What is Bitcoin mining? A Comprehensive Guide to Mine Bitcoin
Bitcoin mining is one of the ways in which you can obtain this digital currency. To get Bitcoins, the so-called miners use the computational power of machines that nowadays must have specialized software and hardware, and which can make millions of mathematical calculations per second.
Whenever a miner or group of miners (pool) solves the necessary mathematical problems to verify the transactions and complete a new block, a certain number of Bitcoins will be distributed proportionally among them, depending on the computing power each contributed.
But mining isn’t only about making money, it’s also a primordial part in the operation of any crypto-currency. Miners make the Bitcoin network stable and secure, by releasing new Bitcoins and verifying transactions made by any user, which will eventually be added to the Blockchain.
How to earn Bitcoins by mining
By confirming complete transaction blocks, miners release new Bitcoins which they receive as compensation for their work. These released Bitcoins become part of a system and make it grow.
Since 2016 every time a miner or group of miners resolves a new block, they receive compensation of 12.50 Bitcoins, it’s expected that in 2020 that reward will be of 6.25 BTC. This reward division is known as “halving” and will be explained below.
Fees or commissions have to be paid for many of the transactions made with Bitcoins, which will be later reverted to the miners. Transaction fees play an important role in the speed with which a miner can verify these transactions, so the higher the fee, the more interest a miner will have to add it to the block and the faster it will be confirmed, and finally added to the Blockchain.
All transaction fees included in a block will be a complement added to the miner’s compensation or for resolving that entire block. Some transactions involve a 0BTC payment, so some miners will have to verify them without receiving compensation.
The average fee per transaction is approximately 0.0001 ฿, but it varies.
Is it easy to mine Bitcoins?
At the beginning, it was very easy and anyone with a personal computer could do it. But nowadays the difficulty of the mathematical calculations has increased and requires higher processing power.
One of the most common practices among miners who don’t have large hardware is to join “mining pools”, or groups of miners, to join forces. The earnings due to block decryption are divided based on the power (hashes and shares) that each contributed.
Bitcoin mining is compared to gold mining. The idea is that any miner can decide to start looking for gold, invest in more advanced machinery to help him find more, collaborate with other miners and distribute the profits or invest to create a large gold mine with trucks, bulldozers, and miners to work for him.
To get an idea of what large-scale miners use to generate Bitcoins, here’s a 360-degree video of a Chinese mine, which is one of the biggest installations in the world and is definitely worth seeing. Both in this type of installation as in most homemade ones, one needs to take into account the required space, the price of the equipment, its maintenance and the electric energy that it consumes. In addition to thinking about the continuous evolution of hardware, one needs to consider the growing difficulty of mining Bitcoins and their increasingly volatile price.
Any investment should always be thoroughly thought out.
Block Reward: Controlled issuing of Bitcoins
Ever wondered how BTC is issued? If there’s no a central authority and miners do all the work, how is this digital money issued? This is a fundamental concept to understand the Bitcoin network and its clever decentralised solution. A good premise to bear in mind is that Bitcoins has a controlled supply, i.e., they are generated under a very specific outline. A maximum supply of 21 million BTC will exist in the network and miners can’t issue a higher number than that. Miners compete to solve a complex cryptographic problem. We’re talking about millions of calculations and tests to solve this computational problem. As the network gets bigger, this also gets harder to compute.
The first miner that solve this problem, will take care of adding that block to the blockchain. What does it get in return? HUGE retribution in BTC, aka: Block Reward. The first reward batches were worth 50 BTC, but this number “halves” every 4 years. By the time of writing this article, the block reward equals 12,5 BTC. And, in a nutshell, that’s the way that Bitcoins are issued in a controlled fashion. On average, 144 blocks are added to the chain every day. By doing the math, the last block will be added in 2140.
The compensation reduction process is programmed and happens once 210,000 blocks have been mined, which happens approximately every 4 years.
The reward earned for resolving a complete block started with 50 Bitcoins in 2009, in 2012 it was 25, and in 2017, every time a block is solved, 12.5 Bitcoins are released as compensation to the miners. Generally, after each “halving” the price of the Bitcoin goes up, so the system compensates for it.
Is Bitcoin Mining profitable?
Is bitcoin mining still profitable? In 2010, you could create a lot of bitcoins using your personal computer. Not anymore. The stakes are much higher now. Bitcoin mining is now a very competitive process that requires highly specialised machines to pull off. Your ordinary PC is just not equal for the task.
