Undoubtedly, Bitcoin is the most popular digital cryptocurrency. Many people want to make Bitcoin because it’s easy to hide it from tax agencies and the government, has minimal transaction fees, and has been accepted by some of the businesses around the world. If you’re interested in earning Bitcoins then there are several ways for this. The first and foremost is to accept Bitcoin as a mode of payment. You can sell goods or services and accept Bitcoins using a wallet as a means of payment. Bitcoin mining is also a great way to earn these coins. Various free Bitcoin mining sites offer a hash power bonus on signup and allow you to start free mining. If you’re a newbie and want to know about Bitcoin mining, then this blog is for you.
What is Bitcoin mining? It is a process of adding transaction records to the blockchain. Mining is a record-keeping process that uses nodes for adding a publicly available ledger which is known as a blockchain. Miners provide the computational investment to a decentralized peer-to-peer network and are issued a certain number of Bitcoins in exchange. Thus, we can say that Bitcoin mining is all about creating new Bitcoin by solving complex math problems. Since these problems are so complex that they cannot be solved manually, Bitcoin miners use high-computational computers & software to solve these problems.
Another outcome of Bitcoin mining is to make the Bitcoin payment network trustworthy and secure. Since the whole network is decentralized and in the chain of blocks, miners need to ensure fairness while keeping the Bitcoin network stable, safe, and secure. In order to document the transaction, Bitcoin miners add these transactions to a public record called the blockchain. The nodes are then used to record these transactions so that they can be verified in the future.
Bitcoin mining analogy
In the beginning (in the early 2010s), mining was done using personal computers. Nowadays, mining has become so competitive that it can only be done profitably with the most up-to-date Application Specific Integrated Circuits (ASICs). Initially, to solve the Bitcoin algorithm, to add to the blockchain and to receive Bitcoin, miners used to involve desktop computers, GPUs, or older models of ASICs. That eventually resulted in huge power consumption. With the growing level of difficulty and to keep electricity costs low, miners now use improve and more efficient hardware like Raspberry Pi Bitcoin mining software.
Bitcoin is a decentralized network. It is backed by millions of computers across the world called “nodes.” These store information about prior transactions and help to verify their authenticity. The recorded transactions in Bitcoin nodes can be accessed by anyone. Each miner contributes to confirming the legitimacy of each transaction and is rewarded for their services with a block.
Few important terms
Blockchain – Bitcoin mining is a resource-intensive and difficult so that the number of blocks found each day by miners remains steady. Blocks that contain a proof of work are considered as valid.
Proof of work (POW) – The blocks in a Bitcoin blockchain have series of data referred to as nonces. These are meaningless data strings attached to each block of a Bitcoin blockchain. Computational devices are required to search for the right nonce.
Mining difficulty – Bitcoin mining is a difficult since hash of a block should start with a certain number of zeros and probability of calculating a hash that starts with many zeros is very low. As more miners join, the rate of block creation will go up. To check this, there is increase in difficulty that in turn push the rate of block creation back down. Any blocks released by malicious miners that do not meet the required difficulty target will simply be rejected by everyone on the network and thus will be worthless.
Block reward – When a block is discovered, the discoverer will be rewarded with certain number of Bitcoins.
How can you start Bitcoin mining?
Bitcoin mining rig
To start Bitcoin mining, you need to have a mining rig. Gone are the days when mining was done using ordinary domestic computers and graphic cards. Nowadays, you need special hardware such as an Ubuntu Bitcoin mining device to start the mining process. Popularly known as Application Specific Integrated Circuits (ASICs), these devices are custom-built for this purpose. The main parameters for selecting these devices include performance (hashrate), consumption of electric power, and price. Hashrate indicates how many attempts to solve a block can the machine make per second. Some of these devices are designed to solve as many as 14 terahashes per second. It means they do 15,4 trillion attempts to solve a block per second. Since these devices perform huge computation, they also emit a lot of heat and noise. In order to get rid of all these concerns, you need to place your machine in a professional data center. The lower price of energy, cooled area, constant monitoring, and low noise will be profitable for you.
You need to set up a Bitcoin wallet. Not only will you receive your Bitcoins in the wallet but also you can manage your Bitcoin addresses. The address consists of a public key and private key in which the public key acts like a bank account number that is used to receive Bitcoins from others. The private key is secret and it serves to send off transactions. There are multiple types of wallets from simple wallets, software ones to the most secure hardware and paper wallets. Each wallet has its advantages and disadvantages. As a beginner, you should opt for a software wallet since it is easy to manage and suitable for frequent manipulation with mined currency.
As mining is getting competitive day by day, solo miners have little chance of discovering the next block since they use a small percentage of hash power. With a single machine, you can´t compete with many large mining farms all around the world. So, the mining pool can easily address this problem. The single miner should join a collective network mining pool in order to merge the computing power of all participants to form a new block. When Bitcoins are mined, the gain is divided among members according to a given power. By following this approach, the income is low, but it is regular. However, new miners should always do their research before joining the pool since some pools may have been untrusted.
Once, you’re up with hardware, a Bitcoin wallet, and have chosen a mining pool, it’s time for you to have a mining client to run on your computer. It is used to connect the Blockchain and Bitcoin network. Mining software is used to allocate work to the external miners. They also collect the complete results of their work. The program is used to broadcast information back & forth on blockchain and also helps you to monitor basic statistics like temperature, cooling, hash rate, and average mining speed.
Now, it’s time for you to start mining and earning Bitcoins. All you need is to connect the miner to a power outlet, link it with a computer, and install mining software. Once you fill in information about your wallet and mining pool into the mining software, you can choose a device and start mining.
Free Bitcoin mining without investment – Is it possible?
Many people ask whether free Bitcoin mining without investment is possible or not. There are several digital assets like websites, apps, and browsers that make it possible to mine Bitcoins while you go about your daily online activities. These assets can be mobile apps like Bitcoin mining Android apps and desktop apps.
Cloud mining – How it can help you?
In this, mining companies set up the mining rigs at their own facility. Rather than buying and setting up and maintaining the Bitcoin mining rigs, a miner can register and purchase shares or a mining contract. With cloud mining, a user doesn’t have to do anything else. The mining company does all the work and give the cloud miner returns on a regular basis. The user essentially buys a proportion of the hash power. However, one of the major concerns associated with cloud mining is that there have been plenty of reports of fraudulent activities. Mining companies even have the ability to halt operations if Bitcoin’s price falls below certain levels. So, due diligence on a mining company is recommended.
Miners can make money by finding proof of work and creating blocks. However, great computing power is required for coin creation. Though cloud mining is the option available but to get rich with the mining process, you need to own a mining rig, learn the technology and processes behind Bitcoin mining. These are the things that you wouldn’t experience through cloud mining.