How to Mine Bitcoin? or Bitcoin Mining – Concept, Mechanism, Profitability, Cost & more
How to Mine Bitcoin? or Bitcoin Mining sounds crazy! But the entire Bitcoin network depends on this valuable point about which we will discuss here.
Even though it is one of the most important things of Bitcoin, it is extremely difficult. Mining bitcoin isn’t an easy task. There are numerous factors to consider before becoming a successful miner.
Hence, if you are new to mining and curious to know it better, just get into this article and find out how Bitcoin Mining is profitable and which things you should know before taking action.
From individual bitcoin mining to the mining pool, you will know every detail about Bitcoin mining in this article.
What is Bitcoin Mining?
Bitcoin mining can be viewed as a backbone of the Bitcoin network. It is mainly because the ‘mining’ ensures the security of the Bitcoin transactions.
In the absence of this critical thing, the whole Bitcoin structure would either be attacked and experience dysfunctional issues.
However, “mining” here does not mean the extraction of substances from the earth, but it is about technical mining done by specialized computers.
In the entire process of mining, the role of a miner is highly considerable.
These miners secure the network and ensure the smooth Bitcoin transaction without any hassle. However, it is difficult to do without the specialized computer’s assistance.
These computers are apt in solving any critical mathematical error that is very-tricky to solve manually by an individual.
Even for standard computers, these calculations can be extremely complicated. The calculation aligns and blocks of transaction which leads to “blockchain.”
The primary focus of Bitcoin mining is to ensure that no errors are available in the transaction and every information is accurate.
For instance, after solving the complex computational issues, it produces a new Bitcoin and makes the Bitcoin Network reliable.
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How to Mine Bitcoin & How Bitcoin Mining Works?
Bitcoin mining is impossible without miners. These minors are actually paid for their mining tasks every 10 minutes.
It is just because of these miners that the user feel confirmed about Bitcoin transactions and feel secure about the network.
In this way, miners effectively avoid the “double-spending” issues, which can become a big issue because transactions are held on a large scale.
“Double-spending” refers to the scenario when the owner of a Bitcoin spends unknowingly or illegitimately spends the same bitcoin two-times.
However, this issue is easy to find with physical currency, e.g., paper notes and coins. But electronically, it becomes quite challenging because the owner can create a copy of a digital token and illicitly can use it without spending the original one.
That’s why to avoid such issues; Miners always check that none of the transactions is repeated twice. They make sure that a single bitcoin isn’t illegitimately reaching any individual.
Things to Consider to Mine Bitcoin
Now, let’s have a look at the points you must consider before getting into Bitcoin Mining.
Cost of energy
Mining equipment consumes electricity; they may require a 220V outlet. Regular home appliances can efficiently work on a standard 110V outlet.
That’s why it will be a wrong idea to use miners at home.
If in your country or region, the electricity rate is high, you may avoid getting in. However, there are plenty of reasons why you need to consider this critical point.
How much time are you willing to spend on bitcoin mining? Time is the critical factor in the entire bitcoin mining process.
Make sure you have a steady and reliable internet connection because every step will be digital.
Make sure the bitcoin value is more than the expenses you incurred. It is highly recommended only to take your official currency into account while finding the bitcoin value.
Through the following points, you must run a crucial analysis. Such as, you will be setting the price level in variations while taking the varying difficulty level in mind.
For instance- you will be finding a price at which Bitcoin mining will appear a profitable decision for you; this price will be known as a Breakeven price.
How much a Miner earns through Mining Bitcoins?
The rewards of mining vary from year to year. For instance, in 2009, when the first bitcoin mined, miners earned 50BTC per block.
Similarly, in 2012, it was 25BTC; by 2016, it was 12.5 BTC, and as of May 11, 2020, it came to 6.25BTC.
However, the price of one Bitcoin in November 2020 was around $17,900. So what does it means?
In simple words, it defines that on completing a single block, the person could earn $111,875 (17,900 x 6.25) for solving a complex computational problem.
As you can see, Bitcoins have been halved in every four-year interval. Throughout this circulation, scarcity can be observed, which leads to a big hike in Bitcoin prices.
You might wonder that if too many bitcoins have been mined, how will new miners find the opportunity? Well, the simplest explanation behind it is time.
Even though the reward is comparatively low as it was used to be a decade ago, still opportunities are high.
Due to inflation, the reward will be halved every four years until the last biotin is mined, but it is anticipated around the year 2140.
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Profitability in Bitcoin Mining
The profitability in Bitcoin Mining is huge. Still, in comparison to the bitcoin mining in 2009 and now, a big difference is apparent.
At that time, the personal computers of miners were enough to handle the entire game.
Miner, who already had a well-working system and basic equipment, had no need to spend even a single penny. If any error occurs, the modest changes in the system settings resolved it all.
Undoubtedly, it was less-stressful. Even though we talk about competition level, so it could be viewed on a ground-level at that time, which means profitability was also high.
