If you’re interested in getting your first fractions of Bitcoin (BTC), there are plenty of options to consider. You can buy on cryptocurrency exchanges online or gradually earn them through Bitcoin faucets by playing online and mobile games or completing tasks on certain websites. But if you want to get your BTC straight from the metaphorical “caves,” you might want to try your hand at the process called Bitcoin mining.
It sounds like we’re going to do some digging, right? Let’s get started.
What is Bitcoin mining?
Bitcoin mining is the process of acquiring the most dominant cryptocurrency in the market today. Like in the hard-rock mining process of excavating precious minerals such as diamonds and gold, it also requires miners who dig inside its digital cave.
These Bitcoin miners use powerful resources to build their Bitcoin mining machines. Some of the most common requirements are powerful computers, specialized hardware like Bitcoin mining rigs, specialized software, a strong and stable Internet connection, and high electricity levels.
Now, you’re probably wondering why expensive and extremely powerful equipment is needed in the process. This is because Bitcoin miners need such resources to solve very complex mathematical problems that cannot be answered by simple computations. But how does it work?
How does Bitcoin mining work?
To further understand how this process works, let’s first take a look at the three main functions of Bitcoin mining—yes, it goes beyond just “digging” new coins.
1. Issuing new BTC
Fiat currencies we use every day are printed and issued by central banks, but Bitcoin is issued differently. Bitcoin’s decentralized nature doesn’t need any governing body or higher authority to run its systems and operations. Bitcoin miners use the computing powers of their Bitcoin mining machines to solve the nerve-racking math problems. Once they solve these computational problems, Bitcoin miners produce new BTC.
Now, the question is, how long does it take to mine one Bitcoin? With the average power usage of an application-specific integrated circuit (ASIC) miner, it usually takes 10 minutes to generate a new coin. This is regardless of the number of miners digging in Bitcoin’s digital cave.
2. Confirming transactions on the network
Aside from generating new BTC, Bitcoin miners also confirm transactions on the network by answering the complex computational problems. The interesting part is that these transactions aren’t verified one by one. Bitcoin miners put them all together in “blocks” and add them to the public network called the “blockchain.”
After completing all the intricate works, Bitcoin miners are rewarded in two ways—the newly-minted Bitcoin or the “block reward” and the transaction or “miner’s” fee. These serve as their profit in mining BTC. However, these incentives vary because of how Satoshi Nakamoto designed Bitcoin’s network.
For every 210,000 blocks mined, the number of coins that miners receive for adding transactions on the network is cut in half. This event, known as Bitcoin halving, affects the miners’ profits. Usually, halving happens every four years.
Now, one major problem that digital payments face is double-spending or the risk that digital money can be spent more than once. Satoshi Nakamoto aims to prevent this from happening when he created Bitcoin, so he designed its transactions to be irreversible. This happens when a transaction is confirmed by miners and broadcasted in Bitcoin’s blockchain, it becomes irreversible.
3. Securing the entire Bitcoin network
When miners confirm transactions, they make the entire Bitcoin network more robust and secure. It will be complicated for the attackers to reverse a transaction when it gets broadcasted on the network. To reverse a transaction, attackers will have to go back to all confirmed transactions and reverse all of them—that’s a lot of work!
How much BTC is left today?
Unlike fiat money that can be printed and issued by the government or central banks when needed, Bitcoin has a maximum supply of 21 million. At the time of writing, its circulating supply is 18,517,712 BTC, which leaves miners with over 2,400,000 BTC—that’s still a lot of coins to generate, so it’s never too late to start digging! When all 21 million BTC have been mined, there will be no more coins available for mining—not unless the network’s protocol changes and allows more BTC supply.
How to mine Bitcoin
With Bitcoin’s mainstream adoption, many people and businesses across the world not only started buying it but also mining it. Because of this, the level of competition on the network began to increase. The difficulty level of mining BTC is also increasing—another critical thing to consider if you want to try mining BTC!
But if you’re really interested in mining, here are some steps you can take to get started.
1. Get a Bitcoin wallet
First things first, you can’t start mining Bitcoin without a crypto wallet. This is where you’ll store, send, receive, and check your balance in real-time. There are two types of cryptocurrency wallets available online—the hot and cold wallets. Hot wallets are digital wallets connected to the Internet, such as mobile and web wallets. Cold wallets, on the other hand, work offline. Examples of this include hardware, desktop, and paper wallets.
You can even find cryptocurrency marketplaces that provide a free Bitcoin wallet, so be sure to pick the most secure and reliable one. We’re talking about your money here, so it’s better to be safe than sorry!
2. Scout for a reliable Bitcoin exchange
After getting your own Bitcoin wallet, the next thing to do is to scout for a reliable Bitcoin exchange. There are thousands of crypto marketplaces around the world, so take your time in choosing the best Bitcoin exchange that best fits your mining and trading needs! Check its security features, authenticity, fees, and other necessary features that will help you pick up the most trustworthy platform.
3. Get your Bitcoin mining hardware
If you’ve read some guides on how to mine Bitcoin on PC or other digital devices, you probably know by now that risking your typical home desktop or laptop in the process is never a good option. Not only will that bring you less profit, but also much unnecessarily higher electricity bills. Bitcoin mining requires high-powered equipment and specialized computers like the ASIC miners. These are designed especially for Bitcoin mining, so don’t worry—they know what to do.
4. Join a Bitcoin mining pool
As we mentioned earlier, Bitcoin mining is an increasingly competitive field. This means it’ll be more difficult to generate a new coin if you go solo. That’s why a lot of miners today join Bitcoin mining pools or a group of miners. When you join a mining pool, you share your hash rate and receive a payout, which will be based on the hash rate percentage you share with the pool.
5. Get your Bitcoin mining software
Aside from the ASIC hardware, you should also get a Bitcoin mining software. This is what you’ll use to link your hash rate to your desired mining pool. You can also use the mining software to share the BTC address where your payout should be sent. The software varies depending on your computer’s operating system, so be sure to check the equipment’s compatibility.
Before you start mining
It’s also important to mention that not all countries are cryptocurrency-friendly. We bet the question you have in mind right now is this: “Is Bitcoin mining legal?” Well, that depends on where you are in the world.
Because of the environmental concerns brought about by high carbon dioxide produced and high levels of electricity consumed by Bitcoin mining farms, some governments are at odds with the activity. So, check whether the jurisdiction you’re in is open to Bitcoin mining or other crypto-related activities.
These are just some of the steps to help you get started with Bitcoin mining. But before you begin digging some digital cash, do your research about how much money you’ll earn with the equipment you’re planning to use. This will give you a clear idea of which way best suits your crypto endeavors and which way is more profitable.
Here’s a reminder: Bitcoin mining isn’t the easiest way to acquire BTC. If the process sounds daunting to you, try buying your first fractions of Bitcoin to kickstart your crypto adventure!