The Bitcoin world has a lot of hidden moving parts to ensure it continues working, with a lot of us taking this for granted. One of the most overlooked parts of Bitcoin is the mining process and just how vital it is to the cryptocurrency.
Mining provides the network with a foundation through its decentralized structure, and it’s this structure that keeps Bitcoin safe. Without the huge network of miners, Bitcoin would be a token with no value at all – a bit like an online game ten years after launch when the developers have stopped maintaining it.
What is Bitcoin Mining?
Bitcoin mining is the process whereby a computer solves a complex mathematical puzzle to create a totally unique hash full of data. This is called a block. Once a unique hash has been verified by at least 51% of the network nodes, it is added to the blockchain, and the miner that solved the puzzle is rewarded with BTC.
This entire process takes roughly ten minutes, but there are times it can take a little bit longer. This isn’t very common, however. The data in these complex math puzzles are the transactions made in bitcoin, similar to how your bank takes time to process payments between accounts.
What is the Difference Between a Miner and a Node?
It is a common misconception that miners and nodes are the same things, but they are very different. A miner is a computer owner who seeks to solve a mathematical equation to create a unique hash. Miners produce new blocks to add to the chain and ensure your transactions are completed so you can use your Bitcoin. Miners use specific Bitcoin mining equipment, which we will cover shortly.
Nodes are regular people running Bitcoin software on computers that keep a track of the blockchain. These people store the entire history of the chain and broadcast it to the world. Nodes verify transactions that other nodes broadcast and – once they are all in agreement – add them to the blockchain.
Nodes are not rewarded for their work. They simply verify transactions for the love of Bitcoin, whereas miners are rewarded with newly minted BTC. In the event of a global apocalypse, as long as one of these nodes is still active somewhere in the world, then the entire Bitcoin blockchain could be resurrected and continued.
What is Hash Rate?
Hash rate is the number of hashes – the complex math puzzles – your miner can compute per second. The higher your hash rate, the more hashes your miner is testing per second, and the better chance you have at creating the next block in the chain.
When miners get close to controlling 51% of the total network hash rate, the crypto community gets a little edgy, as it essentially gives those miners the ability to take over the network. But, unless you’re prepared to sink billions of dollars into mining equipment, you won’t get close to the 51% mark on your own.
What Happens to Miners Once All the Bitcoins Have Been Mined?
There will only ever be 21 million bitcoin in existence, it stands to reason the mining rewards will soon run out. However, Bitcoin’s creator Satoshi Nakamoto was thinking one step ahead when he (or she) created Bitcoin.
Once all the bitcoin have been mined, the miners will receive transaction fees, with the idea behind this being that by the time all the bitcoin have been mined, it will be more popular, and transaction volumes will be considerably higher, meaning there is more money being put aside in transaction fees to pay the miners. So don’t worry if you’re already mining or looking to get into it – there is always going to be money and rewards up for grabs.
What is Block Difficulty?
To ensure bitcoins can’t be mined left, right, and center, there is this mechanism in place called block difficulty. The Bitcoin code essentially dictates that the final hash that a miner creates must be below a certain target, and the block difficulty is a measure of how hard it is to find a unique hash below this target. The higher this number goes, the harder it becomes to mine Bitcoin.
Is Bitcoin Mining Legal?
The legality of mining Bitcoin will depend on where you live. Bitcoin mining is illegal in the following countires:
Bitcoin mining is legal in the United States, except in the state of New York.
How Can I Start Mining Bitcoin?
There are a few ways to go about mining Bitcoin, but unless you have access to cheap electricity and a lot of money to pay for the equipment it’s largely not worth it as an individual. However, let’s say you have both.
To begin with, you need to get yourself some ASIC mining hardware. ASIC stands for “application-specific integrated circuit.” This is easily available online from manufacturers such as Bitmain and Bitfury, and you can even buy ASIC miners from Amazon if you wish. An ASIC miner is vital because the days of using your desktop PC to mine bitcoin is long gone. An ASIC is a specifically designed piece of equipment with a sole purpose of mining bitcoin.
Once you have your ASIC miner, you need some software to control it and tell the mining rig all sorts of things, ranging from where to send your bitcoin rewards to which pool you wish to be part of. Mining solo isn’t profitable as you’re up against a host of bitcoin mining giants such as F2Pool, Poolin, and AntPool who between them monopolize some 50% of the mining power behind Bitcoin.
Is BTC Mining Worth It?
The chances of you winning the block reward is greater than winning the lottery (1 in 13,983,816). The best way to mine Bitcoin is to join a mining pool, where you simply point your mining power to the mining pool and, based on the percentage of hash rate you contribute to the pool, you will receive that percentage of the block reward, should the pool create the next block for the blockchain.
Before you get started and sink a lot of cash into mining Bitcoin, check your electricity costs versus how much you will be earning, as it can quickly become unprofitable. For excample, in areas like Venezuela, mining has become a common activity as the cost of electricity is virtually free. If you live in an area where electricity is expensive, it will, more than likely, end up costing you more money to mine BTC than you will make.
3 Alternatives to Bitcoin Mining
With the costs of mining continuing to soar, it may be worth seeking out one of the following alternatives.
A Bitcoin faucet is a platform where you can earn BTC rewards by completing simple tasks. These rewards are various denominations of Bitcoin based on the task you complete. Tasks include playing games, watching ads, answering surveys, and more.
Popular Bitcoin faucets include:
Cloud mining is essentially where you enter into a contract with a company and pay them to mine Bitcoin on your behalf. This frees the individual up from paying for the expensive costs.
Before you jump the gun and say “cloud mining isn’t profitable”, we should warn you – it is actually rather profitable when undertaken properly. With the correct supply of power and by using high-quality ASIC mining rigs, cloud mining firms can actually remain highly profitable, even in tough economic times. Argo Mining became the first cloud mining firm to be listed on the London Stock Exchange and continues to be profitable to this day, even with the price of Bitcoin sinking further and further.
Canada is a popular place for crypto miners to set up shop thanks to low power costs and the relatively cool environment. MiningSky offers members a chance to help mine Bitcoin by renting out ASIC rigs at an affordable price. If you’re looking to dabble in cloud mining, MiningSky is well worth checking out as a potential platform.
Other Crypto Mining
You might yield greater rewards by opting to choose a different cryptocurrency to mine. Each crypto has its own set of mining rules, and most come with less competition and lower costs than Bitcoin.
Popular coins for mining include:
How long does it take to mine 1 BTC?
On average, it takes about 10 minutes to successfully mine one blockchain of Bitcoin. Achieving this goal will require a very powerful CPU and a lot of energy consumption.
Is Bitcoin mining profitable?
The average person will not be able to turn much profit in Bitcoin mining. This is, in large part, due to the expensive technical equipment needed and the huge amount of energy consumed while mining. We recommend cheaper alternatives to Bitcoin mining.
How can I get free Bitcoin?
Due to the large costs involved with it, Bitcoin mining is certainly not free. Instead, you might want to look at Bitcoin faucets. Faucets reward users with very small amounts of BTC for completing small tasks such as answering surveys, playing games, etc.