1. What is mining?
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 translation of the word mining is “mining or mining”. If we are talking about bitcoin, we are dealing with the mining of “virtual gold.”
2. Who is mining bitcoins?
People who engage in mining are called miners. This word also refers to specialized devices for mining bitcoin and other cryptocurrencies.
3. What does it even look like?
In part, miners can be compared to members of torrent trackers who, by running a special program, allow other users to download movies or music. In the case of bitcoin, the miners keep the payment system running, confirm transactions, and keep the consensus of the entire network unified and unchanged. As a reward, they receive bitcoins.
4. How does the mining process work?
The mining process consists of 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 is rewarded with a certain number of bitcoins. Multiple miners are “competing” for the reward at the same time. Generally, transactions included in a block are considered confirmed after six consecutive blocks are calculated.
5. What does cryptocurrency mining look like?
Today, cryptocurrency mining most often takes place in specialized data centers, also called mining farms. A typical bitcoin mining farm is a room with a certain number of ASIC (application-specific integrated circuit) devices in it. The room itself is kept at the necessary temperature or other means of cooling.
6. Is Mining Profitable?
Several factors determine the economic viability of mining: the cost of electricity, the performance of the hardware, the current complexity, as well as the market rate of bitcoin in relation to other currencies. While in the very beginning of bitcoin’s existence it was quite possible to mine it at home, today it requires very high computing power. The increase in the number of miners and the appearance of more powerful devices leads to an increase in the complexity of mining, which negatively affects the profitability.
7. What kind of equipment do I need?
In the very beginning of bitcoin’s existence, it was even possible to mine on ordinary computers with more or less powerful processors and video cards. Today, that is no longer the case. Nowadays, mining is all about using expensive, specialized devices and chips, which have already turned into a multi-million dollar industry of their own.
8. So, there is no point in doing this on your own?
Probably not, unless you have enough money to buy expensive equipment and be able to pay the costs of maintaining it. However, that does not mean that you have no chance to make money from mining. The so-called pools (associations) of miners exist precisely to involve ordinary users in the process. Pools can include hundreds or thousands of cryptocurrency miners, who receive their shares of the reward according to the size of their contribution. The network sees such a pool as one miner producing hundreds of gigahes per second, even though it is actually one main server that distributes tasks to individual miners. This practice proves to be more efficient and rewards faster, though it does so in small portions.
9. What kind of reward can I expect?
According to Satoshi Nakamoto’s original bitcoin white paper, the reward for finding a new block halves every four years: it was 50 BTC in early 2013, then dropped to 25 BTC, and dropped to 12.5 BTC in summer 2016. The next reduction (halving) of the reward 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 cauldron”. The difficulty of finding blocks changes every 2016 blocks or about every two weeks. As the capacity of the network increases, so does the difficulty.
There are many services for calculating the current profitability of mining on different algorithms and devices. One of the most popular is WhatToMine.