How to mine bitcoins – the essence of the process and where to start, types and profitability of earnings

The content of the article

• What is mining?
• Basic principles
• Cryptocurrency mining difficulty
• Mining Types
• Bitcoin mining on a home computer
• Cryptocurrency mining using a video card
• Mining farms
• Cloud mining without investments
• How to start mining
• What are pools
• Cryptocurrency mining software
• Is bitcoin mining profitable at home
• How much can you earn on mining
• Bitcoin mining costs
• Special equipment
• Electricity costs
• Home PC Power Depreciation
• Pros and cons of mining

The only way to issue bitcoin (btc) cryptocurrency is mining bitcoins, which is the creation of new blocks by performing a specific mathematical task through a specialized program installed on the computer. There are several ways to get a popular digital currency, each of which has its own advantages and disadvantages..

What is mining?

The process of creating virtual coins got its name because of the complexity, comparable with the extraction of mineral resources (from the English mining). The essence of mining is to perform calculations of mathematical problems in order to pick up a certain value. The purpose of such operations is to obtain a hash – a fixed-length bit string. After the code is decrypted, another block of bitcoins appears, including a cryptographic signature. This signature is based on the hashes of previous blocks..

A sequence of bitcoin blocks appearing one after another form a chain of blocks (blockchain). The digits that make up the basis of the hash are selected automatically. Bitcoin mining involves a reward in the form of btc coins, which go to the first hash guesser miner. The amount of virtual reward is halved every four years. At the time the system started in 2009, miners could count on 50 btc for the decrypted hash, now the reward is already 12.5 bitcoins.

Basic principles

The process of mining bitcoins must meet certain principles in order to maintain the validity of cryptocurrency and network security. The main principles of production are:

• the difficulty of creating a currency;
• the set average time to calculate one block;
• lack of a single intake center;
• automatic increase in difficulty level as the number of miners grows;
• the amount of compensation established by the system and provides for a gradual decrease;
• Mandatory confirmation by miners of a transaction between participants in the bitcoin network by including it in the block;
• autonomous network self-regulation.

Cryptocurrency mining difficulty

Due to the constant increase in the number of e-coin miners and the steady increase in computing power, a mechanism is needed to compensate for this growth. As such a mechanism, the complexity parameter was provided, on which the amount of cryptocurrency mined per unit of time depends. The technical side of the concept of “computational complexity” is described as the number of attempts necessary to generate a hash.

Mining Types

Earnings of bitcoins can be carried out in several ways, which involve the use of specialized devices or payment for the rental of other people’s capacities. There are also shareware types of mining. The methods differ from each other in the size of the necessary investments and the expected income from production. The most popular types of bitcoin mining are:

• using a personal computer or laptop;
• using the GPU;
• using FPGA modules and ASIC chips;
• creation of farms for mining;
• cloud mining;
• bitcoin taps, bitcoin games.

Bitcoin mining on a home computer

Cryptocurrency mining using a video card

The time when it was profitable to mine bitcoins using a conventional video card has already passed, since the mining process has become much more complicated and requires large capacities to carry out the calculations. With increasing interest in bitcoin due to the increase in its value, manufacturers of graphics accelerators and processors began to develop powerful graphics cards.

Mining farms

A large number of computers involved in the mining process are the so-called bitcoin mining farms. The principle of their work is the continuous execution of calculations. Hashes are generated using:

1. A large number of video cards – the most energy-intensive type of farms.
2. FPGA modules – economical in terms of power consumption.
3. ASIC processors – the asic device (specialized processors) is the most expensive, but at the same time its maximum speed.

Cloud mining without investments

The principle of obtaining bitcoins using cloud mining is identical to the usual extraction of electronic coins, except that they do not use their own capabilities, but third-party leased ones. The amount of cryptocurrency mined depends on the rent paid. There are also free services offering their equipment for mining.

How to start mining

In order to start mining the first coins, first of all, it is worth deciding on the method of extraction. The size of the initial investments will depend on the chosen method. The general step-by-step algorithm on how to mine bitcoins looks like this:

1. Purchase the necessary equipment.
2. Install the selected program for mining bitcoins on a computer.
3. Choose a pool site.
4. Register a wallet to withdraw rewards.
5. Run software.

