What Is Bitcoin Mining?
Bitcoin mining is the process of creating new bitcoin by solving a computational puzzle.
Bitcoin mining is performed by high-powered computers that solve complex computational math problems; these problems are so complex that they cannot be solved by hand and are complicated enough to tax even incredibly powerful computers.
How are Bitcoins Created and Mined?
When computers on the network verify and process transactions, new bitcoins are created, or mined. These networked computers, or miners, process the transaction in exchange for a payment in Bitcoin. Bitcoin is powered by blockchain, which is the technology that powers many cryptocurrencies.
All mining starts with the blockchain. This is an online decentralized ledger that records transactions throughout a network. A group of approved transactions is called a “block.” These blocks are tied together to create a "chain" hence, the term "blockchain."
In the Bitcoin network, a miner’s goal is to add individual blocks to the blockchain by solving sophisticated mathematical problems. This pursuit requires enormous computational and electrical power. While many miners compete to add each block, the miner who solves the problem will actually add the block along with its approved transactions to the blockchain. This miner receives a reward of 6.25 bitcoins (the block reward is cut in half roughly every four years)
How To Start Mining Bitcoin
Though it is extremely difficult and rarely profitable, Bitcoin mining is still feasible. While the best results will derive from joining a mining pool, the following steps can be taken to venture into Bitcoin mining:
- Calculate profitability: Primary expenses will include cost of electricity and mining hardware. Any profit will largely depend on Bitcoin’s value, which is volatile.
- Get mining hardware: Once initial calculations are made, expect to spend anywhere from several hundred to several thousand dollars on mining hardware.
- Choose mining software: Next, you need a platform through which you can access the blockchain and manage your mining. There are a lot of popular Bitcoin mining software options to choose from.
- Install a Bitcoin wallet: When you’ve mined bitcoins, you’ll need a place to store them, called a "Bitcoin wallet." Digital wallets let you store your bitcoins in “the cloud” but are a common target for cybercriminals. An offline wallet stores bitcoins in a device that is disconnected from the Internet, offering added security.
- Enter a mining pool: Joining a mining pool offers the greatest chance of success.
- Get started: Once the previous steps are complete, you can start mining. This is a very passive enterprise, but equipment should still be routinely checked to ensure that everything is working properly.
Bitcoin is a new Internet currency that anyone can get started mining. There are a number of reasons you might mine: for profit, to help secure the network, to help found a new Internet currency, or just to gain technical experience.