How Do You Mine Bitcoin? 7 Important Things to Know
Right now is the golden age of crypto mining, and everyone is jumping on the bandwagon. Even if you don’t aim to make a career in cryptocurrency, it’s not a bad idea to learn the basics of mining and start generating some income on the side.
1. Blockchain Basics
From a technical view, mining cryptocurrency like Bitcoin is quite a complex process. To fully understand the inner workings of blockchain technology would take years, and for the average crypto-curious person, it’s not worth the time or effort.
However, we suggest you learn the very basics of blockchain technology to give yourself a decent foundation of knowledge at the start of your mining venture.
We won’t dive into the details of blockchain here and now, but there is an endless list of useful resources from across the web, ranging from introductory YouTube videos to exhaustive blog articles and in-depth whitepapers from the inventors of blockchain themselves.
Blockchain isn’t just about Bitcoin – it’s a powerful technology with the potential to revolutionize many aspects of the industry and civic life. Learn how it works, and you’ll be ahead of the game in many aspects of investing and innovation in general.
2. High-Octane Machines
Once you’ve understood your blockchain basics well, you’ll want to focus on the hardware required to mine Bitcoin and other cryptocurrencies.
In short, the mining process builds and fortifies the blockchain ledger, which allows for fast and secure transactions to take place on the network.
Very powerful computer processors are required to solve equations that build the blockchain. Those who contribute to the database are rewarded with coins, tokens, or whichever digital asset you choose to mine.
A DIY mining rig doesn’t have to be expensive – your big-ticket purchase will be a Graphics Processing Unit (GPU), which can cost anywhere from $500 to $1000 depending on its capabilities. From there, you must build a suitable and functional rig with other components.
Alternatively, you can buy an ASIC (Application Specific Integrated) unit to streamline the entire process and accelerate your results.
3. Software, Wallets, and More
Hardware is just a piece of the puzzle when setting up a mining rig. You’ll also need to install the appropriate mining software for the cryptocurrency you wish to obtain and have at least two wallets – one physical and one digital – to store the digital assets you earn along the way.
Thankfully, most of these digital wallet platforms can be used for free, but we recommend investing in a solid physical storage wallet to protect your profits in the real world.
Also, be sure to research the many types of Bitcoin mining pools available to the public, which will dramatically raise your likelihood of long-term earnings.
Each pool has certain requirements, and many have monthly service fees, so know exactly what to expect before you jump in.
Configuring a system for mining is one of the more challenging aspects of this process, so stick with it and don’t let frustration derail you. There are plenty of tutorials available to help you along the way if need be.
4. Main Ways to Mine
We’ve discussed the hardware and software needs for an at-home Bitcoin mining setup, but there are other ways to mine crypto that don’t involve a maze of cables, racks, and cooling units sprawled across your home.
Many of the most successful Bitcoin miners choose to outsource their operations, making them out of sight, out of mind. These enterprise-grade mining businesses are more consistent, efficient, and have a significant competitive advantage.
That’s why many smart Bitcoiners are taking the cloud mining approach, or at least outsourcing their administrative and IT needs to automate and secure these operations.
Just look at some of the Bitcoin mining infrastructure being built in the United States and other countries, using things like renewable energy to make mining more sustainable and effective.
This isn’t to say that DIY mining is totally irrelevant, but it’s important to diversify your mining methods to increase your staying power in an industry with increasing competition.
5. Power Sources and Profits
Whether you plug an $800 gaming computer into the wall in your house or use your life savings to set up an enormous mining operation on the outskirts of town, you’ll need to think about energy.
More specifically, where is this energy coming from, and how much are you willing to pay for it? These are questions that will impact the daily effectiveness and long-term profitability of your mining strategy.
Consider the equation of Bitcoin mining and the role that energy plays in the amount of money you make – the answer should be obvious. You want reliable sources of energy that cost less and give you a competitive advantage on the bottom line.
More Bitcoin mining businesses are waking up to this fact as the industry develops, and why we’re seeing more ESG Bitcoin mining practices being pursued across the space.
If wind, solar, and hydropower can replace natural gas and fossil fuel resources for powering these large-scale mining operations, imagine what this would mean for the health and longevity of your production and profits.
If you haven’t yet researched the link between green energy and Bitcoin, we encourage you to make this a part of your crypto study regimen and see where the next innovations will occur.
6. The Clock is Ticking
If you choose to mine Bitcoin, we advise you to get started as soon as possible. There is a controlled supply in circulation that cannot be manipulated due to the integrity of the blockchain.
It won’t be long before the opportunity to mine these precious digital coins is gone!
Estimates suggest that 2140 is when the final Bitcoin will be mined into circulation, but given the rapidly increasing interest in the industry, it could be even sooner than this.
It’s also worth noting that it becomes more difficult to mine Bitcoin with every passing minute due to the structure of the blockchain. Now is the time to start your venture – don’t delay.
7. Think Beyond Bitcoin
We refer to Bitcoin as the most worthy coin to mine at the moment, but with the rise of altcoins, Bitcoin is no longer the king of the crypto castle.
Ethereum and many tokens on this ecosystem have proven profitable in recent months, and so have altcoins such as Ripple, Cardano, and dozens of others.
Bitcoin is a great place to begin your mining journey, but remember that there are many other viable routes to take as you mine crypto and fill your cold-storage wallet in years to come.
Luckily, most hardware can be reconfigured to mine for other major altcoins, requiring minimal investment if you wish to change course at any time. Stay adaptable and be ready to pivot at any time if your goal is to maximize profits.
Long Term Trends and Developments
Between cloud mining, ESG Bitcoin mining, altcoins, and widespread adoption, the crypto scene is showing plenty of promise. Keep these seven key points in mind as you build an at-home mining set up or invest in something bigger and more long-term. Best of luck, and happy mining.
Sources:
How to Mine Bitcoin | CoinMarketCap