So, how does bitcoin mining work? Simply put, Bitcoin mining is the process of verifying transactions on the bitcoin network. As you might already know, blockchain is basically a decentralised ledger outside the control of any central authority.
The ledger is distributed into millions of computers across the world and every transaction must be verified.
To do this, miners must do some number crunching to find a specific number. These are educated guesses which means making several attempts. A lot of energy is wasted in the process. A bitcoin mining machine actually handles this process. The first to find it gets a reward in bitcoin. Because of the huge interest, the computational power required to mine bitcoin has been increasing. In the following sections, you’ll see the key factors to calculate your mining profitability.
Consider you miner’s hash rate
Simply put, a mathematical problem being solved is called a hash. The rate at which it is solved is the hash rate. The more the miners joining the network, the more the hash rate required. Be sure to look up your miner’s hash rate before you buy. It indicates how well your miner will perform. The higher the better.
The difficulty increases with more miners joining the network hence more resources required. This is the rather tricky part to estimate. This will inevitably affect your profits and it is something you should factor in.
The reward for finding a valid block currently stands at 12.5 bitcoins. This number halves every four years. In 2009, the reward was 50 bitcoins. A total of 21 million bitcoins can ever be created and this supply will be exhausted around 2120.
Is bitcoin mining worth it?
So, is bitcoin mining worth it? A lot of factors go into bitcoin mining. Several bitcoin mining calculators are available for this exact purpose.
One major consideration is the power rates in your country. That is because the cost of electricity plays a huge factor in bitcoin mining. The reason why China dominates this sector come down precisely to this reason. Miners in countries like Russia and Canada also have an edge because of low tariffs.
To demonstrate this point, the cost of electricity starts to surpass the cost of acquiring an Antminer, a popular bitcoin mining hardware after two years of operation.
Hardware Cost and Efficiency
One other major cost is, of course, buying the actual mining machine. A good Bitcoin mining equipment costs anything between $500 to $2000.
Power efficiency should be your major consideration before you make that purchase. Depending on where you are, it could be the single most important thing that determines your mining profitability.
You can estimate the amount of electricity your miner will consume from your monthly bill.
Next, you need to check your miner’s efficiency. This is given in W/GH. The higher the efficiency, the better. This simply means your miner will do more work with less electricity.
Bitcoin mining calculators usually display the price of bitcoin on the side for easy reference.
Mining pool fees
To mine more effectively, you will need to join a mining pool. This is a group of miners who have joined literally pooled their resources. This comes with fees which you need to put into consideration.
Of course, you have to consider the price of bitcoin in the market and make your profit calculations. As you will not start turning in a profit immediately, you will need to make some projections as well.
If you cannot afford a decent mining rig, for now, you can invest in cloud mining. This is where you actually buy computing power instead of actually bitcoin hardware. Those who invested in bitcoin mining 2017 reaped big because of the high bitcoin prices.
So, you are finally ready to go into bitcoin mining? How about we do some bitcoin mining profitability calculations before you get that brand new bitcoin miner?
Bitcoin mining can be a hugely rewarding exercise. It can also be the fastest way to wash your money down the drain if you don’t get certain things right.
Other Factors to Consider
Bitcoin miners generate a lot of heat. That’s why you also need to factor in cooling costs. If you live in cold areas, you can use the excess heat for example to heat your house.
As more miners join the network, the network difficulty will go up. This means more hash power will be required. In this case, you will mine fewer bitcoins with the same hardware.
Also, keep in mind the fact that the number of block rewards will half every four years.
Bitcoin mining calculators will help you estimate your bitcoin mining profitability. However, factors like mining difficulty and bitcoin prices are difficult to predict.
If your calculations don’t work out, you can always buy bitcoin from an exchange.
Top 5: The Best Mining Rigs (hardware) in 2019
Dragonmint is the new king in the block. Manufactured by Halong Mining, it is one of the best miners yet.
The Dragonmint T16 worked surprisingly well, it was sold out within a short time. The bitcoin miner has received high profile endorsements including from the creator of TREZOR and Slush Mining Pool.
Dragonmint T16 consumes 0.075J/GH making it the most efficient out there. It boasts 16 TH/s making it the most powerful. Its ASICBOOST further boosts efficiency by an extra 20%. There is no doubt, Dragonmint T16 ticks all the right boxes.
