Without a doubt, Bitcoin (BTC ticker) is the golden standard for all cryptocurrencies and it is the most liquid crypto in terms of its store of value. Its ATH price has been recorded at an almost $69 000 mark despite skeptical forecasts made by seasoned experts and analysts. But have you ever wondered what is Bitcoin mining and how are Bitcoins mined? The following article delves into the aforementioned topic and conceptual meaning of Bit coin as a trend.
What is Bitcoin per se?
Bitcoin (BTC) is the pioneering decentralized virtual asset that allows P2P online transactions without any financial institutions, governments, authorities, brokers, etc.) using the DLT (blockchain technology). The Bitcoin network is powered by distributed ledger and the Bitcoin electronic payment system uses a PoW algorithm to avoid double spending and establish the consensus of all the nodes working in the Bitcoin network. Bitcoins as digital assets are categorized into Satoshis, each worth 0.00000001 Bit coin.
When computers (in this case, these are nodes) verify and process Bitcoin transactions, new Bitcoins are emitted, or, in other words, it is called “mined” (cryptomining). Strictly speaking, Bitcoin is a code ꟷ it is existent only in a digital representation and is created, generated and stored in digital computer databases. Bitcoin is decentralized by its nature; this definition posits that it does not have a central issuing body that manages the turnover of Bitcoins in circulation. Bitcoins are mined as a reward for payment processing whereas Bit coin miners offer their hashing power on high capacity computers to verify and record transactions (payment operations, in particular) into Bitcoin blockchain. Bitcoins can be mined single-handendly (that is, solo) or bought from other Bit coin holders, miners, traders, crypto exchanges (Coinbase, Kraken, Poloniex, Coinhive, Switchere, Binance, etc.).
Proof-of-Work (PoW) Mining Algorithm
Bitcoin utilizes a Proof-of-Work mining algorithm based on the SHA-256 hashing function so as to validate and confirm Bitcoin transactions in connection with emitting new Bitcoins into common circulative supply. In layman’s terms, the Proof-of-Work (PoW) consensus is a form of adding new mined blocks of crypto transactions to a cryptocurrency’s ledger. With PoW, each block of transactions is defined with a particular hash for creating and solving new blocks. For the block to be successfully generated, confirmed and mined, a crypto miner has to generate and obtain a target hash. The reason why PoW in Bitmining works well is conditioned by the fact that generating and solving the target hash function is complex but verifying it faces no problems at all. As the value of Bit coin increases, it means that more miners of Bitcoins are incentivized to join the Bitmining network, this way increasing its power, earning potential and network security.
Major Pros and Cons of PoW Algorithm
| Advantages | Disadvantages |
| Robust security structure | Turns out to be ineffective with slow transaction processing work and high blockchain commission structure |
| Decentralized transactions verification | Enormous energy consumption for actively working hardware |
| Great opportunities to earn / generate mining rewards | Costly crypto mining hardware (ASIC miners) |
PoW was the prime consensus mechanism of creation for many virtual assets (like Bitcoin, Litecoin, also Dogecoin, etc.) that required a reliable means to process digital money transactions. Despite the fact that a Proof-of-Stake (PoS) consensus mechanism has ever since emerged as an energy effective alternative (meaning it consumes less energy and is more productive), PoW is still widely used and perfectly works up to date.
Regular Bitcoin Halving
Let us start with the definition and exemplification of Bitcoin halving, what is it, why is it so important and how does it work. Bit coin halving is a regular process of dissecting the rewards of mining Bit coin (the job that miners do) after every chain of 210K blocks mined. It is meant to limit the supply of newly mined Bitcoins, henceforth the Bit coin price is viable to go upwards if the demand curve for Bitcoins remains proactive. It is meant to stimulate the inflation rate of Bitcoins by cutting their number in circulation. That is how the entire specification works.
The phenomenon of Bit coin halving occurs to a large extent every four years, whereas the block reward allocated to Bit coin miners is minimized in half. The procedure of halving Bitcoins is about to end in 2140, that is when the required maximum limit of 21M coins reached. At the date of publishing the information, the circulating supply of mined BTC coins makes 18,982,812 BTC generates, left with approximately two more millions meant to be mined by Bit coin miners. The next Bit coin halving occasion is meant to happen in the early 2024 year.
How to Mine Bitcoins in Today’s Conditions?
Bit coin mining is very similar to mining of gold, silver, platinum to a certain extent. Bit coin digital mining is a computer (PC, ASIC, coinminer, bitcoinminer, antminer, quickminer, easyminer) based cryptographic process meant to create / generate and validate newly mined coins, in sync with tracking crypto transactions and bits possession. Both mines work using the same principles and are both power consuming, and both possess the mining potential to generate (and earn) an impressive mining reward for miners involved.
Bitcoin mining is an extremely intricate computing process that utilizes an encrypted computer code, which is meant to create a robust cryptographic ecosystem. With regard to Bitcoin mining performed by crypto miners, the BTC mine is achieved by a mean of creating and validating a chain of blocks, which in their turn can be mathematically verified to have been arranged in the correct work order. The rival miners take participation in the Bitcoiin network to mine BTC and complete challenging math functions termed as “hashes”, meant to process crypto transactions on the BTC ledger. A miner hashpower is the speed. All in all, there are several ways to mine BTC for crypto miners:
– Cloud mining;
– Pool mining;
– ASIC mining;
– CPU mining;
– GPU mining.
