How to mine bitcoin, what mining is, the advantages and disadvantages of bitcoin mining, through this article, we will see and we will also ask the question of whether it is still profitable.
Bitcoin is a decentralized cryptocurrency and completely independent of bodies such as banks or states, in the sense that no outside body controls the issuance of Bitcoin. This is based on one principle: mining. Bitcoin is based on the blockchain protocol.
What is bitcoin mining?
Via a PC
Via dedicated mining machines such as RIGs or ASICs
The computing power acquired will be able to be used for several things, the most important of which is *securing and verifying transactions* between Bitcoin users. This computing power will also make it possible to ensure the operation of the blockchain by verifying that the blocks are well articulated one after the other.
Bitcoin works on the principle that a block should be mined every 10 minutes. Unlike fiat currencies like the euro or the dollar, Bitcoin is, therefore, produced by users. Mining is an operation carried out by very powerful computers which put their computing capacities at the service of what is called the blockchain.
1.1 Some key figures on Bitcoin:
2009: Year of the launch of Bitcoin
2141: In the year 2141, we will reach the maximum number of Bitcoin in circulation
Over 18 million: Number of Bitcoin currently in circulation
21 million: This is the maximum number of Bitcoin that will be in circulation in 2141
If the launch since 2009 has already allowed the creation of more than 18 million tokens out of the 21 million, the rate of Bitcoin mining is decreasing. Indeed, the rate of creation of Bitcoin is divided by 2 for every 210,000 blocks resolved. This is called halving. If in 2009, 50 Bitcoin were created every 10 minutes, the current rate is only 6.25 Bitcoin every 10 minutes today. All this is indicated in the source code of Bitcoin.
How to mine bitcoin?
Mining Bitcoin can be done in several ways, individually from home or by joining a pole of miners.
1.1 Do bitcoin cloud mining
The easiest and most economical way to mine Bitcoin is to do bitcoin cloud mining.
Bitcoin cloud mining consists of using the computing capacity of a company specializing in Bitcoin mining. In a way, by doing this, you are renting out the compute and storage capacity of the business concerned.
With cloud mining, there is no need for technical knowledge or to purchase expensive mining equipment to mine.
You will not risk damaging your computer’s processor either and you will avoid the electricity charges that apply in individual mining.
Cloud mining is also faster and allows you to mine your first cryptocurrencies in just a few hours. Some cloud mining platforms also allow you to buy Bitcoin on their platform.
However, some platforms have a dependency on a middleman which decreases your earnings when you mine and a lot of cloud mining platforms are new to the market, so be sure to choose a reputable cloud mining platform.
1.2 How to do bitcoin cloud mining?
In the tutorial below, we explain how to do bitcoin cloud mining step by step.
Step 1: Open a Bitcoin Wallet
If you want to mine Bitcoin, one of the first things will be to open a Bitcoin Wallet to secure your Bitcoins. Several options are available to you :
Use a virtual wallet: These are wallets to be installed directly on your computer or on your mobile terminal. They allow you to follow the evolution of it in real-time. Some wallets like those offered by Blockchain or Coinbase are very effective.
Open a physical wallet: They can take the appearance of USB keys or physical storage spaces on which private keys are available.
Step 2: Open an account on a cloud mining platform
To get started, you will need to open an account on a bitcoin cloud mining platform.
To create your account, you will need to fill in the following elements:
Step 3: Go to the “Miner” tab
When your account is created, you can go to the “Miner” tab of the cloud mining platform to start mining Bitcoin for free.
If the platform of your choice offers a mobile mining application, you can also start mining Bitcoin from your mobile.
Step 4: Start mining Bitcoin
Normally, it is the broker who takes care of all the operations. You just have to go back to the app or site to mine. You can repeat the operation every 4 hours. On the broker’s site, you just have to click on the green button “4h” to start the operation. It’s as simple as that.
Mining profits are normally paid every 30 to 40 minutes, directly into your account. You can then use your mining profits to trade assets on the platform.
1.3 Mining Bitcoin with a mining rig
If you want to mine solo, you will need to equip yourself with an ASIC first. The increasing difficulty of mining over time makes the use of these machines almost essential. Before purchasing an ASIC, we advise you to stay focused on the following parameters:
The price: It will be directly dependent on the following two variables. Entry-level machines start at around a hundred euros while more efficient equipment will quickly reach a price of € 3,000
The Hash rate: a higher rate very simply allows you to be able to mine more Bitcoin.
The electricity consumption: it is an important parameter. If your machine can mine 2 times faster but uses 3 times more electricity, this may not be the best solution. On this point, it is a question of finding an optimum relationship between extraction speed and electricity consumption.
