How To Do Bitcoin Mining. Considerations And Risks Of Bitcoin Mining
Mining is fun, but has its downsides. Want to know more? Continue reading.
Bitcoin Mining: What Is It?
Bitcoin mining is a process of solving complicated math problems to verify the transaction and gain a reward in the form of a newly minted coin. “Mining” is performed using sophisticated equipment.
The first computer to solve it receives the reward and the process begins again.
Why Bitcoin Needs Miners
Miners are needed to verify if the transaction is authentic or not. The confirmed block goes to the blockchain.
How Bitcoin Mining Works?
Bitcoin transactions need to be verified and put together into a blockchain. Each block carries detailed information about the transaction.
To ensure that blocks have not been manipulated and all the information is correct, hashes, which are sets of cryptographic rules, are used. Bitcoin miners compete in guessing the hash to process transactions.
A miner’s hashrate is the speed at which the configuration of computers is able to solve the mathematical puzzle. This mining protocol is called proof-of-work, because the first miner to prove that they have done the “work” of solving a complex equation earns the right to process the newest block of Bitcoin transactions. Successful miners also receive bitcoin as a reward and a transaction fee.
After a miner successfully verifies a new block of transactions, the block is distributed to all other miners and any other device with a full copy of the Bitcoin blockchain.
Is Bitcoin Mining Legal?
It depends on your location. Bitcoin mining is banned in some countries, such as Bangladesh, China, Egypt, Iraq, Morocco, Nepal, Qatar, and more.
How Profitable Is It To Mine The Cryptocurrency
Mining remains profitable for some individuals. To get successful by mining bitcoin you need to invest in the right tools and join a bitcoin mining pool.
Hardware is the most important and the most influential part of the mining process. It costs a lot and not always you are able to pay it off with mining. The bitcoin mining equipment is alterable for these purposes. For example, some bitcoin mining machines may be adjusted for the low energy consumption which makes mining cheaper.
You should understand the possible profitability before buying equipment. To calculate your possible profit there are special calculators. These services help miners to analyze the cost-benefit equation of Bitcoin.
Still, the profit is not guaranteed.
What You Need To Mine Bitcoins
As people started to use Bitcoin for payments, mining has become a very competitive undertaking, and the hardware and software demands for bitcoin mining are also more sophisticated. To start mining bitcoin, the following are required:
- Competitive mining computers (rigs)
- Low-cost power supply
- Mining software (such as such as ECOS, BeMine, and Kryptex Miner)
- Mining pool membership (if you don’t want to mine solo)
A bitcoin wallet from which an individual performs bitcoin transactions
Bitcoin Mining Equipment
Let’s look closely at the equipment needed.
Bitcoin mining software handles the actual mining process. The software connects your computer to the blockchain to become a mining node or a miner. The software connects you to the pool if you are not a solo miner. Its main function is to deliver the hardware work to the network and to receive completed work from the other miners. You can also monitor statistics with its help.
The popular softwares are:
CGminer: CGminer is one of the oldest and most popular examples of Bitcoin mining software. You can use it to mine different altcoins. It supports ASICs and GPUs.
Ethminer: Ethminer is the most popular software to mine Ethereum. It supports GPU hardware such as Nvidia and AMD.
XMR Stak: XMR Stak can mine cryptocurrencies like Monero and Aeon. It supports CPU and GPU hardware.
These are just our recommendations. We advise you to do your own research and find what suits you best.
For different cryptocurrencies there are different types of devices required. For currencies without dedicated software it’s enough to simply use GPU. At the same time, it’s not suitable to mine other types of crypto. It’s better to choose graphics cards as they provide more hashing power. Though graphics cards are faster, they consume more electricity and generate a lot of heat. That’s when miners decided to switch to something called an application-specific integrated circuit, or ASIC.
ASICs now cost a tremendous amount of money, that’s why sometimes buying crypto makes more sense than mining them.
Bitcoin Mining Pool
A mining pool is a place where miners gather together to share their resources. Being in a mining pool gives you an opportunity to solve mathematical problems faster than when doing it solo. The reward is split between members. The process of mining is more stable and predictable with mining pools.
Look for a pool when you are ready to join. There are some criteria to base your pool choice on:
Mineable cryptocurrency: Make sure the pool is mining the cryptocurrency you’ve selected.
Location: Make sure the one you choose is available in your country.
Reputation: This factor is an important one. Don’t get in the pool with unreliable people.
Fees: Some pools have higher fees than others.
Profit sharing: Different pools have different rules for profit sharing.
Ease of use: This feature can be important to keep in mind.
How To Choose Hardware For Bitcoin Mining?
You can make a rig frame yourself from an old CPU case. Wine cases or milk crates are practical too. If you prefer a metal frame, it’s better to choose an aluminum one as it is not flammable.
Motherboard And Processor
For mining, it is necessary to have a device that can fit up to 8 GPUs.
These cards are easy to tune, but they require additional power.
Feel free to choose the cheapest one.
Choose 4GB as it is necessary.
You can choose any hard drive as it has a minimum of 50GB capacity. The speed of the storage doesn’t affect bitcoin mining rate.
If you are going to use between 4 to 6 GPUs, then it is best to choose 1000 watt or 1200 watt power supply units. When you want to utilize more than 6 GPUs, make sure to select PSUs with over 1400 watts of power.
Acquiring ethernet cables is the best. However, if it is not enough, you can try to use powerline adapters. If it also has no effect, it is better to simply use Wi-Fi through a Wi-Fi adapter.
How To Do Bitcoin Mining: Alternatives To Mining Bitcoin At Home
You may consider starting mining at home as it is the most obvious way to mine, but bitcoin mining farms cost a lot. There are alternatives to it:
Mining in Pools
A mining pool is a group of crypto miners who combine their resources to strengthen the probability of finding a block and successfully obtain cryptocurrency. It’s beneficial for those who don't have enough resources to mine on their own, as well as for those who don’t want to wait long. The disadvantage is that the reward is shared between miners and the fee is taken from it.
This method allows you to mine even without your own equipment. Just use a special service to rent the computing power of another miner and gain income.
Considerations And Risks Of Bitcoin Mining
Crypto mining may look as a risk-free thing, but it isn’t. There are some factors that can prevent your success:
Cryptocurrency volatility: Your big gains may turn into nothing one day because of volatility.
Ban on mining: In some countries you could have problems with law because of it, so make sure it’s not prohibited in your area before you start mining.
Environmental damage: Because of the big power consumption these mining farms are causing damage, which is unwanted.