Cloud mine is meant to be one of easiest and most affordable ways to mine BTC for miners. In order to get into cloud mining, a miner does not need to buy any equipment to mine crypto: a person simply leases a certain volume of hashrate capacities to mine crypto via the cloud using the hashpower produced by Bitcoin mining giant datacenters. All the mining jobs are done remotely (online) and miners get their mining earnings based on the mining contract specifications (duration, hashpower, maintenance costs, etc.). The contract is operable all year round (Jan., Feb., Mar., Apr., May, Jun., Jul., Aug., Sept., Oct., Nov., Dec.) and the miner gets only newly mined coins. The biggest advantages of cloud mine services are as follows:
– Low entry barriers for investments;
– Free demo mining contract work;
– No special tech knowledge is required;
– Meant for long-term investment plans;
– Daily accruals of mined coins.
Pool mining is a joint conglomerate of crypto miners who combine their computational resources (work together) in order to strengthen the probability of finding a block. As a rule, if the pool work is successful, this would mean that the participants will receive a reward and distribute it for every miner proportionally to the efforts made. This could be a good alternative for those who want to delegate their mining rig’s hash power and mine crypto collectively.
ASIC mining rigs are very powerful mining machines meant to mine one or several cryptos with similar hashing algorithms. They can perfectly work in any specially equipped premises, but the energy consumption for an advanced ASIC miner is enormous. ASIC mining can be profitable for a crypto miner if the electricity costs are cheap.
Lastly, the work of CPU and GPU machines for Bitcoin mining is not profitable because they are not powerful enough to mine crypto and let the miner earn profit (presently, they are not meant for such complex computational tasks or efficient work).
Why People Mine Bitcoins at All?
It is not a surprise to anyone that the prime aim of why people mine Bitcoin is making profit and earning passive income. In the majority of instances, it is a long-term investment in digital currencies (financial portfolio diversification). For other interested parties, mining is meant to be an educational or entertainment affair. A crypto miner machine can be a great resource for learning the mechanism of cryptocurrency mining and digital ledger technologies.
Is BTC Mining Profitable Nowadays?
In the majority of cases, solo mining posits itself to be very costly and inefficient because the expenses exceed the actual revenue generated. Presently, a great many people get into cloud mining and mine crypto on the cloud. The work of cloud mining services is simple: a miner leases the preferred hashrate capacities from the website and mines crypto online. It is worth to pinpoint the fact that Bitcoin cloud mining is a long-term investment tool and the miner will reap the benefits only in due course of time. Notwithstanding that, there are many scam projects that work online and offer their cloud mining services to crypto enthusiasts. It is of utmost importance to do your own research before investing your money in any prospective endeavor.
Legal Status of Bitcoin Mining
In the biggest part of countries and jurisdictions, Bitcoin as a payment means as well as BTC mining as an activity are not regulated, henceforth not forbidden by local authorities. However, in some countries like the People’s Republic of China, crypto, crypto mining and any other crypto-related activities are prohibited by law. By contrast, in El Salvador, crypto is recognized as a legal means of payment just like a legal tender. Therefore, it is best to conduct your own research and acknowledge if BTC mining is allowed in your country or not.
Bitcoin Mining Pools: Brief Analysis
Case in point, BTC mining pools are groups of distributed virtual currency miners who work together with a prime aim of mining new blocks on the network and share the mining revenue. The very existence of such miner organizations allows a regular miner or joint entities to mine Bitcoins profitably (positive revenue for the hashing work performed). The list of BTC mining pools is as follows:
– F2Pool
– AntPool
– Binance Pool
– ViaBTC
– Poolin
– Hashing24
F2Pool is undeniably one of the oldest and recognizable Bitcoin mining pools (founded back in 2013). Presently, it supports a great variety of PoW digital assets. In order to start mining with the F2Pool service provider, the would-be miner is required to have a mining apparatus and complete ordinary registration with the website. Then goes AntPool. It is one of the very popular crypto mining services launched back in 2014. Its share accounts for nearly twelve percentage of the BTC network hashrate. It also has multicurrency mining capabilities and boasts daily payouts to its clients. Binance Pool has multiple mining pools scattered worldwide and it supports both PoW and PoS mining mechanisms. ViaBTC was created back in 2016. It supports the mining of such coins as BTC, BCH, LTC, ETH, ZEC, DASH, etc. Poolin is a multicurrency mining pool founded back in 2017. It supports BTC, ETH, BCH, ZEC mining and is very popular in the Asian region. Hashing24 is an Ireland-based BTC cloud mining service provider. It was launched back in 2012 and is concentrated on BTC mining exclusively. The ranking of these pools in terms of the total BTC hashrate is as follows:
– F2Pool — 9.5%
– AntPool — 8.5%
– ViaBTC — 3.6%
– Poolin — 3.2%
– Hashing24 — 2.7%
– Binance Pool — 1.2%
Summary
To cut a long story short, there are a plethora of ways and opportunities to mine Bitcoin, the best performing crypto asset on a global scale. Some do it to make profit, some do it for fun. Nevertheless, be careful with investments in any assets because the crypto market is very volatile and nobody can guarantee absolute double or triple ROI. Do not invest more than you can afford to lose and always search for a reliable and reputable service provider.
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