One popular question on the mind of every Bitcoin enthusiast is how they can mine their own Bitcoin. We have done adequate research and have come up with this article to get started on mining your own Bitcoin. Bitcoin mining can be a very complex process that involves no guarantees.
What Exactly is Bitcoin Mining?
Bitcoin Mining gets its metaphor from Gold mining – it’s assumed Bitcoin is dug for just like gold but it’s only just a metaphor. Bitcoin mining requires a totally different process and uses modern, impressive technology. Before you get into Bitcoin mining proper, you first have to understand how Bitcoin works as a cryptocurrency.
Bitcoin is one of many cryptocurrencies that works on a distributed, decentralized network which is called a “Blockchain”. A blockchain is basically blocks of the currency which are linked to each other and each block contains currency as well as data pertaining to transactions on the chain. To go in-depth on how Blockchain works, you can read “What is Blockchain?”.
Now on a Blockchain, many transactions take place. A blockchain requires several computers or calculations to validate each transaction – this is so that nobody can create a fake transaction. It has to appear across other computers on the blockchain’s network for it to be validated. Remember that Blockchain is decentralized and distributed so for it to stay active, people contribute their computing power to assist this blockchain. People all around the world help keep Bitcoin alive by validating several million transactions daily. As a “Thank you” for doing this, they are rewarded with blocks of Bitcoin. Each block contains 12 Bitcoin.
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To successfully mine Bitcoin with their computers, they require a special program. This program attempts to solve complex mathematical problems so it can solve for the block that contains the latest transaction data. About every 10 minutes, a new block is added to the blockchain.
In technical terms, what miners do is they run SHA256 double round hash verification processes to validate transactions on Bitcoin’s blockchain. Bitcoin was designed so as more miners join the network, the mathematical problems become more difficult to solve. This is so that no one gains major control over the Blockchain network.
This short video properly explains what Bitcoin mining is and how it works
What is a Hash Function?
A hash function is an encryption method that is one-way and doesn’t use a key. Encryption is a method which computers now use to hide or secure information from the pure view of others. What a hash function does is to receive input, use a private key(which nobody knows) and then create a random but fixed length value based on that input. So if we put the word “Bitcoin” into a SHA 256 calculator, we would get “b4056df6691f8dc72e56302ddad345d65fead3ead9299609a826e2344eb63aa4”. If one letter in the word “Bitcoin” is changed or removed, we would get a completely different value.
Why does Bitcoin Mining use Hash Functions?
In the example above, we knew the input we entered into the SHA256 calculator. In Bitcoin mining, the input is unknown. What mining computers do is to guess as many inputs as possible so they can correctly predict the next hash. They use fast computers which predict millions of guesses every second until they find output that matches a hash value less than the next target block. This means computers all over the world are competing to make guesses and the one with the first accurate guess is thanked with a block containing about 12.5 Bitcoin. That block also needs to be part of the longest chain of the blockchain otherwise it is invalid. Bitcoin is designed so that it’s difficult to just earn Bitcoin by mining but also adding a verification layer for the transaction.
This is a diagram depicting what Blocks in a Blockchain look like
How To Mine Bitcoin?
To mine Bitcoin, here’s how you can get started with Mining your own. There are generally four ways to approach Bitcoin mining.
Pay for Mining Resources
Like we said earlier, there are many companies who own supercomputers specifically designed for mining Bitcoin. These companies rent out some of that power to those who can’t afford supercomputers or don’t have the expertise to set up theirs. They are called “Cloud mining services”. You basically pay for a portion of computing power and get rewarded with Bitcoin.
These are some popular cloud mining services:
- Genesis Mining
We have heard about some fraudulent activity in this category. So carry out extensive research before you pay for cloud mining services.
Own Bitcoin mining resources
ASICs or Application-Specific Integrated Circuit chips are computers designed for mining Bitcoins. They are fast and energy efficient. Although they are designed to be energy efficient, you have to take note of your electricity bill should you decide to purchase them. Amazon is one of the best places to buy ASICs.
Download Bitcoin mining software
Bitcoin mining software use spare computing resources on your laptop or desktop to mine Bitcoin. Note that your computer wasn’t specially designed to make that many complex calculations so it could result in over-heating or complete shutdown of your computer. So you need to be careful how much RAM and CPU power you give to these software. Some popular are EasyMiner, CGMiner and BFGMiner.
This category requires some caution so you don’t download fake software that steals your personal information.
Join a mining pool
A mining pool is a group of Bitcoin miners who contribute computing resources in order to solve a block. If you don’t have appropriate computer power, it could take you years to get one Block and solve blockchain problems. This is why people create pools – they split the work and then share the rewards amongst miners.
Some pools you can join are Bitminer, Slush Pool and P2PMiner.
Disclaimer: This article simply serves as a guide to Bitcoin and is not to be read as guaranteed investment advice. The author does not take any responsibility for the trading of and the volatility of Bitcoin or any other investment vehicles.
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