your equipment.
ASIC miner & AntMiner
Now we know that an ASIC is a hardware used to mine bitcoins. It can also be used for other coins like SHA-256 algo. As mentioned before, even the fastest computer’s GPU or CPU is not enough to win in the mining game. ASIC has a clear edge over generic CPU and GPU, as the device is designed for one specific task of mining. They can mine bitcoin at a higher speed by solving the puzzles and mathematical problems. There are several ASIC miners available in the market. But according to features and user review, Bitmain AntMiner S9 is one of the best-known miners ever available.
AntMiner is basically a brand specifically designated for bitcoin-based ASIC hardware. The ANTMINER S1 model is available with a speed of 180 GH/s for bitcoin mining. Other renowned models of this device are known as AntMiner U1 and U2+. The former has a speed of 1.6 GH/s, with the power consumption of 2W , while the latter has a speed of 2.9GH/s with a power consumption of 2.95 W.
Bitcoin Mining software
As we know, mining hardware has primary importance in winning the bitcoin race because bitcoin mining software is vital in completing the mining process.
The software basically connects bitcoin miners to the blockchain. It also connects you to the mining pool, if you are part of that. The software act as a mediator between the ASICs and the mining process. It delivers the transaction information to the miner, receives the solved problem to blockchain and the mining pool. The software is compatible with almost any kind of operating system. If you are using OSX, Windows, or Linux, there is bitcoin mining software compatible with these systems. The software not only acts as a medium of exchange between the miner’s hardware and blockchain, but it also displays useful information on your screen, such as temperature, hash rate, fan speed, and average speed of the bitcoin mining hardware.
There are a few different types of Bitcoin mining software out there and each has its own advantages and disadvantages, so be sure to read up on the various mining software out there.
Is Bitcoin Mining profitable?
Is Bitcoin Mining profitable in 2019? Well, the answer is yes, it can be! But to make it profitable, you need to have high-speed equipment. Start with investing in your hardware as the mining race is impossible to win with the home computer or your personal laptop. Before starting, you can use a bitcoin mining calculator, also known as the BTC calculator to calculate your profit. There are a few important factors that also play a role in mining profitability. One such factor is the cost of electricity to power up your equipment. The availability of electricity also matters a lot, because you need to process as many transactions as you can in order to make a profit. The difficulty of making the mining process profitable increases as increasingly more miners enter the network. This happens because the number of bitcoin rewards generated every 10 minutes remains constant. Another important factor in determining profitability is the price of bitcoins against the standard currency. The Bitcoin calculator allows you to analyze all these factors to calculate profits.
Bitcoin Mining regulations
The legality of Bitcoin is dependent on the location and activity of users. Bitcoin is not a currency regulated by any kind of central bank, and there is generally no regulation of its monetary policies. Bitcoin is generated through the crypto mining process within computer systems. So, cryptocurrency mining is a process out of reach of any government or bank. It is a kind of a virtual peer to peer payment system. But it offers a convenient way to process international transactions without taxes and exchange rates. It also protects the identity of its users.
The actual regulation of bitcoins varies between countries. The US Treasury had issued guidelines and limits for the use of bitcoins since 2013. The department did not consider bitcoins to be a currency, rather they pegged it as an exchange service. Bitcoin adheres to the US Bank Secrecy Act, which means that the identity of miners and users can be compromised depending on circumstances.
A Bitcoin wallet is an important software for its users. It’s online storage for bitcoin users. As it is a virtual currency, bitcoins are physically non-existent. But the bitcoin wallet keeps the private keys of your bitcoins, which serves as the substitute for currency. You can make purchases or receive your bitcoins via the bitcoin wallet. You can use this software through the desktop or your mobile phone.