To start mining Bitcoin at home, you will need to install the Bitcoin software and configure it for JSON-RPC. CGminer or BFGminer software is particularly popular with Bitcoin miners.
1.4 The best bitcoin mining rigs
Bitmain Antminer S9i
Halong Mining DragonMint T1
Bitmain Antminer T9
Pangolin Whatsminer M3X
1.5 Join a mining pool
It is a solution to pool expenditure items and maximizes the chances of mining Bitcoin. Most of these miners’ pools are also aimed at novice miners.
This solution will generate and ensure profits more regularly since the profit generated by one of the members of the pool will be redistributed among all the miners. One of the advantages of Bitcoin mining pools is the faster processing they provide. Having multiple nodes on the same network, the discovery process will be faster and you will be able to mine faster than if you were alone.
Another benefit of using a mining pool is that the income you generate will be more stable because blocks will be accepted faster and more often. However, keep in mind that the profits will be distributed among all members.
1.6 best bitcoin mining pools
Poolin: operates around 18% of all blocks
F2poo: one of the oldest mining pools
BTC.com: mine 15% of the entire block
How does Bitcoin mining work?
The principle of Bitcoin mining is based on “ Proof of Work ” or proof of work. It is this principle that ensures strong security of Bitcoin. Proof of Work is a concept whose origins date back to the mid-1990s. At the time, it was a question of creating and implementing an anti-spam system against malicious emails.
It is the miners who make the principle of Proof of Work work. Concretely, this method works in three steps:
1- *Minors check the incoming data* on the register and validate the authenticity of transactions
2- After verification, they create the new block of the chain
3 - Minors are rewarded with Bitcoin. The Proof of Work will determine by a certain number of rules (the consensus), which miner can generate the next block and how the Bitcoin fragments will be distributed between the different miners involved.
One of the strengths of the system is that it is precise visible to everyone. Everyone can take action and detect possible fraud. The system is based on very high transparency.
From a blockchain point of view, the following steps are respected in the construction of a new block:
A transaction is integrated within a block
All minors can check the validity of the transaction and confirm it if necessary
The miners select the header of the last (most recent) block to integrate it into the new block as a “hash”
The miners have to solve the mathematical problem, for which only extremely powerful computers can operate. Bitcoin was designed to make mining and therefore calculations more and more complex
When the solution is found, the block is added to the channel and will be broadcast over the entire network.
Here is a schematic overview of how mining works.
1.1 The advantages of mining Bitcoin
Be rewarded in Bitcoin, the price of which could still appreciate after having properly resisted the health crisis
Participate in the collective security of the concept. This is one of the strong axes of Bitcoin, its fully decentralized control system for transactions.
Generate money while staying at home
Be part of a decentralized concept, far from traditional payment systems
Collective mining, via a pool or via cloud mining allows you to afford more chances of obtaining Bitcoins.
1.2 The disadvantages of mining Bitcoin
Solitary Bitcoin mining has many drawbacks, especially if you are doing it from France. Here are the main negatives:
A very high cost of electricity: This greatly reduces the profitability of mining since, in France, electricity is much more expensive than in other countries in the world such as China or certain Asian countries.
Requires high-tech equipment: While Bitcoin mining is energy-intensive, it also requires the use of technological equipment which is sometimes very expensive. This is another point that comes down to profitability.
Bitcoin mining is very energy-intensive on a global scale. Some studies tend to prove that mining would represent a greater electricity consumption than countries like Israel, Switzerland or Greece.
The difficulty of mining is enhanced all the 2016 blocks which can make the mining quickly obsolete equipment.
If you mine individually, you are unlikely to be considered the creator of a new block
How much money can be made by mining bitcoin?
As an individual, Bitcoin mining is no longer really lucrative. It can be more interesting if you go through cloud mining platforms.
If at the launch of Bitcoin in 2009, the mining activity was completely voluntary and was primarily used to develop the cryptocurrency, the rise in the price of the cryptocurrency has completely changed the activity.
At the time, the blocks to be integrated into the blockchain were extremely simple and much less bulky than they can be today. This is why any individual was able to mine Bitcoin with equipment that would be totally outdated today.
Minors must validate transactions. Each time a Bitcoin transaction takes place, the network adds additional fees. These additional fees cover the verification of the transaction by minors. This is how minors are paid.
Determining how much money you are going to be able to earn by mining Bitcoin requires knowing where you are. If you are located in a country where the price of electricity is very low, it may be more interesting to engage in mining, as long as you have a sufficiently powerful computer.