The second in contention is predictably the Antminer series from Bitmain, the Chinese manufacturer that currently dominates the market. The Antminer S9 is slightly less efficient than the Dragonmint at 0.098J/GH and less powerful at 13.5TH/s.
Please bear in mind that this is the rate for the latest model shipped March 2018.
This is S9’s predecessor by Bitmain. It consumes 0.25J/GH which is significantly higher than the Dragonmint T16 and the S9. Although much less efficient, the S7 comes with its own Power Supply Unit (PSU). This can be a reasonable choice if you use cheap renewable energy like solar.
AvalonMiner is another reputable bitcoin mining rig with a power efficiency of 0.109J/GH, about 10% less efficient than the Antminer S9. Its hash power is placed at 11TH/s which is pretty decent.
AvalonMiner is the predecessor to AvalonMiner 821. It has a hash power of 8.8TH/s. AvalonMiner 761 supports cluster mining and can support up to 6 devices.
WhatsMiner M3 is another decent bitcoin mining machine with a hash power of 12.5TH/s. Although its hash rate is slightly less than the Antminer S9, it is considerably cheaper. It comes with a PSU and has the same noise levels as an Antminer S9.
Top 4: Best Bitcoin Mining Pools and Why
Now that you’ve picked your ideal mining rig, you’ll probably want to be part of a mining pool. By sharing computational power, miners share their resources in a “pool” to get better results. In fact, it is very hard to be profitable unless you participate in a mining pool. Each one has its own characteristics and some are fairer than others when distributing the total profits. We’ve selected the best four in our opinion, please check below:
With a history dating back to 2010, Slush Pool has got to be the oldest one around. It takes the trust of the community to come this far. It is currently the fourth largest accounting for over 11% of bitcoin network’s hashing power. The good thing with Slush Pool is that there is a demo miner for you to tinker with. If you are new to bitcoin mining, we advise you to learn as much as possible before you fully immerse yourself. There are many bitcoin pools for beginners where you can start.
Luckily, Slushpool has a simple, easy to use interface for beginners and a more advanced one for the more experienced miners. There is a scoring mechanism for your hashrate. Switching to another pool then coming back may not be a good idea as you will lose some points.
Slush pool fees are set at 2% which is slightly higher compared to others. Rewards beyond the set threshold are sent out every hour. You can set it to as low as 0.001 BTC. For registration of your pool address, bitcoin wallet will suffice. Bitcoin mining does not guarantee results. If you are not sure, it is best to buy bitcoin from an exchange.
True to the sharing revolution, Antpool lets you connect to other miners around you. First off, Antpool is brought to you by Bitmain, the manufacturer of the Antminer, the most popular miner right now. The capability to link to the nearest miners means you can get a faster connection. The other good thing about this coin mining pool is that there are servers across the globe so you can connect faster from almost any corner.
Antpool now accounts for about a quarter of the total hashrate on the bitcoin network, making it the largest mining pool available. Payouts are done every day as long as your rewards exceed a certain threshold. Rewards are calculated using various methods and you can choose your preferred one.
In one, a percentage is charged against the total payout (about 4%) and an additional 2% on transaction fees. Another plan offers full payout except the pool gets to keep the transaction fees. Be sure to check out the more methods and detailed calculations on the site.
BTC.com is one of those in contention for the top spot. This mining pool has a better way of sharing transaction fees. This is calculated within a certain period, added to the block reward and distributed. This helps bring in some good profits especially when mining fees are high as was the case around December 2017.
An honourable mention goes to F2Pool which accounts for more than 5% of bitcoin’s hashrate. Like many other mining pools, the payout is calculated on a Pay Per Share basis minus a 3% pool fee. Payouts above 0.005 BTC are done daily. This is another Chinese based mining pool which has been in operation since 2013. The advantage with this pool is that it also supports other coins such as Ethereum, Monero, Dash etc. Occasionally, you will get some free altcoins for mining certain cryptos.
One criticism against F2pool is that it doesn’t mine low fee transactions. This is however true for many other pools as well. These are just the top bitcoin mining pools. There are several others to choose from
Asking how to join bitcoin pool. Simple, you just need to sign up and enter your bitcoin address. Set up with a few clicks and you will be ready to go. Good luck with your bitcoin mining.
