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What is Bitcoin mining?

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  • What is Bitcoin mining?

    What exactly is it?

  • #2
    Bitcoin mining is the process of adding transaction records to Bitcoin’s public ledger which is called the Blockchain as it is a chain of transaction blocks.




    BTC is processed by computing power and recorded in a public ledger (Blockchain) with the help of a network of computers. The processing of BTC transactions is termed ‘mining’. BTC mining rewards people with computer power by generating BTC and giving fees paid to people who mine.

    Currently, BTC is processed by an algorithm called SHA-256. Special mining equipment may be purchased to process these transactions with the most advanced miners being purchased by the Chinese maker Bitmain

    Mining can be done with either a physical miner or a virtual miner. You then can mine as a collective (Pool) and share the profits, which is the most common way or to solo mine where you maximise profit.

    When mining is done as a collective where multiple people ‘point’ their miners to an online site you can mine and collect newly produced BTC and the fees that are paid by other people. This is shared out with all the miners depending on how fast each computer miner is. The faster the computer miner, the more BTC earned. It is more complicated than this and a lot of research needs to be done.

    Pool Mining

    Pointing miners together with other people guarantee regular payouts daily (or more often) but profits can vary depending on what online site you point your miner towards. There are a lot of online BTC profit calculators that can help choose what pool to use to maximize profits.

    A lot of research needs to be done with mining, as this is a complicated model. As BTC is only software and it has many variables it needs to calculate. Just to name a few, BTC difficulty may change with the available network (this means profit changes, and mostly decreases if computing power remains the same). The value of how much BTC is worth and how fast the miner is.

    Solo-Mining

    Solo mining is where you as an individual point your miner to solve equations on the Blockchain and are rewarded with the most BTC. This is only true if you have huge amounts of speed with your miner and are having a good probability.

    This is why pointing miners together with other people is more common as the combination of all the miners then acts as one huge miner and will mine BTC quickly. The BTC from the processing of transactions is then paid out daily or sometimes more often back to the smaller miners if in a Pool. In solo mining, you will receive close to 100% of the profit (minus a fee).
    • Collectively joining other miners (payouts are shared according to miner speed and paid daily or more often)
    • Solo Mining (More BTC earned but requires fast miners)

    Problems with any type of Pool mining is you must trust the Pool you are mining with not to steal you BTC or get hacked if you are to store the coins there. However, payments can be sent to your private wallet and this is an option offered by many Pools.

    The problems with solo mining are you are required to have a huge amount of mining power to get regular payments. Technology advances will also require you to purchase new miner’s just to keep down electricity costs and the value to BTC needs to be in favour. Over time the newly created BTC payouts will reduce.
    • With collective mining, websites can be hacked
    • Solo mining calculations are complicated and new miners need to be purchased regularly to remain efficient

    The advantage of solo mining is there is a higher chance to make a profit, and since the BTC earned is sent to your private wallet it is more secure than keeping it online.

    Bitmain has a good reputation for online mining ( or another option to turn a profit is ‘Cloud Mining’.

    Cloud Mining

    Cloud mining is the easiest form of mining that does not require a physical miner to be sent to you. This removes the cost of electricity, noise, and heating as generated by the miners.

    Buying online, mining speed for BTC (currently measured in gigahash per second: GHS) is the fast way to turn a profit. Each Company reputation again needs to be considered, as a lot of faith in these companies is placed not to steal your money or to go bankrupt, or even hacked.

    As technology advances, these companies buy newer miner models and can sell GHS at a set value of BTC given the market price. Any buyer can purchase this. The more GHS you buy, the more BTC is earned.

    Alternatively, you can also hire individual miners online for a set price of BTC. This is not really cloud mining, as cloud mining is 24 hours a day, 7 days a week, 365 days a year. Hiring individual miners are only for a set period of time and are prone to going down due to loss of power or network connection. This would mean that you are no longer any profit and are paying for nil speed. Certain websites can broker hiring of miners such as NiceHash.

    Nicehash does not charge BTC when the miners are not working.
    • Cloud Mining is the easiest way to mine BTC
    • Can rent online individual miners

    Cloud Mining would be a medium to high skill level to profit but once set-up can be considered a passive income with no input. This income will decrease over time but if you can consider all the variables necessary then you can get a good return on investment.

    Caution: There are a lot of scams that pretend to be Cloud Miners. Many of these so-called “cloud mining” websites lure unsuspecting victims to buy mining contracts which actually pay out in the beginning – this to ensure others will be lured into knowing the contracts pay out. Unfortunately, this ends in tears as the happy miners are not able to access the website as it goes offline without warning… the perpetrators have run off with the money.

    Get your FREE copy of the Bitcoin Believers Manifesto from the link in my profile.




















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