A phrase you may have often heard mentioned when reading about Bitcoin is Bitcoin mining. So in this blog we will answer the question what is Bitcoin mining, as well as how to mine Bitcoin, and perhaps most importantly, is Bitcoin mining profitable?
What is Bitcoin mining?
Let’s begin by talking about what exactly Bitcoin mining is. To put it simply, Bitcoin mining is the process in which transactions are verified and added to the blockchain (public ledger). This is also the way in which new Bitcoins are released, as miners are rewarded with Bitcoin for verifying the transactions. There are no specific requirements if you want to mine Bitcoin, you will just need a computer and special hardware, however the process relies purely on computer processing power, so the more power you have the more rewarding the process will be.
So what does the process itself actually involve? Before a transaction, or block of transactions are accepted by the network, it must have something called ‘proof of work’, and this requires the miners to find a specific number which is also called a ‘nonce’. This number is then hashed with the content of the block, with the end result required to be smaller than a pre-set difficulty rating. The process is time consuming because there are a huge number of different nonce values that must be tried before this target is met.
The Bitcoin miners are of course a vital piece of the jigsaw, as without them nothing would be authorised, and no new Bitcoins could be released. And the mining process itself is what makes the blockchain so secure, as the process means that if anybody wants to modify something on it, then all connected blocks have to be modified for it to happen.
How to mine Bitcoin?
If you still don’t fully understand the technical processes of how mining works, then that’s not an issue as anyone can mine Bitcoin, and getting set up is surprisingly simple.
The first thing you will need is Bitcoin mining hardware. In the early days it was possible to mine just using your computer, and technically it still is, however nowadays a typical computer won’t possess enough processing power to make the process worthwhile. This is partly because the mining process pushes your computer to the limit, so the electricity it is using will more than likely outweigh profit you will be making from it.
Mining hardware comes in the form of cards which are inserted in the same way a graphics card would be. The prices of these will vary, with the cheapest ones being available for a few hundred dollars, however of course you get what you pay for so a more expensive model will likely earn you more rewards.
The next step is to make sure you have a Bitcoin wallet so you have somewhere to collect your rewards. As discussed in other blog articles there are a few types of Bitcoin wallet available, and these are straightforward to set up.
Before beginning the process you will have to decide whether you want to mine alone, or mine as part of a pool. If you mine as part of a pool then it can lead to quicker rewards, as both resources and rewards are split, whereas mining on your own will be more difficult but you get to keep all the rewards for yourself.
Once you have made this decision and have the hardware and Bitcoin wallet, then you will need to download mining software. The majority of these are available for free, and they will all contain instructions on how to get it setu960and how to connect it to your Bitcoin wallet as the process will vary slightly for each one.
When you have this setup then you’re ready to begin the mining process, just be sure to keep an eye on the temperature of your computer as the process will push all your hardware to its limits.
Is Bitcoin mining profitable?
So the burning question after reading this for sure will be is Bitcoin mining profitable? This really depends on how powerful your computer and hardware is, because as previously mentioned the entire process relies on how much processing power you have. When you begin the process it’s important to keep an eye on how much you’re being rewarded, as mining uses a lot of electricity, so without decent hardware then it’s likely that you’ll be spending more on power than you’re earning in rewards.
If you feel that the mining process for Bitcoin is not worthwhile, then it may be worth checking out other cryptocurrencies, as many of them have a similar mining process for verifying transactions and releasing currency, with the setup process being pretty much the same.