Mine Bitcoin: How Does It Work?

So you want to mine Bitcoin, but you don’t know the fundamentals. Like any emerging technology, there is a lot to learn, especially if you want to get ahead of the pack and make some actual money like any emerging technology.

Thankfully, mining Bitcoin isn’t that complicated if you’ve got some basic tech skills and you’re willing to put in the hours on studying the concepts that make it work.

In this article, we’re giving you a basic overview of how Bitcoin mining works so you can hit the ground running with a rig of your own and start staking Satoshis from the comfort of your living room. Let’s get started.

Bitcoin Mining Basics – What is Mining?

To grasp the basics of Bitcoin mining, you need a loose understanding of blockchain technology, the conditions for earning and creating Bitcoin, and the most effective ways to mine.

Let’s cover these fundamentals first.

Powered by Blockchain

Entire books and dissertations have been written on blockchain technology, so we’ll try to sum it up quickly in the context of Bitcoin mining.

Blockchain is best described as a decentralized network of nodes working together to create an indestructible, unchangeable, and perfectly secure database of information.

In the case of Bitcoin, the data is a record of transactions, also called a ledger. Since the Bitcoin blockchain is decentralized, no single person or party can adjust or manipulate the ledger, making it ideal for anonymous, fast, and secure transactions.

Blockchain technology has the potential for securing medical records, logistics tracking, and even voting in elections. For now, we’re focused on mining Bitcoin, and the blockchain is where the magic happens.

How Bitcoin is Made and Earned

Now that we have some blockchain basics established, let’s see how mining fits in.

The mining system is actually how the Bitcoin blockchain is built, strengthened, and fortified for greater security. This is accomplished by computing systems working nonstop to solve complex equations in a process known as hashing.

As computers solve these cryptographic functions, new “blocks” are added to the blockchain, and Bitcoin is distributed to the nodes that complete the equation first.

Here’s a rundown of how mining works in practice from start to finish:

• Your computing system (node) is added to the network
• The node begins hashing to solve for the next equation in the chain
• If the node solves the hash number, Proof of Work is achieved
• The node with Proof of Work is rewarded Bitcoin and transaction fees
• The process repeats, next solving for the header of the most recent block
• Equations become longer and more difficult as the blockchain develops

As you can see, mining Bitcoin is a complex process. It’s a matter of having huge amounts of computing power, with a bit of luck, being at the right place at the right time to earn Bitcoin.

3 Ways to Mine

There are many ways to mine Bitcoin, but only three are relevant and work pursuing to make money in the current climate.

• Cloud Computing Mining: This outsources the mining process to a service provider who takes care of all the technical and administrative requirements. Just as you might outsource your servers or computing resources for a web application, cloud mining applies the same approach to mining Bitcoin in the process we described above.
• Enterprise Mining: Your second option is to create a large-scale Bitcoin mining operation with hundreds of computing units and pursue an enterprise mining venture. This requires a massive upfront investment, constant ongoing maintenance, and countless unseen risks.
  We’re seeing more heavy hitters enter the Bitcoin mining space with a lot of new money coming in, so these large operations will likely be the norm in years to come.
• At-Home DIY Mining: Finally, you can take the at-home DIY mining route and piece together a rig that earns you a minimal amount of Bitcoin each day. This is more of a hobby than a legitimate source of income but an excellent way to understand the basics of Bitcoin mining first-hand.

The Tools of the Trade

If you’re interested in setting up a Bitcoin mining operation of your own, now is the time. Here are the basic hardware and software needs you have to get started.

The Right Rig

Whether you choose a traditional gaming computer, an ASIC mining unit, or create a custom machine of your own, you can effectively earn Bitcoin as long as you’ve got the hardware for the job.

A Graphics Processing Unit (GPU) is the real money-maker here, so be sure to invest in a powerful card rather than wasting too many resources on secondary components like RAM and CPU.

Don’t forget the power source and cooling! These machines run hot, especially if they’re running 24/7, 365.

Software, Wallets, and Pools

Countless websites review mining software, wallets, and mining pools, so we won’t cover them in detail here.

Just remember that these are three essential components to getting your mining operation up and running, so plan and do some research to find the best for your needs.

We suggest you stick with the “best for beginners” approach to software and storage when starting, even if it means less profit at first.

Eventually, you can start experimenting with different forms of storage, jump around to new pools, and create software ecosystems that allow you to utilize your hardware to the fullest degree.

Adjustments and Upgrades

The beauty of DIY Bitcoin mining is that you can scale, adjust, and fine-tune your operation at any time, giving you a huge degree of control over the outcomes of your efforts.

Many crypto miners start by focusing on Bitcoin but then branch out into other altcoins or spend more time building new rigs for further expansion.

Our best tip is never to be stubborn and avoid locking into any single mining philosophy. There’s always something new right around the corner in the world of crypto!

Mining Trends to Look For

Speaking of new crypto developments, we’ve got some mining trends you should watch for in the years to come – stay tuned.

Energy-Efficient Bitcoin Mining

Green energy is the way of the future, and carbon-neutral Bitcoin mining is leading the charge. Look for companies coordinating with renewable energy infrastructure to earn monumental profits while making the crypto industry more sustainable in the process.

The Rise of the Altcoins

Bitcoin is only the beginning.

The rise of coins like Ethereum, Litecoin, Cardano, and extensive De-Fi ecosystems will further prove that efficient crypto mining has longevity and lucrative prospects long into the future.

Long-Term Business Models

Bitcoin mining has primarily been viewed as a hobby for the past decade, with only a few major mining operations established in China, the United States, and a handful of other countries.

Now, Bitcoin mining is becoming big business, and it’s only a matter of time before large-scale, long-term companies are established and stomp out smaller firms.

It’s time to think bigger – are you positioned to earn Bitcoin as competition heats up?

Get Busy Mining Bitcoin Now

Bitcoin mining pioneers are taking the industry to new heights regarding efficiency, strategy, and bottom-line profits. Mining is a complex process on a technical level, but the barrier of entry is relatively low for the time being.

Don’t delay to start your Bitcoin mining journey – the time is now.

Sources:

How Does Bitcoin Mining Work? | Investopedia

Bitcoin Mining Explained | Simplilearn

What is Crypto Mining, and Can Anyone Do It? | Yahoo Finance