Bitcoin Mining Profitability Calculator – Is it worth to mine Bitcoin in 2020?
Bitcoin Mining profitability has dropped drastically since the bear market of 2018. The cost of mining rigs soared between 2017 and 2018, as the network grew and the mining difficulty did accordingly. So, what are the odds of getting profits by mining BTC this year? Is it possible to get a good return rate over time? Due to the volatile changes in Bitcoin price, we can’t give a definite answer. But here’s what you can do: fill as many fields of the following calculator and check if this activity is profitable for you:
Powered by CryptoRivalshowCalc(‘bitcoin’, ‘500’, false, ‘0’, ‘f93’, ‘f93’, ‘f93’, ‘4e9f15′, ’09c’, ‘f0ad4e’, ‘d9534f’, ‘f5f5f5’, ‘eee’);
Mining hash calculator
In general, a good calculator will factor in bitcoin network’s hashrate. Simply put, this is the total amount of power needed to run the network. A good bitcoin hash rate calculator will include this. This figure usually goes up over time and a hashing power calculator will constantly update this.
As we have seen, a bitcoin mining profitability calculator is several things in one. Mostly, it is a bitcoin mining electricity calculator and bitcoin hash calculator all rolled into one.
Good bitcoin mining profitability calculators will also give you profitability estimates for other altcoins as well. Whattomine.com, for example, integrates a Litecoin miner calculator so you can compare with other miners.
This calculator also compares several types of miners in terms of their profitability to help you choose the best. Whattomine.com also has various columns to cater for the various algorithms.
Hash per second calculator
All you need to do is enter the hashrate of your bitcoin miner. This is usually given in GH/s. A higher hashrate means the miner is more powerful. A hash to bitcoin calculator will translate your hashpower to bitcoin. You will sometimes find this being referred to as m hash s calculator or mhash s calculator.
The other thing you need to know is the cost of electricity in your locality. This is perhaps the most important factor and you need to get this right.
Can You Mine Bitcoin for Free?
When it comes to bitcoin mining, the first thing that comes to mind is expensive hardware and high electricity costs. But contrary to popular belief, you don’t actually have to own bitcoin mining hardware to mine bitcoin. As dodgy as it sounds, you can actually mine bitcoin for free
Of course, nothing really comes for free. You have to put in the time, effort and talent and money in exchange. Perhaps it’s important to point out here that there are several online scams that promise ridiculously high rewards. If it’s too good to be true, it’s probably just that. Exercise your due diligence.
Alternatives to get BTC without a big initial investment
Here are some alternatives to mine bitcoin without buying actual mining rigs:
- Cloud Mining: Cloud mining means you buy a certain amount of shared computing power and a remote data centre. This means you earn a regular amount of bitcoin proportional to your contribution.
- Earn BTC by completing tasks: You can actually earn free bitcoins while doing some fun tasks online – like watching and reviewing movies. Others reward you with free bitcoins for watching a couple of adverts. And it doesn’t have to be all that boring. Certain apps like the Free Bitcoin Maker allow you to earn free bitcoins every few seconds. You should be careful, though.
- Mining Pools: One way to avoid the hefty investment needed for successful bitcoin mining is to join a mining pool. When you join one like Slush Pool, you are basically contributing your computing power together with other miners across the globe. The mining pool operator will give you your cut at the end of the day. This is one way to mine free bitcoins with little in hardware investment.
- Bitcoin Faucets: Bitcoin faucets give out rewards in satoshis for completing online tasks like filling in a captcha. Some systems dispense bitcoins at certain fixed intervals.
- Mine with your CPU/GPU: although is not very profitable, you can try mining for some hours with the resources of your own PC. Some online services allow you to do it via your browser and earn small amounts of BTC p/day. Of course, is not profitable but you can use it to get your first BTC and you might start understanding the underlying technology.
Final Thoughts on Bitcoin Mining
So to answer the question; is bitcoin mining profitable. The answer is yes if you are willing to put some significant investment. If you don’t have much money to spare, you can settle to buying and selling bitcoin instead. But Bitcoin mining is more than profitability and making money, mining is the backbone of BTC and decentralization and it makes BTC a more democratic and fair system where anyone can participate and get benefits. If BTC becomes something bigger one day, Bitcoin miners will have a huge reward in money, but also of being part of a technological revolution.