Updated on March 01, 2023 11:30 AM
Bitcoin mining is a process of adding a block to the blockchain while solving complex mathematical puzzles which in return gives Bitcoin as a reward.
It’s always a better option to create a genuine income via Bitcoin Mining, although it requires some heavy setups and a lot of electrical energy but is still something which lots of miners are doing. Even at the time you’re reading this blog, many miners are already getting rewards through Bitcoin mining. As it sounds so interesting, many questions have been asked about the sustainability of Bitcoin mining.
To understand how Bitcoin is mined, let’s see some detailed aspects of it.
Bitcoin mining is the process of contributing to Bitcoin's proof-of-work (PoW) consensus mechanism to find new blocks and assist with transaction validation. The collective efforts of all Bitcoin miners are crucial for the blockchain's integrity and for ensuring that transactions remain irreversible.
Bitcoin is not a tangible currency or bill that can be exchanged with any bank or government. It is simply a code that must be decoded to receive the reward.
When a new block is located, the miner gets rewarded, which is called the Bitcoin block reward. Following the 2020 halving, this is now fixed at 6.25 BTC per block, however, most miners get significantly less because they work together as part of a mining pool.
To mine Bitcoin, you'll need a few things: a powerful computer, specialized mining hardware, and access to electricity. Here's a step-by-step guide on how to get started:
Choose your mining hardware: You can use your computer's CPU or GPU to mine Bitcoin, but this is no longer profitable. To make a profit, you'll need to invest in specialized mining hardware called ASICs (Application-Specific Integrated Circuits) that are specifically designed for mining Bitcoin.
Get a Bitcoin wallet: You'll need a wallet to store the Bitcoins you mine. There are many options available, including software wallets, hardware wallets, and online wallets.
Join a mining pool: Joining a mining pool is recommended, as it increases your chances of earning Bitcoins. Mining pools are groups of miners who work together to solve complex algorithms and share the rewards.
Download mining software: There are several mining software options available, depending on your hardware and operating system. Some popular options include CGMiner, BFGMiner, and EasyMiner.
Configure your mining software: Once you've downloaded your mining software, you'll need to configure it to connect to your mining pool and Bitcoin wallet.
Start mining: Now you're ready to start mining! Your mining software will automatically begin solving the complex algorithms and earning you Bitcoins.
Monitor your earnings: Mining Bitcoin is a competitive process, so it's important to monitor your earnings and adjust your hardware and settings as needed to maximize your profits.
Keep in mind that mining Bitcoin requires a significant investment in hardware and electricity, and the difficulty of mining increases over time, making it harder to earn a profit. However, with the right equipment and strategies, mining Bitcoin can still be a profitable venture.
Bitcoin miners compete to solve incredibly complicated mathematical problems that necessitate the use of expensive hardware and massive amounts of power to properly add a block. Miners must find the accurate or closest solution to the puzzle to finish the mining process. Proof of work is the technique of determining the right number (hash). Miners predict the target hash by making as many guesses as they can at random, which demands a lot of processing power. As more miners join the network, the difficulty rises.
Application-specific integrated circuits, or ASICs, are the computer hardware necessary to initiate the mining process. They can cost up to $10,000. ASICs consume massive quantities of power, which has sparked criticism from environmentalists and restricts miners' profitability.
If a miner successfully adds a block to the blockchain, they will be rewarded with 6.25 bitcoins. Every four years, or every 210,000 blocks, the incentive value is lowered in half. Bitcoin was trading at about $17,086 in December 2022, making 6.25 bitcoins worth $106,000.
Before determining which miner to buy, you must first establish whether your environment is suitable for running a mining business. This boils down to four fundamental requirements:
Internet Connectivity: Each miner requires a consistent internet connection. This is best accomplished by connecting an Ethernet wire directly to the router. Fortunately, these connections come in large lengths, so the router does not need to be near the miner. You may also utilise WiFi, but it is not always as dependable.
Power Consumption: The majority of current miners require a 220V outlet. However, except for appliances, most residential dwellings and flats only have conventional 110V plugs. If you don't have any 220V outlets, one solution is to contact a certified electrician to install one. Any do-it-yourself approach compromises your safety and is not encouraged. Unfortunately, a 110V to 220V converter will not function.
Cooling: ASIC miners produce a significant amount of heat. It's the first rule of thermodynamics: the miner's energy is turned into heat rather than destroyed. This necessitates sufficient ventilation and the use of fans to assist circulate the air. Even better, you might be able to reuse the heat to keep your garage or basement warm throughout the winter.
Mining Hardware: Today, practically all Bitcoin mining gear is made up of ASIC computers, which in this case perform one thing and only one thing: mine for bitcoins. Today's ASICs are several orders of magnitude more powerful than CPUs or GPUs, and new chips are created and deployed every few months, gaining both hashing power and energy efficiency. Today's miners may generate over 200 TH/s while using only 27.5 joules per terahash.