The increasing difficulty of mining forces miners to invest in machines that are more and more efficient but also more expensive. This is precisely why the mining trend is towards the conglomerate of miners.
However, for the moment, some people accept to lose money by mining Bitcoin by betting that the price of Bitcoin will rise in the future.
As you will have understood, mining Bitcoin depends on several parameters such as:
Your place of residence
The capacity of your computer or mining system
Currently, each block of Bitcoin generates 6.25 BTC for miners. Either during August 18, 2020, 6.25 * 10,260 € (price for a BTC) = 64,125 € to be distributed among minors every 10 minutes, since a block is generated every 10 minutes. If the sum may seem very large, as a minor, you will only receive a tiny part of this amount. We will talk about fragments of Bitcoin.
Some studies from 2017, when the price of Bitcoin was still below $ 1,000, showed that a miner could earn between € 20 and € 40 per year assuming constant mining throughout the year. The rise in Bitcoin prices, multiplied by 10 since changes the situation but cannot constitute a salary for an isolated miner. Considering the price of electricity, it’s still a safe bet that the gain is, in reality, a loss.
In reality, the main problem with Bitcoin mining is that the competition is fierce and despite the halving (dividing the reward by 2), miners are still very numerous.
Mining or buying Bitcoin?
As we explained, the two operations are very different. Mining does not in any way make you the owner of the Bitcoins you mine. Mining or buying, everything will depend above all on your profile. Remember that at the time of writing, the price of Bitcoin is € 10,260 per BTC.
Despite the halving, the number of Bitcoin miners continues to increase. So much so that carving a piece of the pie becomes more and more complicated. If you want to mine rather than buy, then we advise you to do so through a cloud mining solution.
If you have a fairly small budget, mining by one of the solutions mentioned above is probably the best solution. Under certain conditions, cloud mining remains an effective solution to acquire Bitcoin for free.
So there is no better and more effective answer than the others. It depends above all on the context. If you are in a country where electricity costs are quite low, mining Bitcoin will be more interesting than in other countries like France.
Frequently Asked Questions (FAQs)
1. What hardware is needed to mine Bitcoin?
To choose the right material, the parameter to look at first is the hash rate. This should be as high as possible. It is also important to keep an eye on the ratio between the energy consumption of the equipment compared to its hash rate.
2. What efficient equipment for less than 1000 € to mine Bitcoin?
The Antminer T17 + is very good value for money for Bitcoin mining. It is regularly displayed at a price lower than € 1,000.
3. What is the most effective software for mining Bitcoin?
If you are going through an ASIC, CGminer or BFGminer software are good tools to start mining Bitcoin
4. How to calculate my profitability in mining Bitcoins?
Some solutions like the What to Mine site allows you to calculate your profitability as miners on many cryptocurrencies like BTC.
5. Are there more effective solutions than mining as an individual?
Yes, definitely. Joining a mining cooperative or even a cloud mining solution allows you to pool costs that can be colossal.
6. What is the blockchain?
The blockchain is the backbone of Bitcoin. It is she who ensures its proper functioning.
7. What is halving?
This is a split in two of the reward given to miners of a cryptocurrency. In the context of Bitcoin, the first halving took place in 2012, when Bitcoin traded for $ 12. The reward was increased on this occasion from 50 Bitcoin to 25 BTC. The fall in the reward is often offset by a rise in the price of Bitcoin.
8. Is it necessary to download the blockchain to start mining?
No, you can mine Bitcoin without having downloaded the entire blockchain first.
9. Is it possible to start mining other cryptocurrencies?
Yes quite. It’s even something to seriously consider if you want to mine on your own without being part of a larger group of miners. Some cryptocurrencies have high potential and still have low mining difficulty compared to Bitcoin.
Conclusion: Is Bitcoin Mining Worth It?
If you want to get into mining as an individual, it is very likely that it will not be profitable, considering the cost of electricity and the investment required for the machines to be purchased. The only option that could possibly be viable would be to own your own power generator. It’s pretty clear today that the cost of mining Bitcoin is higher than the profit it could bring you.
However, by going through a cloud mining company, your performance will be improved while remaining an additional income. Cloud mining solutions allow you to mine very easily with just a few clicks while staying at home and without having to face large electricity expenses and without having to invest in very expensive mining equipment.
Alternatively, you can buy Bitcoin instead of mining it. Many analysts are speculating on a rise in the price of virtual currency for years to come. If you want to focus on buying rather than mining, online brokers allow you to trade cryptocurrencies or the CFDs of these cryptocurrencies like eToro.