Mining is the process of creating new bitcoins, which is based on computers solving complex mathematical problems. Mining is the only way to issue cryptocurrency. One of the translations of the word mining is “mining or development of deposits.” If we are talking about bitcoin, then we are dealing with the production of “virtual gold”.
Who is mining bitcoin?
The people who are mining are called miners. This word also means specialized devices for mining bitcoin and other cryptocurrencies.
What is it like?
In part, miners can be compared to participants in torrent trackers, which, by launching a special program, allow other users to download movies or music. In the case of Bitcoin, miners maintain the functioning of the payment system, confirm transactions, and maintain a consensus on a single and unchanging state of the entire network. They receive bitcoins as a reward.
How does the mining process take place?
The mining process consists in calculating the hash (output) of the block header in the blockchain. The block includes the previous block header hash, transaction hash and a random number. When a new block is formed, the miner receives a reward – a certain amount of bitcoins. Many miners are competing for the award at the same time. As a rule, transactions included in a block are considered confirmed after six blocks in a row have been calculated.
What does cryptocurrency mining look like?
Today, cryptocurrency mining most often occurs in specialized data centers, which are also called mining farms. A typical bitcoin mining farm is a room containing a number of ASICs (application-specific integrated circuit). In the room itself, the required temperature regime is maintained or other cooling methods are used.
Is mining profitable?
The economic feasibility of mining is determined by several factors at once: the cost of electricity, the performance of “hardware”, the current complexity, as well as the market rate of bitcoin in relation to other currencies. If at the very beginning of the existence of bitcoin its mining was quite possible at home, today it requires very large computing power. An increase in the number of miners and the appearance of more powerful devices lead to an increase in the complexity of mining, which negatively affects profitability.
What equipment do you need?
At the very beginning of bitcoin’s existence, it was possible to mine it even on ordinary computers with more or less powerful processors and video cards. Today it is no longer necessary to talk about it. Modern mining is the use of expensive specialized devices and chips, the production of which has already become a separate multi-million dollar industry.
It turns out that there is no point in doing this alone?
Most likely, yes, unless you have sufficient funds to acquire expensive equipment and be able to pay the costs associated with its maintenance. However, this does not mean that you have no chance of making money from mining. It is to involve ordinary users in the process that the so-called pools (associations) of miners exist. Pools can include hundreds and thousands of cryptocurrency miners who receive their reward shares in accordance with the size of the contribution. The network sees such a pool as one miner producing hundreds of gigahashes per second, although in fact it is one main server that distributes tasks to individual miners. This practice turns out to be more effective and brings rewards faster, although it does it in small portions.
What reward can I expect?
According to the original Bitcoin whitepaper written by Satoshi Nakamoto, the reward for finding a new block is halved every four years: at the beginning of 2013 it was 50 BTC, then dropped to 25 BTC, and in the summer of 2016 it dropped to 12.5 BTC. The next reduction (halving) of the award will take place in 2020.
If you are a member of a pool, you can count on a reward proportional to your mining capacity in the “common pot”. The difficulty of finding blocks changes every 2016 blocks or approximately every two weeks. As the power of the network increases, so does the complexity.
There are many services for calculating the current mining profitability on various algorithms and devices. One of the most popular of these is WhatToMine.