What is mining?

What is mining?

Mining is the process of creating new bitcoins, which is built on computers solving complex mathematical problems. Mining is the only way to issue cryptocurrency. One of the translations of the word mining is “mining or mining.” If we are talking about bitcoin, then we are dealing with the extraction of “virtual gold”.

Who is mining bitcoins?

People who are mining are called miners. This word also means specialized devices for mining Bitcoin and other cryptocurrencies.

What does it even look like?

In part, miners can be compared with participants in torrent trackers, who, having launched a special program, give other users the opportunity to download movies or music. In the case of Bitcoin, miners support the functioning of the payment system, confirm transactions and maintain consensus on a single and unchanged state of the entire network. As a reward, they get bitcoins.

How is the mining process going?

The mining process consists in calculating the hash (output) of the block header in the blockchain. A block includes a header hash of a previous block, a transaction hash, and a random number. When forming a new block, the miner receives a reward – a certain amount of bitcoins. A lot of miners are simultaneously “fighting” for the award. As a rule, transactions included in a block are considered confirmed after six blocks in a row have been calculated.

What does cryptocurrency mining look like?

Today, cryptocurrency mining most often occurs in specialized data centers, which are also called mining farms. A typical farm for mining bitcoins is a room in which a certain number of ASIC devices is located (from the English application-specific integrated circuit, “special-purpose integrated circuit”). In the room itself, the necessary temperature conditions are maintained or other cooling methods are used.

Is mining profitable?

The economic feasibility of mining is immediately determined by several factors: the cost of electricity, the productivity of hardware, the current complexity, as well as the market rate of bitcoin in relation to other currencies. If at the very beginning of the existence of bitcoin, its extraction was quite possible at home, today it requires very large computing power. An increase in the number of miners and the emergence of more powerful devices lead to an increase in mining complexity, which negatively affects profitability.

What equipment do you need?

At the very beginning of the existence of bitcoin, it was possible to engage in its mining even on ordinary computers with more or less powerful processors and video cards. Today we no longer have to talk about this. Modern mining is the use of expensive specialized devices and chips, the production of which has already turned into a separate multi-million dollar industry.

It turns out that doing it alone makes no sense?

Most likely, yes, unless you have enough funds to acquire expensive equipment and be able to pay the costs associated with maintaining it. However, this does not mean that you have no chance to earn on mining. It is for the involvement of ordinary users in the process that there are so-called pools (associations) of miners. Pools can include hundreds and thousands of cryptocurrency miners who receive their share of the award in accordance with the size of the contribution. The network sees such a pool as one miner producing hundreds of gigahashes per second, although in fact it is one main server that distributes tasks to individual miners. This practice is more effective and brings a reward faster, although it does it in small portions.

What reward can I expect?

According to the original Bitcoin technical document written by Satoshi Nakamoto, the reward for finding a new block is halved every four years: at the beginning of 2013 it was 50 BTC, then decreased to 25 BTC, and in the summer of 2016 decreased to 12.5 BTC. The next decrease (halving) of the award will take place in 2020.

If you are a member of a pool, then you can count on a reward proportional to your mining power “in a common boiler”. The difficulty of finding blocks changes every 2016 blocks or about once every two weeks. With increasing network power, complexity increases.

There are many services for calculating the current mining profitability on various algorithms and devices. One of the most popular of them is WhatToMine.

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