Crypto mining in its basic meaning is the process of creating new cryptocurrencies by solving very tough and complicated math problems to deal with and verify the transactions of these cryptocurrencies. This mining of bitcoin requires a miner and this miner will receive an amount of bitcoin that is already predetermined.
Recent years have witnessed the skyrocketed price of the cryptocurrency and the bitcoin which also increases its rate of mining. But mining is not as simple as it seems. There are various paradigms associated with the mining of cryptocurrencies and bitcoins. Even though the value of cryptocurrencies and bitcoins are at a higher level, for people this process of bitcoin mining is not an interesting task. Its complex nature and high costs always make this process of mining uninteresting and tough.
Various statistical data associated with the bitcoin mining
- A miner gets a predetermined amount of bitcoin for successfully creating a new block on the bitcoin blockchain. The income of a miner now is 6.25 bitcoin.
- Creating a new block in the bitcoin blockchain is a very tough task and its high electricity consumption adds to its complexity. Mining consumes approximately 94.2 terawatt hours of electricity a year.
- The value of the bitcoin changes over time and it is not steady. Sometimes the value becomes very high and suddenly its value drops to the lowest range. So the price of bitcoin is extremely volatile.
- Solving extremely difficult math equations is one of the primary problems associated with bitcoin mining. To solve these math problems, one has to use extremely expensive computers and a high amount of electricity. This correct number or the answer to the math equation is known as a hash. A miner has to find this correct answer or number or should find the number closest to the correct answer. This process of finding the correct answer or number close to the correct answer is known as proof of work. By randomly making many guesses as fast as they can, the miners reach closer to the target hash. The complexity of the process increases as the number of miners increases in the network. Reaching the target hash is the first step.
- For all these, computer hardware is required. This computer hardware is known as application-specific integrated circuits or ASICs. These ASICs can cost up to 10000 dollars. Because of its high electricity consumption, it receives many criticisms, especially from environmental protection groups and activists. This high electricity consumption also limits the profitability of the miners.
- After the successful addition of the new block to the blockchain, a miner will receive 6.25 bitcoins as the reward which is worth 125000 dollars.
Profitability of the Bitcoin mining
The chances vary when it comes to the profitability of the bitcoin miners. The high costs and the high energy consumption of the mining, always act as a negative factor that affects the profitability of a miner, even if their endeavour is successful. Recent studies show that as the complexity and the difficulty of the mining increases so is the computing power required to complete the process.
One way to mitigate the factors that affect the profitability of the miner is to join the mining pool. When joined with such pools, we can share the high costs of the mining. In a mining pool, miners can share the resources which in a way helps reduce the cost. But sharing resources and capability means sharing the profits also. The changing value of the bitcoins also affects the profitability of the miners in a mining pool.
How to start bitcoin mining
- Wallet: A wallet refers to the place where you store your bitcoins. There are both hot and cold wallets. A hot wallet is an online wallet. Cold wallets are offline ones. They comprise storage devices like solid-state drives, hard drives and flash drives. Hot wallets are vulnerable to hacking and because of that people prefer cold wallets.
- The second thing you needed for mining is mining software. There are many software providers and they are free to download. They can run on both windows and Mac computers. When the software is connected with the appropriate hardware, bitcoin mining can be initiated.
- computer equipment: It is one of the things that adds to the high cost of mining. You need to have a powerful computer to solve complex math problems which require an enormous amount of electricity. This hardware is what costs you the most and makes the mining difficult.