Understanding the Basics of Mining to Produce Bitcoin by Yourself

This could help you mine bitcoins and sell it to others.

Understanding the Basics of Mining to Produce Bitcoin by Yourself. It is important as Bitcoins are ruling our world. The new digital currency is overtaking our usual banking channels. One can buy literally anything with these bitcoins. So, we discuss how you make bitcoins by yourself.

Miners use special software to make Bitcoin. They use software to solve mathematical problems and in exchange, they issue some number of Bitcoins. This way of issuing encourages more people to mine.

Bitcoin mining is a peer-to-peer computer process to make the Bitcoin transactions safe. Miners keep the network secure by approving only verified transactions. Mining also releases new Bitcoin to the public ledger called as the block chain.

Anybody having internet access and the hardware can get into mining Bitcoins. Mining compiles the transactions into blocks and solves a difficult puzzle. The first solver of the puzzle can place the next block on the block chain and claim the reward too. The reward includes transaction fees and the newly released Bitcoin.

Read: How can you mine bitcoin on your phone?

In the earlier days, making money from Bitcoins was very easy. They could be mined with a home PC. More and more miners are getting to the network, thus Bitcoin mining becomes all the more difficult.

Hardware for Bitcoin Mining

We need specialized hardware and need to join that is called as a mining pool. It is a place where large numbers of miners work together and share their results. The mined coins do not contribute to a huge profit because of the expensive hardware and the electricity consumed when mining.

Before we try to understand how easy or hard Bitcoin mining is, we should understand some terminologies.

Hash Rate in Bitcoin Mining

The Hash Rate: Hash is a computational problem that has to be solved by a miner’s computer. The Hash rate is the rate at which the problems are getting solved. The more miners in the network, the higher is the hash rate. It also indicates the performance of an individual miner.

Bitcoin Difficulty

Bitcoin Difficulty: The Bitcoin network produces a certain number of Bitcoins every 10 minutes. The difficulty level of the mathematical problems has to increase accordingly to accommodate the hash rate increase. This gives rise to a situation where if the miners are more, mining becomes harder.

Bitcoin mining is in fact, designed to be difficult by keeping the number of blocks found every day by miners, steady. Mining gets difficult because the SHA – 256 of a block should be equal to or lower than the target for the block which the network will receive. In other words, the hash of any block should start with a set number of zeros. This probability is very less so numerous attempts have to be made, which makes the task even more difficult.

Bitcoin Mining Network Difficulty

Bitcoin Mining Network Difficulty: It is a measure of difficulty to find a new blog compared to the easiest it can ever be. It is calculated per 2016 blocks to a certain value such that the earlier 2016 blocks are generated in two weeks if everyone were mining at this difficulty. This generates one block in every 10 minutes.

The rate of block creation goes up as more and more miners join the network. At the same time, the difficulty level goes up to adjust itself, which in turn brings the rate of block creation down.

Bitcoin mining has literally grown from a group of enthusiasts into an industry-like venture. The money-making was initially easy but in the present day, only those with special and high-power machinery can extract Bitcoins profitably.

Bitcoin Mining from Technical Standpoint

Moreover, it’s not that difficult from a technical standpoint, but it requires proper infrastructure and capital investment. Mining using a CPU or GPU is no longer viable. You must use an ASIC. Using the fastest available Bitcoin ASIC miner, the Antminer S9 14TH/s, it will take 250 days to mine 1 BTC (Bitcoin). This means you would earn $17.31 USD per day. It uses approximately 1400 watts of electricity. There may also be additional charges for shipping, tax, and use tax.

The Antminer S9 is extremely loud and hot. It sounds kind of like a hairdryer that is howling in different tones, but even louder. You can easily hear it through a wall. It is also as hot as an electric heater. Moreover, if you live in a hot region. it requires an air-conditioning environment so it is not going to overheat. You do not want to run an Antminer S9 in your home.

Using the Antminer R4 8.7TH/s, it will take 400 days to mine 1 BTC (Bitcoin). This means you would earn $10.75 USD per day. The Antminer R4 is to be a much quieter option for home users in its design. It uses approximately 850 watts of electricity. There may also be additional charges for shipping, tax, and use tax.

Although early on in Bitcoin’s history individuals may have been able to compete for blocks with a regular at-home computer, this is no longer the case. The reason for this is that the difficulty of mining Bitcoin changes over time.

Block Production in Bitcoin

In order to ensure the smooth functioning of the blockchain and its ability to process and verify transactions, the Bitcoin network aims to have one block produced every 10 minutes or so. However, if there are one million mining rigs competing to solve the hash problem, they’ll likely reach a solution faster than a scenario in which 10 mining rigs are working on the same problem. For that reason, Bitcoin is designed to evaluate and adjust the difficulty of mining every 2,016 blocks, or roughly every two weeks.

When there is more computing power collectively working to mine for bitcoins, the difficulty level of mining increases in order to keep block production at a stable rate. Less computing power means the difficulty level decreases. To get a sense of just how much computing power is there, when Bitcoin launched in 2009, the initial difficulty level was one. As of November 2019, it is more than 13 trillion.

All of this is to say that, in order to mine competitively, miners must now invest in powerful computer equipment like a GPU (graphics processing unit) or, more realistically, an application-specific integrated circuit (ASIC). Some miners—particularly Ethereum miners—buy individual graphics cards (GPUs) as a low-cost way to cobble together mining operations.