Bitcoin is the most valuable cryptocurrency in the world and Bitcoin Mining is the backbone of the Bitcoin Network.
When a normal person hears the word “Miner” the first thing which comes into our mind is a person with a shovel but in bitcoin world, Bitcoin miner is a person with a very powerful computer.
In this guide, we will tell you everything you need to know about Bitcoin Mining and how you can become one. Let’s get started.
What is Bitcoin Mining?
Bitcoin is the cryptocurrency and it has a finite supply of 21 million coins. Bitcoin Mining is the process from where the new bitcoin come. In a broader aspect, bitcoin mining has multiple functionalities which make the bitcoin network more secure. These functionalities include the issuance of new bitcoins in the network, confirmation of transactions and security of the network.
Bitcoin Miners around the world approve the transactions and as a reward, they get the bitcoins which they can later sell to cover the cost of operation and earn some profit. Bitcoin Blockchain only adds one block per 10 minutes so there is only one miner who gets the reward. For every new block, bitcoin miner uses his equipment to solve the mathematical puzzle known as “proof of work” and whoever solves the puzzle first get the reward.
However, for approving the block, bitcoin miner need the number of confirmations to add the new block to the blockchain.
Another functionality of bitcoin mining is to make the bitcoin network secure. There are hundreds of bitcoin miners around the world and network hash power is distributed among different miners.
So in this way, miners make the whole bitcoin network more secure.
Moreover, if someone wants to reverse the bitcoin transactions, he will have to get the 51% hash power of the bitcoin network which is almost impossible.
What is Proof of Work?
Proof of Work is a consensus algorithm which ensures that sufficient time has been spent on the creation of new block. In the Proof of work, bitcoin miners calculate the hash of the previous blocks and hash of the block itself using the SHA-256 algorithm. In Bitcoin Network, Bitcoin miners compete with each in calculating the hash and whoever complete this complex puzzle as soon as possible get the block approved and get the reward.
Solo Mining vs Pool Mining
Bitcoin Mining is a complex process and you need a lot of computational power to solve the mathematical puzzle. So there are two options which you can opt depending on the equipment you own.
In solo Mining, you operate on your own, you dedicate your resources to the bitcoin network and you can earn a profit if you able to approve your block to the blockchain. Solo mining can give you huge profits as you don’t have to share your reward with anyone.
In Pool Mining, you join the group of miners where you dedicate your resources to the pool. In Pool mining, miners get the profit on the basis of their hash rate. Hash rate is the total computational power and your profit will increase if you add more computational power to the pool. For example, if you contribute 1% of the pool hash rate then you will get .125 bitcoins out of current bitcoin block reward which is 12.5 bitcoins. So in pool mining, apparently the profit margin is low but in reality, the success margin of approving the block is much higher than solo Mining.
How to start Mining Bitcoins?
Bitcoin Mining is an expensive process especially if you live in an area where electricity is expensive. Bitcoin Mining equipment is also very expensive, a good bitcoin mining rig will cost you more than $450 and it goes up to $3000 depending on how much power you need.
So if you have decided to start the Bitcoin Mining the follow these steps to become Bitcoin Miner
- Step 1 is to get the ASIC mining Rig. As we mentioned earlier, you need a powerful computer to start the bitcoin mining and ASIC mining are specialized computers that are specifically designed for mining purpose.
- Step 2 is to select whether you want the solo Mining or Pool Mining. For Solo Mining, you will need very powerful and as many as possible ASIC mining Rigs to compete against the powerful pools around the world. However, we would suggest that you should join Mining pool as you can’t compete against mining pools as they have much higher hash rate than yours.
- Step 3 is to download the Bitcoin Mining Software. In the software, you will dedicate your hash rate to the specific pool and you will also share the Bitcoin Address where you want to receive your payouts.
- You are all set to become a Bitcoin Miner.
Is it profitable to become a Bitcoin Miner in 2018?
It is one of the most important questions which should ask yourself before starting mining. In our opinion, the answer to this question is No, let us explain. Bitcoin mining was a profitable business a few years ago as the number of mining pools was very low and the people were able to actually earn good profits.
But as the popularity of bitcoin and other cryptocurrencies increased, it also attracted a lot of corporate investors to it and today these investors owned dozens of large warehouses with 100s of ASIC Rigs with huge computational power. So in simple words, you will compete against these large corporate mining pools and even if you join any mining pool, the profit you will get will be very low.
In our opinion, if you have huge investment then you can join the mining pool but if you don’t have large investment and looking for alternate ways to earn a profit then you can start crypto trading. Crypto trading is much more profitable than Bitcoin mining and chances of getting high profits are also very high.
If you are interested in crypto trading then read our guide “How to get started with Cryptocurrency” where we shared the details which can help you to start the cryptocurrency trading. Or if you want to know more about cryptocurrency, check out our guide “What is Cryptocurrency for Dummies”
Cryptocurrency trading, in many ways is like binary option trading and there is always a risk to any money you invest as you could lose more than you put in. So we do advise caution and proper exploration of any opportunity before jumping two foot in.
Write any questions or comments below and we will definitely get back to you.