If you’re looking for ways to acquire Bitcoin (BTC) aside from engaging in crypto trading, your best option includes getting it straight from the metaphorical “caves” through a 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, Bitcoin mining also requires miners and heavy-duty mining equipment. The difference is that you won’t need to jump into an open-pit excavation site or go underground when mining BTC—the entire process is done digitally.
Setting up a Bitcoin mining operation can be resource extensive. Some of the most common requirements are powerful computers with specialized software and hardware or Bitcoin mining rigs, a stable Internet connection, and a cheap electricity supply.
Now, you’re probably wondering why miners invest in expensive and powerful equipment to run the process. Bitcoin miners need such resources to solve complex mathematical problems that simple computations cannot answer. But how does the entire mining operation work?
How does Bitcoin mining work?
To further understand how this process works, let’s take a look at the three main functions of Bitcoin mining—yes, it goes beyond just “digging” new coins.
💰 Issuing new BTC
The fiat currencies we use every day are printed and issued by central banks, but Bitcoin is issued differently. Its decentralized nature means that it doesn’t need any governing body or higher authority to run its systems and operations. Instead, Bitcoin miners use the computing powers of their powerful Bitcoin mining machines to solve nerve-racking math problems. Once they solve these computational puzzles, Bitcoin miners are rewarded with 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, the entire process of minting a new coin usually takes 10 minutes. This is regardless of the number of miners digging in Bitcoin’s digital cave.
☑️ Confirming transactions on the network
Bitcoin miners confirm transactions on the network by answering 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 a public network called the “blockchain.”
After completing all the intricate parts, Bitcoin miners are rewarded in two ways: they receive the newly-minted Bitcoin or the “block reward” and then 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 and verifying transactions on the network is cut in half. This event, known as Bitcoin halving, affects the miners’ earnings. From the reward of 50 BTC per block during the pre-halving era, miners now receive 6.25 BTC per block after the third Bitcoin halving in May 2020. Usually, halving happens every four years and will continue until all 21 million BTC are mined.
One major problem that digital payments face is double-spending or the risk of spending digital money more than once. Satoshi Nakamoto had this in mind when he created Bitcoin, so he designed its transactions to be highly secured. When miners confirm and broadcast a transaction in Bitcoin’s blockchain, it becomes irreversible.
🔒 Securing the entire Bitcoin network
When miners confirm transactions, they make the entire Bitcoin network more robust and secure. It will be complicated and nearly impossible for the attackers to reverse a transaction after it’s 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, over 88% or 18,656,793 BTC have been mined, which leaves miners with over 2,300,000 BTC. When all 21 million BTC have been mined, there will be no more coins available for mining—unless the network’s protocol changes and allows for more BTC supply.
How to mine Bitcoin
With Bitcoin’s mainstream adoption, many people and institutions worldwide have become very interested in acquiring it first-hand. Because of this, the level of competition and mining difficulty on the network began to increase. But if you want to try your hand at Bitcoin mining, here are some steps you can take to get started.
Step 1. Get a secure 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 different types of cryptocurrency wallets available online, so be sure to get what best fits your storage and mining needs. You must also pick the most secure and reliable one—we’re talking about your money here, so it’s better to be safe than sorry.
Step 2. Get your Bitcoin mining hardware
If you’ve read some guides on how to mine Bitcoin on a 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 higher electricity bills because of increased power consumption.
Bitcoin mining requires high-powered computers that have specialized hardware like ASIC miners.
This type of hardware is specially designed to run the tedious processes of Bitcoin mining, which is why they cost a lot of money. BTC mining rigs’ price varies per brand, the amount of hash power or rate they can produce, and other powerful features they have. Here are some of the top ASIC miners in the market today, in no particular order.
- Antminer T19
- Antminer S19
- Antminer S19 Pro
- M30 S+
- M30 S++
Step 3. Get your Bitcoin mining software
Aside from the ASIC hardware or mining rigs, you should also get Bitcoin mining software. This will connect your Bitcoin miner to the blockchain if you’re going solo or link your hash rate to a mining pool if you’re joining a group of BTC miners. You can also use the mining software to share the BTC address where your payout in the Bitcoin mining pool should be sent—we’ll talk more about this in the next step.
The software you’ll need varies depending on your computer’s operating system, so make sure that your hardware and software are compatible. Here’s a list of some BTC mining software for you to check out.
- CGMiner – This is known as one of the oldest BTC mining software in the market. It runs on Mac, Linux, and Windows devices and is compatible with ASIC, FPGA (Field Programmable Gate Array), and GPU (Graphics Processing Unit) miners.
- Awesome Miner – If you have multiple mining rigs or a mining pool, Awesome Miner can be your friend. It can manage numerous mining engines and handle multiple mining rig types like FPGAs and ASICs, using one dashboard. It’s designed for Windows and Linux devices and is free for anyone to download and use.
- MultiMiner – Known for its quick-start mining features, MultiMiner is built and designed for Windows devices. It’s also compatible with mining rigs, such as GPUs, FPGAs, and ASICs.
- BFGMiner – If you’re interested in doing a little bit of software tweaking or customization, BFGMiner is one of your best options. It can mine multiple cryptocurrencies at the same time and is compatible with FPGA and ASIC miners. Additionally, it runs on Mac, Linux, and Windows devices.
Step 4. Choose your mining strategy
You have two options to run your mining operations: solo mining and pool mining. As we mentioned earlier, Bitcoin mining is an increasingly competitive field. It’ll be more challenging to generate a new coin if you go solo since you’ll be competing with thousands of miners worldwide—including massive mining pools and huge institutions. If you choose to dig BTC’s digital cave alone, you won’t be sharing your block rewards with others. On the flip side, you might also need to shoulder all the expenses of Bitcoin mining operations all by yourself.
That’s why a lot of miners today join Bitcoin mining pools or a group of miners. When you join a mining pool, you’ll share your equipment’s computing powers and receive a payout based on the hash rate percentage you share with the pool. Your chance of generating a new coin also increases since you’re mining as a group. But before you join any mining pool, be sure to check the following:
- Pool size – If you’re just kickstarting your BTC mining operations, joining a big mining pool might be a good idea. While it doesn’t guarantee you big earnings right away, you’ll surely get paid more frequently.
- Minimum payout – It’s essential to know how much you’re required to mine before getting paid. Scout for pools with small minimum payouts if you’re looking into getting block rewards more often.
- Pool charges – These will be automatically deducted from your reward and are usually percentage-based. Check how much fees you’ll need to pay and decide if it’ll work for you.
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 the 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.
It’s also important to consider the location where you’ll set up your mining operations. The ideal countries for BTC mining have a cold climate. This will help the mining machines to cool down, avoid potential overheating issues, and reduce the rate of electrical consumption. It’s also important to steer away from commercial and residential areas if you don’t want to receive noise complaints that can put your mining operations to a halt. Mining machines operate 24/7 and produce too much noise that might just be unbearable for people in such communities.
With all the information we’ve discussed, you’re probably thinking, “Is Bitcoin mining profitable?” That depends on the strategy you’ll choose. But before you begin digging for digital cash, do your research about how much money you’ll earn with the equipment and technique you’re planning to use. You may use this calculator to estimate your profit vs. overhead costs. This will give you a clear idea of which way best suits your crypto endeavors and which way is more profitable.
Here’s another reminder: Bitcoin mining isn’t the easiest way to acquire BTC. If the process sounds daunting to you, you can buy your first fractions of Bitcoin on Paxful to kickstart your crypto adventure!