But after ASICs (application-specific integrated circuit) came into play, the entire game of Bitcoin mining went through a big evolution. The competition skyrocketed.
Now miners purchase expensive equipment’s and pay higher expenses as these electrical equipment’s are energy-consuming.
It raised difficulty in bitcoin mining, and a vast difference can be observed now.
Difficulty in Bitcoin Mining
As we discussed above, the difficulty in bitcoin mining has increased a lot. Initially, the competition was comparatively low.
But when ASICs entered the market, everything changed, and competition boomed. Still, the difficulty level in Bitcoin mining varies.
Every two weeks, the competition in Bitcoin fluctuates, yet it continually increases.
Hence, it is very obvious that a higher difficulty rate is a drawback of Bitcoin Mining because individual miners would find it more challenging to solve computational problems.
Hence, earning becomes relatively difficult. When Bitcoin first stepped into the market, the difficulty level was merely 1.
As of today, it is more than 16 trillion. It’s no surprise that the difficulty level as of now has skyrocketed.
However, it happens because Bitcoin Network wants its miners to solve the tricky calculation in every ten minutes. This means an individual miner will have to win the race within ten minutes.
This difficulty level doesn’t end; it goes on as the network makes it harder, which reduces the probabilities to win the race.
Although, for people with slower equipment, the problems are endless. They find it impossible to even stand in the race.
That’s why miners often purchase costly equipment that raises another challenge.
Cost of Bitcoin Mining
Bitcoin Mining cost has increased at a dramatic rate after ASIC entered the game. People aspire to become a powerful miner and win the race. But this achievement comes at a huge cost.
Thanks to the ASIC mining box, that probably appears as a treasure finding machine to you, but it can easily bite a big chunk of your money.
This means that you will be spending a huge amount on equipment before you earn a good-amount from Bitcoin mining.
Choosing an ASIC Miner
Without ASIC or ASICs miner, mining bitcoin will be an impossible task. However, the brand new model can easily consume a big buck, that’s why you can also choose the used one.
But make sure you purchase from a verified seller only. Else, it can put you into a double loss. Your miner will fail to outperform.
Let’s have a look at the points you need to note down before purchasing the best miner:
Unit Price and Shipping Cost
Brand new ASIC miners are more efficient; they are reliable but can be very expensive. The shipping charges and taxes are some additional elements that can raise the expenses as well.
So purchase a new one only if you have a big amount for investment.
Hash Rate is denoted in TH/s. The high Hash rate of a miner will indicate more BTC mining.
Miners can be very power-consuming. But modern Miners are coming with high-tech solutions. Even though they consume less energy, still don’t forget to take advice from electricians.
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Profitability in Bitcoin In Today’s Time
The difficulty in Bitcoin Mining isn’t a new concept. But when it comes to profitability in Bitcoin in today’s time, miners share different opinions.
Even though the challenges are enormous with bitcoin mining, it is still profitable if you consider taking the right action.
For instance- Bitcoin is a digital currency that is currently operational at a huge-level. That’s why miners will require to employ advanced hardware. But it isn’t necessary that it will boost profitability.
In addition to this necessary thing, you will also require a comprehensive analysis to get a clear insight into the cost and profitability ratio.
Bitcoin Mining Alternative
The individual miners looking for further assistance can become a mining pool member- known as a group of miners.
In the group, miners share the profits and risk because they work together every minute. So this way, the speed required for mining increases, which bridges the gap between efforts and profitability.
In case the difficulty level rises and computational challenges are also increasing, more miners are invited into a pool. However, it decreases the reward ratio too; still, it boosts the winning chances.
Hence, it is still profitable because this pool will always be leading in the race. The obtained reward is then shared among the participants in the mining pool.
Therefore, you can also choose a mining pool if you don’t want to become an individual player.
How to choose a Mining Pool?
When it comes to selecting the mining pool, the options vary. That’s why, if you are willing to enter in a particular type of pool, you will consider some factors first.
It will help you in choosing the best option. It isn’t necessary to join the large pools in the anticipation that the reward will be big. That doesn’t make sense.
Instead, you should choose the best mining pool where the reward chances are high and where profitability is successful and meet your expectations.
Such as, you can choose the smallest pool, but it will reduce the chances of profitability.
Luckily, if you remain successful in mining the blocks, you can earn rewards comparatively higher. You often earn nothing in such pools, but during some fortunate situations, you can hit a big jackpot.
That’s why, before you directly enter into a pool, explore some mining pool options that will make you a successful miner.
How to Mine Bitcoin? – Conclusion
Undoubtedly, Bitcoin mining can be a complex task. The task of mining comes up with big challenges. It can be costly and time-consuming.
Even though the competition is high in Bitcoin mining, you can still outperform with the proper investment and planning.
You can choose the bitcoin mining pool where you will be sharing the risk and rewards with other miners.
Though, these pools also come in variations. That’s why; it is entirely up to your selection.
Mining is still profitable, like before; the only difference is that the difficulty level has exceeded way more than it was before.
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