Bitcoin (BTC), created by the anonymous Satoshi Nakamoto, was the first ever cryptocurrency released. It brought a whole new reality to the world, offering a much needed alternative to traditional FIAT currency. Bitcoin also introduced blockchain, a technology that has gone on to revolutionize almost every working sector and industry.
Blockchain is what enables Bitcoin’s decentralized network—a network which is run by electronic devices, such as personal computers and mining rigs, that work to solve the cryptographic computations necessary to validate a transaction. In return, people who offer their computing power to the network are rewarded with freshly minted Bitcoin.
Bitcoin still remains the most popular and valuable cryptocurrency to-date. While specialized ASIC chips and mining rigs have made mining at home more competitive—this article will explain the principles behind it and explain how you too can start mining bitcoin.
How To Mine Bitcoin
Bitcoin’s mining algorithm is called SHA-256. This algorithm is unique in that it always outputs a 256-bit number, a basic unit for computation. More so, the number it produces is formed as a hexadecimal number system with 64 characters—making it easy for human-readability.
This number is called a hash and how it is produced computationally is called its hashing function. The speed at which an electronic device can do the necessary computations is referred to as the hashing power. Why you don’t need to understand every detail of this process, having a general understanding will help you to make informed decisions when beginning to mine.
In order to mine Bitcoin—you need a device with a high enough hashing power for the SHA-256 algorithm to yield a profit. The power needed becomes exponentially higher as more and more Bitcoin are mined.
After Bitcoin’s release, home-miners could use their personal computer’s internal CPU. It was easy and efficient and the process required little power. Today, the Bitcoin mining market is drastically different. Various ASIC chips exist that are designed to mine Bitcoin at rates much faster than a home computer’s CPU or a purchased GPU. ASIC chips are specialized GPUs designed to maximize the hashing rate of a given mining algorithm.
Large mining rigs around the world assemble thousands of these specialized ASIC chips into cooling tanks. This extreme hashing power has made the profitable of bitcoin mining at home difficult.
To begin mining Bitcoin, you will need to acquire either a CPU, GPU, or an above mentioned ASIC chip. All of these are devices that will provide the computational power needed for the SHA-256 algorithm. As discussed above, the higher its hashing power (the rate at which it can do computations) the higher the likelihood of profit.
With little upfront costs, A CPU is the best budget-friendly option for a home miner. While its possible to use the CPU built into your home computer, it is very unlikely that it will yield a profit margin today. However, it can be a great way to test out the process and experiment with different mining softwares. You can invest in several relatively inexpensive CPUs that have more power such as the AMD Ryzen Threadripper 1950X. This is an all around good CPU which can be a good option for mining smaller less competitive cryptocurrencies.
Like the CPU, a GPU is another external device that can be used for the mining process. A GPU is able to do more computations in a shorter amount of time which increases its hashing power significantly. Along with the added boost in power comes an equal added boost in cost. While GPUs are also great for the casual home miner, they require more commitment and a larger upfront investment. Here’s a short list of recommended GPUs to buy for Bitcoin mining in 2019.
- Nvidia GeForce GTX 1070
- AMD Radeon VII
- AMD Radeon RX580
Investing in an ASIC chip will offer the highest likelihood of profit, it can be paired alongside the above technologies as well.
The ASIC chip will offer you the most power but will also come at the highest price point.
These highly specialized GPUs can be used singularly or paired together to create mining rigs. When running such equipment, it is important to calculate the needed electrical power to make sure it is offset by your mining earnings to yield a profit. Here a few ASIC chip recommendations for mining Bitcoin in 2019:
- Dragonmint T16
- Antminer S9
In order for your devices to communicate with the Bitcoin network and its mining algorithm, you will need to install a mining hardware. There are many options, each with unique pros and cons depending on your needs. For basic set-up, the Bitcoin Miner is a good choice as it features a profitability chart for users. Another good choice is the free to use BTCMiner.
A Bitcoin Wallet:
Having a secure wallet is an important part of the mining process. It gives you ease of mind to know that your minted coin is securely protected. As well, it is a convenient place to manage transactions and monitor your earnings. There are a variety of wallet types for both your desktop and mobile devices offering convenience to theri users. A safe choice for beginners is Coinbase. It is both an exchange and wallet in one with low user fees and a reputation for being secure.
Once you’ve selected your hardware, software, and a reliable Bitcoin wallet you’re ready to begin mining. All you need to do is follow the instructions of the mining software you’ve chosen to configure your hardware. You will want to insert your Bitcoin wallet address so that your earnings can be deposited there directly. Once this is complete, you can navigate through the software settings to set parameters for when your hardware mines (ie. all the time or only when the OS is logged in)
Pool, Solo, or Cloud
To offset the considerable high costs of Bitcoin mining, two other options exist. The first is to participate in a mining pool. Online pools are filled with people who pull together their resources to maximize mining profitability. This approach can help offset large investments into hardware, but it also runs the risk of instability. A mining pool may shut down at any moment if its creators deem the mining unprofitable.
The second is cloud mining. This is where you rent mining hardware from a company that mines on your behalf. The biggest obstacle to cloud mining is the lack of security in the company you’ve chosen. There are many scam cloud mining services so being sure that you have found a reliable company is key to a successful experience.
Both pool and cloud mining will help mediate the costs and inconveniences associated with solo mining such as the heat and fan noise created when running and cooling hardware.
Bitcoin has continued to hold its strength in the cryptocurrency market and still leads as number one. This serves as a good incentive when considering whether to invest time and money into the coin. While Bitcoin mining has becoming increasingly more difficulty, the likelihood of profitability relies on many different factors.
Participating in a mining pool or cloud mining could be your ticket to seeing a margin of profit. Either way, participating in the Bitcoin network will increase the network’s stability, diversity, and adoption. These statistics will ultimately affect the long-term value of Bitcoin.