The majority of today's prominent cryptocurrencies are virtually hard to mine with a single person's equipment. Mining has grown increasingly computationally intensive. Mining has progressed from CPU mining to GPU mining, and finally to ASIC mining.
Satoshi Nakamoto mined the initial batch of 50 bitcoins (the "Genesis Block") on January 3, 2009, using his personal computer's CPU chip. Mining was easier in the early days of Bitcoin, and most people mined using graphics cards on their computers.
During the early stages of bitcoin mining, the advantages of mining on PCs exceeded the disadvantages (including electricity costs, machine depreciation, etc.). According to prior claims, a PC might mine hundreds of bitcoins in a week.
As mining got more difficult, the bitcoin incentives were designed to be halved. Conventional CPUs were no longer fast enough to meet the rising complexity of the mining method. So, in 2010, the first program designed exclusively for mining with a computer graphics card was released.
In parallel computing, the computational capacity of a GPU in a single graphics card is comparable to hundreds of CPUs. As a result, mining efficiency will be considerably enhanced. As a result, many people moved to GPU mining and built their mining appliances using one or more sophisticated graphics cards.
As more individuals work in the mining business. The Bitcoin network's overall computational power continues to hit new highs, and improved mining equipment, such as field programmable gate arrays (FPGA), has developed. In 2011, the first FPGA miner surfaced in China. The device is called the "Pumpkin Miner" and is manufactured by Nangeng Zhang, also known as "Pumpkin Zhang." However, due to FPGA mining's high power consumption. It was eventually pulled out of the market in just six months.
The first ASIC (Application-specific integrated circuits) miner, called Butterfly Miner, was introduced in 2012. Initially, ASIC miners had around 200 times the computational power of graphics card mining. However, the power usage rate was not significantly different, and it quickly gained market popularity. ASIC miners have quickly progressed to become the third generation of bitcoin miners. Many have continued to improve and evolve mining chip technology, beginning with 110nm, 55nm, 28nm, and now 14nm.
The block reward provided to Bitcoin miners for processing transactions is cut in half every 210,000 blocks mined, or about every four years. This is known as halving because it reduces the rate at which new bitcoins are issued into circulation by half. This is Bitcoin's method of imposing artificial price inflation until all bitcoins are freed.
This rewards scheme will continue until the intended maximum of 21 million coins is achieved around the year 2140. At that moment, miners will be rewarded with fees for executing transactions, which network users will pay. These fees ensure that miners continue to have the incentive to mine and maintain the network.
Controlled supply-block reward halving
Controlled supply-timeline estimation
Graph demonstrating the impact of the network's hash rate (continuously quicker versus continuously slower) on the restricted supply of Bitcoin through time.
This chart would benefit from a minimum of once-a-year updating every 52,500 blocks (one-quarter of a reward halving cycle).
Each time halving happens, the mode by which Bitcoin should be mined gets changed. From CPUs to ASIC, mining computation came a long way. Since the next Bitcoin halving will take place it will push the mining difficulty more complexity. How Bitcoin mining has progressed and how it is going to be in future, below are some of the mining trends which could be implemented after the next Halving.
The more computational power is needed for mining, the greater the number of computations per second that can be performed. The more you try to locate the correct "answer" (a random value), the better your chances of getting the correct answer first. This generates new blocks and earns bitcoin rewards.
Huge crypto-mining corporations have started constructing large mining operations in nations and regions with low-cost power in recent years. As new plants come online, competition in the mining sector heats up and competition in computer power increases. Mining has now evolved into an industry requiring technical competence and big-scale operations, with enormous market oligopolies. Even with a few ASIC miners, mining bitcoin is now nearly difficult.
Top Bitcoin mining pool as per 2022
Cloud mining is an innovative strategy that has evolved in the industry in recent years to allow anybody to engage in mining. Thus, cloud mining allows users to acquire and deploy cloud computing capacity from a service provider for mining purposes. Users just need to pay the service provider to rent the computational power resources needed to mine, rather than purchasing the mining machine or establishing the mining farm.
The usage of graphics cards by miners is far from gone. Many cryptocurrencies other than Bitcoin, because of differences in mining algorithms, nonetheless have an architecture that permits miners to use GPUs to mine. As a result, many miners continue to utilise graphics cards from chipmakers such as AMD and NVIDIA for mining. And they mostly mine cryptocurrencies such as Litecoin (LTC) or Dogecoin (DOGE). Miners that use ASIC miners have adapted their ASIC design to mine other cryptocurrencies.
