A bitcoin miner processes transactions on the block chain, and helps keep a public record of all transactions in history of bitcoin. Miners are rewarded in bitcoin for processing transactions.
The supply of bitcoin is limited. Only 21 million bitcoins will ever be available. Miners are rewarded with bitcoin blocks for processing transactions. In the beginning of the bitcoin Blockchain, the block reward was 50, then it reduced to 25, and now is 12.5btc for every block that is mined. How much will bitcoin be worth when block rewards are reduced to eg less than 1btc per block?
Most bitcoin miners now join a pool, like a club of people mining for bitcoin. Then when one of the miners is rewarded for processing transactions, (finds a block) it’s shared out between all of the other miners. In the early days of mining, it was possible to find blocks of bitcoins easily just using a computer CPU, or GPU. Now bitcoin mining equipment can be very expensive. Some machines costing thousand of pounds. Waves platform allows you to mine just by holding your coins. More info here.
If you are solo mining bitcoin, not in a pool to generate any reward you must have a great deal of mining hardware, and plenty of capital reserves to pay your electricity bills. Bitcoin mining uses allot of electricity. But you keep all of the reward when you are solo mining.
Some people still solo mine as a sort of lottery. That one day they might get rewarded with a whole block. While it is still technically possible. The odds are millions to one. Unless you invest heavily in mining equipment. And with the difficulty rating ever increasing making it even harder to find a block. Most people decide to mine in a pool and share rewards.
When bitcoin mining was first invented every miner could easily find blocks of bitcoins. All they needed was a simple cpu, or maybe a gpu. (Graphics card). So you can imagine how wealthy those people must be now if they had held onto the coins. And for those that sold back when bitcoin was worth just a few dollars, you must be kicking yourself now. Money is not everything remember.
How Much Money Can Be Made Mining Bitcoin?
Most home miners mine in a pool now because the probability of finding a block solo mining is very small unless you have a large mining operation. However Money can still be made mining crypto currencies. If you have an idea of the type of mining setup you are going for then check out whattomine.com and enter your mining info.
Some things to think about when deciding to start mining with your own hardware are:
- Electricity cost – check your bills to find out how much your electric is per unit, or kWh. Services exist that allow you to have your mining hardware running in countries that have lower electricity costs.
- The cost of your mining hardware. The value of your hardware can go up and down depending on the value of your crypto currency. The price of old bitcoin mining equipment has increased with the price of bitcoin.
- Return on investment. How long will it take to recoup your initial investment.
- Where are you going to set up your mining equipment? Mining hardware can generate allot of heat. If you live in a hot country you may need a way to provide air conditioning to keep your miners cool. Possible fire precautions health and safety requirements.
- If you hav a few miners working together you may need to consider the power draw that they are putting on your electrical system. Some miners operate in and above 1kw ranges. Putting too much load on an electrical system can cause over heating, and fire risk! Be safe! Seek professional advice.
- Difficulty adjustments. What your mining equptment makes you next month will be less than what it makes you today in the majority of cases.
- Your strategy. Will you be selling your hard earned coins to pay your electricity bills? Will you be holding coins for a period of time hoping for a price increase? Or just selling them all right back to fiat as you earn them? Or something else?
- Technical skills required. While some miners use a friendly gui. Others you will need to be able to use the command line interface, set up hardware, wiring, network config etc.
Different coins use separate mining algorithms to mine each coin.
- Bitcoin uses SHA 256.
- Ethereum uses Ethash at the moment.
- Litecoin uses scrypt.
Not all mining hardware is compatible with all mining algorithms. For example you could not use an bitmain antminer s3 ASIC to mine litecoin. And a GPU would be ineffective to mine bitcoin now.
A starting point for bitcoin mining could be using bitmain antminers. Or if you are looking to mine Ethereum you will need a GPU set up. At this point things start to become more complex because you need to understand how to set up the hardware, and configure the miners. But don’t worry. There are plenty of tutorials out on the web to show you how. The technical knowledge you will need is determined by the coin you are planning to mine. Some miners are designed to be plug and play. While others you will need to install fresh operating systems, and set up a dedicated rig for your mining.
Bitcoin is still less than 10 years old at the time of writing this. The 1st bitcoins were issued January 2009, and only 21 million bitcoins will ever exist!