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Bitcoin

Step-By-Step Guide to Bitcoin Mining

3 Mins read
  • Fast Fact: Bitcoin can only be created by mining.

Mining is one of the primary ways known to obtain free or paid cryptocurrencies like Bitcoins. There are many other ways too.

Unlike Gold and other minerals or metals that are mined from underneath the ground, Bitcoin is mined using Bitcoin mining hardware like high powered computers that solve complex math puzzles known to be POW (Proof of Work) through Bitcoin mining software.

Using High powered computers doesn’t mean that it’s easy to mine cryptocurrencies; instead, it takes a lot of time, efforts and money. For all their efforts the miners get rewards too. 6.26 BTC is the current block reward.

The first Bitcoin miners were able to earn more and quickly with respect to today’s miners. It has become more difficult to mine Bitcoins these days as the quantity of Bitcoins that can be mined is getting reduced.

Bitcoin has made a lot of people Billionaires and maybe more are on the way too. Some Billionaires are well known and some are still unknown.

What is Bitcoin Mining?

A decentralized network used to verify and secure Bitcoin transactions from one end to another through a peer-to-peer computer process is Bitcoin Mining. Steps in Bitcoin mining-

  1. Verifying whether the transaction is valid or not.
  2. Collecting transactions in the form of a block.
  3. Select the header of the most recent block and adds it to a new block as a hash.
  4. Solving the algorithms for proof of work (POW).
  5. When the algorithm is solved then a new block is added to a ledger which is known as Blockchain and propagates to the networks.

 

 

What is Proof-of-Work (PoW)?

PoW function protects Bitcoin against double-spending, which also lets the ledger remain unchanged. In simple words, PoW is a method to ensure that the information (new block) was difficult (costly, time-consuming) to be made. PoW cost processing power can be translated to hardware, energy and time.  It helps to make Bitcoin mining hard and resource-intensive so that miners can find the blocks (files in which transaction data is permanently stored) which remain steady over time, producing a cash supply that is finite and well managed. If individual blocks contain PoW than they are considered valid. Bitcoin Miners can check PoW every time they receive a block.

 

  • How many Bitcoins can be mined & how many are left to be mined?

Total Bitcoins that have been issued out of 21 million are 18,497,075 till today which is 88.81% of the total Bitcoins on the planet. Thus, 2,502,925 Bitcoins are left to be mined.

  • When will the last Bitcoin be mined?

After the recent Bitcoin halving held in May 2020, there are 900 Bitcoins being mined per day.

In 2140 last Bitcoin halving is considered to occur.

  • How Does Mining Create New Bitcoins?

Bitcoin mining’s main aim is to allow Bitcoin nodes to reach a reliable and impenetrable agreement. Mining is also the method used to introduce Bitcoins into the system. When miners are mining Bitcoin and their PoW is verified then they are paid transaction fees as well as allowance of newly created coins, called Block Rewards. They both serve the purpose of circulating new coins in a Decentralized manner while inspiring people to provide safety for the system through mining.

What is Mining Difficulty?

It’s a measure of how difficult it is to find a Hash reach the target value (a 256-bit number) during Proof of Work. When the difficulty increases, the target value decreases and vice-versa.

Let’s see how it work-

What is Bitcoin Cloud Mining?

Cloud mining or Cloud Hashing enables users to purchase the mining capacity of hardware in data centers. Bitcoin cloud mining enables users to earn Bitcoin without managing mining rig, hardware, software, electricity, bandwidth or other offline issues; in other words, you pay for all these services by entering the hash rate online that you want and the company you paid will mine for you. You don’t have to do anything after paying for cloud mining.

All the Bitcoin mining is done remotely in the cloud. This enables owners to not deal with any of the hassles usually encountered when mining Bitcoins such as electricity, hosting issues, heat, installation or upkeep trouble.

Use only the trusted websites for cloud mining. BEWARE of all the Frauds going on in its name. Homework done before an investment is better.

Advantages of Bitcoin Cloud Mining:-

  1. No excess heat to deal with.
  2. Quiet due to no constantly humming fans.
  3. No electricity cost.
  4. No Bitcoin mining equipment to sell when it is not profitable.
  5. No ventilation problems with hot equipment.

 

Disadvantages of Bitcoin Cloud Mining:-

  1. Beware of FRAUD companies!
  2. Unverified or shady Bitcoin cloud mining operations.
  3. Lower profits- Bitcoin mining companies also have expenses.
  4. Bitcoin mining contracts may have the ability to cease operations or payouts in the contracts if the Bitcoin price is too low.
  5. Lack of ability to change the Bitcoin mining software.

 

Final Verdict:- Is Bitcoin mining still profitable in 2020?

Yes. It’s a famous saying in the crypto world that it is never too late to invest in Bitcoin. Whatever the hash rate be, whatever the difficulty in mining Cryptocurrencies be, whatever the governments do to Bitcoin, The Bitcoin price is surely going to rise and make you rich.

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