What is Bitcoin Mining?

Cryptocurrency mining is considered to be an investment in the current era when Bitcoin prices are spiking like anything. Bitcoin came into existence through mining and circulates online after being mined. Bitcoin mining not only adds transaction but also results in releasing Bitcoin. The two main processes in mining are trying to solve a computationally difficult puzzle and compiling recent transactions into blocks. The participant who solves the puzzle first gets to place the next block on the block chain and claim the rewards. The miner gets incentives for mining in the form of Bitcoin and Bitcoin is newly released as well. As there is an increase in computing power to mine,the more will be the difficulty of the puzzle.

Security

The security of the Bitcoin network depends on this decentralization. Anyone with an internet connection and the proper hardware can participate in Bitcoin mining. If inclusion of a block in a block chain is disagreed by any peer then the decision is based on majority consensus, that is, if greater than half of the mining power agrees. The blockchain gets corrupted if an individual person or organization has control of greater than half of the Bitcoin network’s mining power. 51% attack is the concept of someone controlling more than half of the mining power and using it to corrupt the block chain. Thus the security of the Bitcoin network depends on the incentives of miners and transaction fees to employ mining.

Block Reward

Block rewards provide the vast majority of the incentive for miners. Block reward refers to the amount of new bitcoin released with each mined block. In 2009,the block reward started at 50 bitcoin, in 2012 halved to 25 bitcoin, and in 2016 halved again to 12.5. The block reward is halved roughly every four years. This decreasing reward will result in a total release of bitcoin that approaches 21 million. According to current Bitcoin protocol, 21 million is the highest amount and no more will be mined.

Transaction Fees

Transaction fees are amount of Bitcoin as a reward for the miner.This reward is given for mining the block in which the transaction is included.The version of the Bitcoin client used to send transactions, has fee minimum rules. A major security problem for Bitcoin may arise as the block reward reduces over time. making miners less provoked to mine bitcoin for the block reward. this could be solved by replacing incentives of block reward with transaction fees. Transaction fees are voluntary on the part of the person sending a transaction and even if a transaction is included or not. Thus, users sending transactions can use transaction fees to verify their transactions to incentive miners.

Mining Difficulty

The Bitcoin network adjusts the difficulty of the mining roughly every two weeks automatically. According to the software protocol, it adjusts itself to keep constant rate of block discover. If more computational power is employed in mining, then the difficulty will adjust upwards to make mining harder. The price of Bitcoin, the block reward, and the amount of the transaction fees determines the total payout. The higher the number of people and difficulty level, the lesser profitable mining is for miners.

Mining Hardware

Mining was done with CPUs from normal desktop computers in earlier days of Bitcoin. Graphics cards or graphics processing units are more effective at mining than CPUs. GPUs became dominant as Bitcoin gained popularity. A hardware was designed specifically for mining Bitcoin known as an ASIC (Application-Specific Integrated Circuit). Nowadays mining can only be done profitably with the latest ASIC machines. The older methods can increase the cost of energy consumed than the revenue generated. The difficulty has geared up as ASICs got advanced and increasing participants for mining. Since mining power gives you a vote in whether to accept changes to the protocol.political power also plays a role for controlling mining power. Examples of companies which make the  mining hardware are Bitfury, HashFast, KnCMiner and Butterfly Labs.

Mining Pools

Mining pools are different from cloud mining, which actually is a scam. Mining pools are operated by third parties and coordinate groups of miners. Miners can get a steady flow of bitcoin by working together in a pool and sharing the payouts amongst participants. The probability that a participant finding solution is equal to the portion of the total mining power on the network. Miner receives reward for solving the puzzle in the first place. Participants with lesser mining power might consume longer time and have smaller chance in discovering the next block on their own . The difficulty of the puzzle can also worsen the situation. The miner may never recoup their investment. This problem can be solved by mining pools.

Electricity Costs

Miners are racing to implement the latest mining chips and locate to areas where cheaper electricity is available. The largest mining operation in North America, run by MegaBigPower, is located where there is ample hydroelectric power and cheap electricity prices. CloudHashing runs a large mining operation in Iceland, where electricity generated from hydroelectric and geothermal power sources and where the cold northern climate helps provide cooling. If there’s any chance for one to get free electricity, they should definitely consider Bitcoin mining.

The following are some of the best Bitcoin mining hardware out there in the market. These reviews shed a light on, how good these machines are.

Reviews

AntMiner S9 Bitcoin Miner

It’s the most advanced and most efficient Bitcoin miner today. If you’re serious about Bitcoin mining this is your rig. But since this miner just came out it’s possible that Bitcoin mining difficulty will now increase even more. The cost of the hardware and electricity, and pool fees were not taken into account. Another fact is that the difficulty may rise and the price of BTC may drop.

Even though AntMiner S9 seems the toughest miner, it will take only a small amount to time to get outdated. Until that happens though, it looks like a pretty reliable piece of equipment.

AntMiner S7 Bitcoin Miner

The AntMiner S7 was the reigning champion up until a few months ago. Even at today’s difficulty levels you can still make around 0.15BTC a month with the halving of the block reward.

However I wouldn’t suggest buying this rig due to the fact that it’s neither here nor there. For an entry level device, S7 is too expensive. With the current difficulty level, it’s very weak to generate a healthy amount of Bitcoin also.

AntMiner S5 Bitcoin Miner

The AntMiner S5 is and entry level Bitcoin miner. This is most suitable for someone who’s on a small budget to invest in. Those who bought this, seems to be very pleased with the AntMiner S5. As the device is outdated, and with the decreasing block reward and current mining difficulty you won’t be able to make more than 0.05 BTC per month. This means you’ll need to run it for about one year and 8 months to get a full Bitcoin. Even, some had complaints about the loud noise produced by AntMiner S5.

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