Bitcoin mining has been catching on in popularity. Bitcoin has been widely acknowledged by big and famous brands and more businesses are incorporating it as a payment option for their services. Other than buying Bitcoins, people have the opportunity to mine it, like mining for gold, only digitally.
Mining bitcoin is the process through which an individual adds digital transactional records to the blockchain. It is considered a record-keeping process that requires immense computing power with the end goal being to make sure the payment network is trustworthy and secure.
With time, mining of Bitcoin has evolved to become a complex process with more people gaining interest in it. But first things first, what is required to be able to mine Bitcoins?
- A computer-At first, any computer would have worked and helped anyone mine, but with the process becoming more complex. Now, the process is more complex and more engaging hence the need for more powerful computers
- A mining rig- This is a hardware device that was specifically made to make mining of bitcoin faster and efficient. The name of the rig is ASIC (Application-Specific Integrated Circuit chips) and is an expensive device with a time-consuming manufacturing process.
- A Bitcoin wallet- this is a digital wallet where Bitcoins can be kept. For starters, a software wallet works best which still serves its purpose. It will manage the Bitcoins and still allow them to be transacted.
- Join a mining pool- mining bitcoins alone is not profitable since its competing against large mining companies. To make it big, join a mining pool where other miners provide their computing power and returns are divided among them.
- A mining software- the software will be tasked with delivering work, collecting results, completing results, and adding them to the blockchain.
After having all the above set, blockchain miners now have a competitive advantage to start mining.
How it Works
A bitcoin miner is an equivalent of an auditor in the respect that they are tasked with verifying the legitimacy of Bitcoin transactions. This reduces the risk of a person’s double-spending. They are tasked with ensuring the transactions are as safe and honest as possible.
A miner will verify a block, which is 1MB of transactional data, and get rewarded with a certain quantity of bitcoin. The size of the transactional data is dependent on the size of the transaction. This means that it can be one transaction or maybe hundreds of transactions but all adding up to 1 MB which is the size of a single block.
The miner has to come up with a ‘hash’, a 64-bit hexadecimal number that should be equal to or less than the given ‘hash’. To be rewarded, miners have to be the first one to come with the ‘hash’ which will require a powerful computer to help miners compute.
How Much Bitcoin Miners Earn?
According to Coindesk, the rate that miners get for every block of Bitcoin mined is currently at 6.25 BTC. This wasn’t always the case given that the rate was subjected to a process known as halving in May 2020. Every four years, the process referred to as halving takes place. During this process the rate of Bitcoin paid per block is cut to two.
The average revenue returns recently also hit a new high at $50.78 million per hour for the first time in three years. Income earned through transactional frees has increased to $9.14 million as of Feb 2021. Miners revenue is expected to increase with subsequent years.
Drawback to Bitcoin Mining
- Requires heavy investment- to start mining Bitcoins, miners have a lot of devices and software they will have to have. Like the ASIC, a device that makes mining faster and efficient but the cost to getting it is very high.
- Uses a lot of electricity- mining Bitcoins requires the use of a lot of electricity. This is from the use of the high-performance ASIC hardware device that is known for its high electricity consumption. Another added cost that a miner will have to bear.
- Low returns- sharing a pool with other miners may give miners a competitive advantage. Simultaneously, it means that they have to share the bitcoins they make among themselves after every block completion.
- Fluctuation Bitcoin prices- the price of Bitcoins is always fluctuating. The miner may expect the price to increase but instead find it decreasing leading to huge losses.
Is it Worth it to Mine Bitcoins?
Like any other business, bitcoin mining will boil down to the amount of input versus the output. Miners will get varying results based on hardware and investment. Finding ways to reduce costs, like electricity, finding pools, and inexpensive mining rigs will work for all miners.
Plus, mining is more profitable now as compared to how much Bitcoin miners will earn per block after four years. To get the most out of bitcoin mining, look for the required devices and join a pool as soon possible before the next halving process takes place.
Technician at Computer PRO Unltd, father of one, gamer.