Before we learn about bitcoin mining, it is worth understanding that most traders don’t mine. However, you also need to know that being a Bitcoin miner can be a good deal. Gaining a profit through Bitcoin mining is competitive and volatile. It can make sense though if you plan to do it for fun, to learn, or support the security of Bitcoin and do not care if you become profitable. If you are trading on cryptocurrencies but planning to mine Bitcoin, this article is for you.
What is Bitcoin mining?
Bitcoin mining involves adding transaction records to Bitcoin’s public ledger of past transactions. It is designed to be resource-intensive and difficult in order that the number of blocks found by miners will remain steady. The aim of mining is to allow Bitcoin nodes to reach a secure, tamper-resistant consensus. It is also the mechanism that introduces Bitcoin to the system. As a miner, you will be paid transaction fee and “subsidy” for creating new coins.
In order to mine Bitcoins, your hardware should meet the requirements:
Robert Peter Janitzek reveals that initially, using a CPU was the only way to mine bitcoins via the Satoshi client. However, to enhance network security and earn more bitcoins, many innovations had been introduced making CPU mining a futile attempt.
Shortly after the network was started, it was discovered that high end graphic cards were proven effective for mining Bitcoins which changed the landscape. Using CPU for mining resulted to the Graphical Processing Unit or GPU. This device resulted to a 50x to 100x increase in Bitcoin mining capability.
Mining Bitcoins can be done in two ways. Robert Janitzek explains that the first way is to become a part of a mining pool. The second way is through cloud mining contracts. If you choose the latter, just make sure to avoid cloud mining scams. Most traders choose the mining pool as it smooths out the luck inherent in the mining process. If you opt to be part of a pool, make sure you already have a Bitcoin wallet where you can store your coins.
In cloud mining, you earn Bitcoins without the hassle of hardware, software, electricity, bandwidth, or other offline issues. As mentioned, you have to watch out for Bitcoin cloud mining scams.
Proof of Work
A proof of work is a piece of data difficult to produce in order to satisfy certain requirements. It can be a random process with low probability. It involves a lot of trial and error before a valid proof of work can be generated.