Computer experts and academicians have predicted recently that Quantum Computers will control the Bitcoin mining business and compromise the blockchain's security because of their massive computational capacity. However, quantum computers have not yet reached the level of widespread use and adoption. Furthermore, quantum computers are expensive to build and are not designed for mining. As a result, the cost-effectiveness of mining is debatable - it is unknown if quantum computers can disrupt the Bitcoin network.
Even if Bitcoin miners are successful, it is unclear if their efforts would be lucrative because of the high initial equipment expenses and continuous power bills. According to a 2019 Congressional Research Service research, one ASIC may consume the same amount of power as half a million PlayStation 3 systems.
The computational power required has grown in tandem with the difficulty and complexity of Bitcoin mining. According to the Cambridge Bitcoin Electricity Consumption Index, bitcoin mining consumes around 94 terawatt-hours of electricity per year, which is more than most countries.
Bitcoin's yearly footprint in electricity consumption hit an all-time high in early 2022 when it was thought to be greater than Finland's power usage. This is according to a site that attempts to estimate the energy usage of both Bitcoin (BTC) and Bitcoin Cash (BCH). It does this by assuming that miner costs and income are the same: the bigger the miner's income, the more powerful the gear that can be supported.
Joining a mining pool is one method to share some of the hefty costs of mining. Pools enable miners to share resources and increase capabilities; however, shared resources imply shared incentives, therefore the potential payment is lower while using a pool. The price fluctuation of Bitcoin also makes it difficult to determine how much you're working for.
Software Rewards: The program compensates you for providing your machine for bitcoin mining in a specific cryptocurrency. For example, if you are mining Bitcoin, the program will pay you for your efforts. This assists miner in making money.
Profitable Mining: Even though the price of a cryptocurrency appears to be higher, mining is a process that can help you earn a lot of money. People who have a powerful mining setup have a better chance of making more money than they did when they first built their rig.
Sustainability Issues: Bitcoin mining consumes lots of energy and resources. The amount of energy needed to run the Bitcoin network is mind-boggling. The Bitcoin network generates around 73 million tons of CO2 each year, which is similar to Turkmenistan's emissions, according to Digiconomist. According to data through September 2022, Ethereum produced an estimated 35.4 million tons of CO2 emissions before moving to proof of stake, which reduced to 0.01 million tons. The World Wide Web's founder, Tim Berners-Lee, has called "Bitcoin mining" "one of the most fundamentally pointless means of spending energy."
High-Cost Setup: Setting up a bitcoin mining gear or farm may be expensive. When your computer is mining for lengthy periods, you will incur large electricity expenses. This, in turn, will raise your costs.
Market Volatility: The volatile nature of the cryptocurrency market makes it a riskier business for both investors and miners. Expect unexpected highs and lows within hours, which may result in losses. For example, if you are mining Shiba Inu and the price of Shiba Inu suddenly lowers, you may find yourself losing more money rather than generating enormous gains. Many individuals avoid crypto mining due to the volatility of bitcoin.
Bitcoin mining is the method to get bitcoin rewards by solving a mathematical puzzle to crack a block to validate the block into the blockchain. While doing so, the miner gets a reward as Bitcoin.
With today's difficulty rate but considerably more powerful technology, a solitary miner could mine one bitcoin in around 10 minutes. However, the average rate for most miners is 30 days.
According to sources, bitcoin mining is prohibited in several nations, including Bangladesh, China, Egypt, Iraq, Morocco, Nepal, and Qatar. However, it is legal in the United States and most other nations, but not all US states permit it.
Mining one bitcoin block earns you 6.25 bitcoins. Furthermore, the amount of electricity necessary to mine one bitcoin is enormous. However, the total procedure proves lucrative.
There is no minimum or maximum amount of GPUs that may be used during mining, and you can even start with one. However, if you are serious about mining, a system with six GPUs is advised.
It is not a guarantee that crypto mining will damage your GPU or computer. Most GPUs are equipped with auxiliary fans that prevent degradation during prolonged periods of use. However, it's crucial to keep your hardware clean to prevent any damage.
Yes, it is possible to mine Bitcoin on an iPhone using authentic mining apps without any leaks in the app store. However, the mining process is slow, with one block taking about 10 minutes to mine, and the reward is only 6.25 Bitcoins per block.
Mining one Bitcoin block will earn you a reward of 6.25 Bitcoins, which is currently valued at approximately $143,000. However, the high power consumption required to mine Bitcoin can significantly reduce the profitability of the mining process.
Joining a Bitcoin mining pool is a simple and free process. You need to have Bitcoin mining hardware and download mining software. There are both free and paid mining pools available, with paid pools charging a percentage of the pool fees.
With a high-quality power source, efficient mining hardware, and power efficiency, a Bitcoin miner can achieve a hash rate of up to 10Th/s. However, the profitability of Bitcoin mining depends on several factors, including power cost, Bitcoin price, and power consumption.