Mine Bitcoin: The Complete Guide to Mining Bitcoin
To call Bitcoin a disruptive technology is the understatement of the 21st century.
What began as a high-concept white paper became an infamous internet currency, then skyrocketed into one of the most valuable and talked-about assets in the world.
Now that everyone wants a piece of digital gold, they’re wondering the best way to get it. Exchanging USD works, but did you know that Bitcoin can be “mined” with a fairly simple at-home setup or through cloud services?
Bitcoin mining is a misunderstood aspect of the cryptocurrency conversation, and one that deserves more attention.
That’s why this article is all about Bitcoin mining, what it really means, and how to get started as a casual hobbyist or serious profit-seeker. Let’s begin.
What is Bitcoin Mining?
No pickaxe or metal detectors require to mine Bitcoin. The process is digital, but the rewards are very real. Here’s what you need to know.
Work and Reward
Without taking a full course on blockchain technology, there are a few central ideas you can chew on to better understand how Bitcoin mining works.
Start with a visual exercise. Picture the blockchain as a database that exists not in one singular location, but decentralized across millions of individual devices around the world, which are known as nodes.
Many of these nodes do little besides send or receive the occasional transaction, but a large segment is also actively verifying and validating these transactions.
This is accomplished by solving cryptographic equations, and these active problem-solving nodes are called miners.
The goal of a miner is to crack the code of the latest hash, which is a continuation of past equations that make up the existing blockchain ledger.
When the hash is solved, the transactions are legitimized, and a new block is added.
The miner is then granted “proof-of-work” for completing the task and is compensated with a designated amount of Bitcoin (often a fraction of one coin).
As the blockchain grows longer and stronger, the equations become more complicated, and the stakes get higher – it’s an exciting time to mine for Bitcoin, as always!
Powering the Process
Boil it down to basics and the concept is pretty clear: miners solve complex equations that validate transactions and build blocks, then get rewarded for their contributions.
But what is actually required on a physical level to crack these tedious, never-ending math equations? Even the smartest math whiz would need more than a calculator. The answer is hardware – lots of very powerful computers working 24/7!
The most effective computing resources for mining are graphics processing units, computer processing units, and unique pieces of hybrid hardware called application-specific integrated circuit (ASIC) miners.
Whether you’ve got a small graphics card running in your home office desktop or a massive server farm on the outskirts of town, every miner is locked into a constant competition to crack the next code and collect their rewards.
On-Site vs. Cloud Mining
The idea of Bitcoin mining usually conjures up images of a makeshift data center in a spare bedroom with endless wires and racks, but that’s just one part of the story.
Nowadays, an increasing portion of the Bitcoin mining power comes from managed servers, also known as cloud computing, which makes the process much simpler and more reliable for investors and institutions that are serious about gains.
While the average DIY mining operation requires a big upfront investment of money, time, and applied knowledge, cloud services offer the chance of immediate cash flow, even if there are extra fees for management and maintenance.
Some dedicated mining operations also use innovative sources of renewable energy or have other competitive advantages worth considering.
Running the numbers is what crypto mining strategy is all about – is it worth the costs, and what is the most profitable way to approach the market at the moment?
Start Mining Bitcoin Now
Outsourcing your Bitcoin mining operation to the cloud is perfectly reasonable, but let’s talk about what the process involves for an at-home setup The beauty of Bitcoin mining is that you can get started fairly quickly with some basic hardware and a few programs.
We suggest seeking out specific tutorials for your hardware, wallet, and other variables, but here’s a brief overview of the process you can expect.
Hardware, Software, and Wallets
Since CPUs are basically obsolete for Bitcoin mining purposes, newcomers will want to dedicate the majority of their hardware budget to a graphics card or an ASIC miner unit.
The advantage of a graphics card is that they’re found in most commercial desktops, and can be upgraded and replaced easily for around $1000 apiece. ASICs, on the other hand, can run well up over the $2000 range and into the stratosphere.
While there are high-end and low-end versions of these components to be found, the ASIC is certainly the preferred hardware for Bitcoin mining now.
For those with cash to spare upfront, multiple cards or ASICs are always better than one, increasing raw computing power and boosting the likelihood of lucrative rewards.
However, it’s best to begin with one durable and user-friendly piece of equipment that will serve as training wheels for larger, more complex setups later on.
There is no shortage of crypto mining software available online, and certain hardware types tend to work better with specific frameworks recommended by manufacturers.
Choices become trickier when it comes to wallets and pools, of which there are dozens to choose from. Depending on your approach to mining (volume, frequency, scaling), you will want to select options that suit your needs.
For instance, a large and rapidly expanding mining operation should use dedicated cold storage and perhaps minimize involvement with pools to increase their stake. Alternatively, a single-unit apartment setup just needs a digital wallet and membership to a mining pool for better profits.
Considerations When Mining Bitcoin
We’ve mentioned some of the main trade-offs and choices to be made when mining Bitcoin, but there are more variables to consider as you get into the process.
Energy Costs
It’s easy to fixate on the price of Bitcoin and the deposits to your wallet, but crypto newbies must not forget the critical factor of energy costs when calculating profits.
Depending on where you live and how you get energy to your computers, these costs might quickly overshadow and perceived profits you bring in on a monthly basis.
There are plenty of calculators online to help crunch the numbers before you dive in.
Sustainability
This is the touchy topic in the crypto world right now, and it comes down to one question: is Bitcoin mining sustainable from an energy and environmental standpoint?
It seems like everyone has something to say about the subject, from Janet Yellen to Elon Musk.
Thankfully, eco-friendly Bitcoin mining is on the rise, and will be a smart alternative to the energy-heavy, grid-reliant operations around the world right now.
Renewable energy Bitcoin mining not only great for the environment - it’s also great for large-scale, highly profitable mining strategies. Keep an eye out for companies leading the charge on ESG Bitcoin mining moving forward, because that’s where the edge will be found.
Stay Ahead of Crypto Mining Trends
Bitcoin mining – and crypto mining in general – are still in its early stages of development and adoption. True best practices are still undiscovered, and the rules are still being written!
This introduction should prove useful, but there’s so much more to learn. Be sure to keep up on trends and news stories in the crypto community, whether you’re a long-term investor or just a casual crypto fan looking to get more involved.
Sources:
How to Mine Bitcoin | BitDegree