How Do I Mine Bitcoins?

With time, the world is aggressively heading towards financial advancements along with new technologies being introduced every day. Accordingly, investors across the globe are searching for new and advance ways to invest their assets. At this time, Bitcoin gives them the chance to influence the world by stepping into the crypto universe.

Bitcoin was initially considered as a worthless currency. The first Bitcoin transaction was made by a programmer called Laszlo Hanyecz to purchase pizzas for 10000 Bitcoins and later those two pizzas were regarded as the world’s most expensive pizzas. Bitcoin has come a long way since its inception to become mainstream. Today, it is accepted by major businesses and service providers as a payment method and is dominating the whole cryptocurrency market with a value of more than 6000 US Dollars.

What is Bitcoin Mining?

To get you started, first, let’s understand the concept of Bitcoin mining. Bitcoin mining is the process of initiating a Bitcoin transaction in the network of nodes (computers). The whole Bitcoin network runs on a ledger technology called Blockchain which is distributed to the network. The people who initiate Bitcoin transactions are called miners.

When a miner initiates a transaction, a Bitcoin block is created by the network of computers which need to be confirmed by the miner for accuracy. Then the miner applies a complex cryptographical formula to the block which creates a hash. The hash is used in producing further new blocks. Let’s understand this whole process with the below bullet points.

- The transaction is pushed into a block.
- Miners verify whether the transaction is valid or not.
- They insert it into the new block as a hash.
- They solve the cryptographic problem.
- The new block is added to the Blockchain and then propagated throughout the network.

How Does Bitcoin Mining Work?

Every time a miner initiates a new transaction to the Bitcoin network, a new block gets produced using the hash of the previous block. The process means that the new block is accurate and it gets confirmed by the network. The following image would help you to understand this better.

At a time, the miners don’t verify only a single transaction; in fact, they all work for verifying multiple Bitcoin transactions which are virtually locked into boxes. Miners primarily search the key that can open the virtual lock. The moment their computers find the key, they are able to open that box and thereby verify the transaction.

However, miners get compensated with the smallest amount of Bitcoins after mining a single block as completing such complex tasks is not easy. A recent study estimated the number of efforts miners take for finding the correct key to the box i.e. almost 1.7 billion.

What Do You Need To Mine Bitcoins?

To verify Bitcoin transactions, miners need to have a couple of tools with them. First of all, they should possess Bitcoin wallets that would work as their bank account for holding the rewards they get in the mining process. In addition to that, they should also have dedicated computer hardware i.e. GPUs (Graphical Processing Unit). Such GPUs work 100 times faster than the ordinary CPUs. The next thing miners need to have is a strong and secure internet connection along with sufficient cooling systems for their computers as mining generates high temperature to the systems.

What is Bitcoin Mining Hardware?

Bitcoin mining hardware refers to those highly specialized computers that are generally used for mining Bitcoins. However, choosing Bitcoin mining hardware will completely depend on the miners. According to their circumstances, they get affordable mining hardware. But, there is a list of things to consider while opting for a Bitcoin mining hardware.

Miners need to judge each unit based on their hashing power, the electricity that is consumed by the hardware, the temperature of the hardware, and finally the cost of it. There also exist some ethical reasons related to decentralization for choosing the manufacturer of a particular hardware.

What Are Bitcoin Mining Pools?

Bitcoin Mining fascinates various crypto enthusiasts as it allows them to enlarge their Bitcoin holding by using the Proof-Of-Work algorithm. Bitcoin Mining pools are made during the process of Bitcoin mining while an individual miner shares his/her power resources with other miners over the Blockchain network.

Small miners join the bigger Bitcoin mining pool to gain profits. Through such mining pools, the small miners combine their existing resources more effectively during mining. As a result, they receive Bitcoins as rewards. But all the miners of a pool are bound to split that reward among the other members of the according to the power consumed by each miner. The miner who used the most power in the mining process receives the highest profit.

Is Bitcoin Mining A Waste of Electricity?

Bitcoin mining doesn’t consume physical labour, unlike gold mining. Instead, it consumes power, time and capital of the miner. Bitcoin miners across the world need to solve the difficult math problems for gaining the reward. For which they use their network of computers to submit a line of attempts. If consuming the electricity can increase the chances of getting more rewards (i.e. Bitcoins) for the miners, then it’s definitely not a waste of electricity.

Is Bitcoin Mining Legal?

Bitcoin mining is legal in some part of the world. However, where the use of Bitcoins or other cryptocurrencies is banned people can’t mine there as mining also gets prohibited in such countries. But if someone chooses to use his own resources to mine Bitcoins that would not be considered illegal as currently, Bitcoin mining has become a niche business to earn more by spending less.