Starting on the path to mining Bitcoin can be pretty daunting. There are a lot of terms being thrown around, and there’s a lot of money to be made, but what does it all mean?
When you think about getting into Bitcoin mining, you’re probably thinking about all the money you could potentially make by using your computer to do some work. But what is Bitcoin mining? The best way to describe it is that it’s like a giant math problem that gets more complicated over time.
Let’s start from the beginning.
What is mining?
Mining is the process of adding transaction records to Bitcoin’s public ledger of past transactions. This ledger of past transactions is called the blockchain as it is a chain of blocks. The block is added to the blockchain by a miner.
Mining is intentionally designed to be resource-intensive and difficult so that the number of blocks found each day by miners remains steady over time, producing a controlled finite monetary supply. Individual blocks must contain a proof-of-work to be considered valid. This proof-of-work (PoW) is verified by other Bitcoin nodes each time they receive a block. Bitcoin uses the Hashcash proof-of-work function.
How To Mine Bitcoin?
The first thing you need to know about mining bitcoin is that it’s now extremely hard for individual miners to turn a profit. I’m going to show you how to do it, but only if you’re willing to invest hundreds of dollars in specialized computer equipment, and to pay electricity costs that will probably be upwards of $100/month.
In order to mine Bitcoin, you must install software on your computer or connect to someone else’s computer who will let you use their hardware. Mining software listens for transactions broadcast through the peer-to-peer network and performs complex mathematical equations to verify each transaction.
If a transaction is verified as legitimate, miners assign it to a block and add it to the blockchain. Each time a miner successfully verifies a block of transactions, they are rewarded with Bitcoins.
A mining pool is a group of people who have grouped together their efforts to mine Bitcoin and split whatever reward they get in the end. The advantages are that you can sometimes get a steady payout, which can be more convenient than waiting for individual payouts. The disadvantage is that you sometimes have to trust the pool operator and some pools require you to provide your private key as part of the process.
KuCoin has a great mining pool with an easy to use interface, as well as paying out in many currencies. It has its own token called KuCoin Shares (KCS), which is included in the profit distribution of the exchange. KuCoin offers trading pairs such as BTC/BCH, BTC/DASH, BTC/NEO, BTC/ETH, KCS USDT and many more.
Reasons For Mining Bitcoin
There are plenty of reasons to mine Bitcoin, but let’s start with the most basic one: money. Mining Bitcoin directly gives the miners a chance to earn new Bitcoins, which they can then trade for fiat currency or use to buy things.
Because mining is such a complicated process, it’s hard to predict how profitable a given miner will be—it depends on factors like the current exchange rate and the Bitcoin difficulty level. But as long as you have cheap electricity and/or hardware, you can make a profit by mining Bitcoin… even if it’s not too big of a profit!
Is It Worth It To Mine Bitcoin?
The advantages associated with bitcoin mining are undeniable. If you choose to mine bitcoins, you have full control over the process, including how much energy your computer expends on it and when it stops. The downsides involve high costs on electricity and hardware, as well as its demanding nature on your computer’s resources and time.
When you decide to mine for cryptocurrency, you are choosing how much power from your computer’s processor and electricity from your electricity bill you’d like to devote to trying to solve those math problems.
The more power and electricity you use, the more likely you are to receive a reward—but the more you’re going to pay for electricity, and the less likely you’ll be able to cover that cost by receiving a reward.
Is It Lucrative To Mine Bitcoin?
The answer to this question depends on a number of factors, including the cost of electricity in your area, the difficulty of mining at any given moment, and how often you can mine. You also need to consider whether you are mining for fun, or mining for profit.
If you are mining for fun, then it doesn’t really matter how much electricity costs—you’re just doing it to see how the whole process works. If you’re mining for profit, then it’s a good idea to join a Bitcoin mining pool and try to increase your chances of finding blocks.
Risks Of Bitcoin Mining
Bitcoin mining is a relatively simple and low-cost process, but there are some risks to it.
First off, there are two types of risks involved with bitcoin mining: real world risks and digital world risks.
Bitcoin’s value isn’t stable. BTC price can fluctuate wildly within minutes at times and sometimes even hours. This means that even if you buy all the needed equipment for mining and find the perfect place to do it, your profits may be dampened by the current value of a bitcoin.
Secondly, there are individuals out there who are constantly looking for ways to pose threats into your computer and steal or manipulate your data.
Because of these people, you want to make sure you take every precaution you can when purchasing new hardware and software for your operation. You also don’t want to put too much sensitive information on any publicly available forum (like this one) where a hacker could gain access to your information