What are pools

To increase the chances of getting btc coins, specialized web services (pools) provide their miners with their services, which include the use of maximum parallelization of calculations. This method of mining provides for pool members to search for their solution options without linking them to the decisions of others. Miners provide the pool with their computing power, and the pool for finding the block acts like a solo miner. When choosing a pool, you need to know the rules for the distribution of remuneration and the power of the pool.

Cryptocurrency mining software

To start mining Bitcoins, you should install the software. Mining programs are divided into two types: for processors and for video cards. It is necessary to choose software based on the parameters of existing equipment. The most popular programs among users are presented below:

• name: Bitminter;
• characteristic: the application, which is also a pool, runs on video cards, there is ASIC support, is compatible with all operating systems;
• Pros: suitable for both beginners and experienced miners, ease of installation;
• cons: no
• earning opportunities: the value of coins mined in 24 hours is equivalent to $ 0.5.

A console client that is convenient to use for both beginners and professional miners:

• name: BFGMiner;
• feature: console client that supports video cards and to FPGA devices, support for scrypt, RPC;
• pluses: easy tuning of pools, the ability to control the cooling elements of a computer;
• Cons: high requirements for equipment;
• earning opportunities: an experienced miner receives 18 thousand satoshi per day.

For users who have knowledge of the MS Dos operating system, have equipment with a powerful processor and video card, the DiabloMiner program is suitable:

• name: DiabloMiner;
• Feature: Support for operating systems such as Windows, Linux, Mac, the installation of video cards of different series;
• pluses: simplicity of setup of parameters of a pool;
• Cons: not suitable for beginner miners;
• earning opportunities: on a powerful computer you can get a reward of 20 thousand satoshi per day.

A console client that easily adapts to user requirements is the Ufasoft Miner program:

• name: Ufasoft Miner;
• characteristic: there is the possibility of changing the address of the pool, suitable for the extraction of cryptocurrencies such as bitcoin, ether, lightcoin;
• pluses: several operating modes depending on the user level;
• Cons: requires a lot of RAM;
• earning opportunities: experienced miners receive a reward from 18 thousand satoshi.

The CGminer program is more suitable for users who have extensive experience in the MS Dos system:

• name: CGminer;
• characteristic: involves installation on powerful processors, while overclocking the video card increases MH / s to the maximum;
• pluses: there is a possibility of reprogramming, it is easily configured;
• cons: not suitable for beginners;
• earning opportunities: from 18 thousand satoshi per day.

50 Miner – a graphical shell for several of the most popular miners, such as Cgminer, Phoenix, Diablo, Poclbm:

• name: 50 Miner;
• characteristic: it is possible to use without installation, while all settings are saved in the configuration file;
• pluses: ease of authorization, compactness;
• Cons: instability, it requires a lot of RAM;
• earning opportunities: with minimal initial conditions, you can earn 15 thousand satoshi per day.

Is bitcoin mining profitable at home

To understand whether it is profitable to engage in mining bitcoins at home, you need to calculate the size of the necessary investments and predict how quickly they pay off. Given that since the emergence of the process, which is today called mining, the situation on the cryptocurrency market has changed significantly, it is worthwhile to know the main factors affecting the economic feasibility of mining now:

1. The complexity of production contributes to the continuous growth of equipment capacity, which affects its cost. At home, it is difficult to ensure a competitive level of mining speed.
2. The growth of the btc rate in relation to official currencies attracts new participants to the network. If the rate of bitcoins falls, the profit from their sale may not cover the invested funds..

How much can you earn on mining

Bitcoin mining has the goal of making a profit, so before you start mining cryptocurrency and wait for the computer to earn money without your participation, you should find out what level of earnings you can count on. There is no single answer to this question, because the amount of income depends on many factors, such as:

• Bitcoin exchange rate fluctuations;
• the relevance of the selected production method;
• equipment acquisition costs;
• the number of miners in the network;
• electricity cost.

You can calculate the approximate profit from mining using specialized calculators (for example, on the Russian btcsec website) that take into account the totality of the parameters entered by the user. However, even in this case, it should be taken into account that when the bitcoin exchange rate on the cryptocurrency exchange changes, the calculation results will be irrelevant.

Bitcoin mining costs

In order for Bitcoin mining to be profitable, the income from it should cover all the costs associated with mining. The economic component of expenses includes expenses for:

• purchase of special equipment;
• payment of bills for electricity consumed;
• repair and adjustment of capacities;
• payment for capacity rental.

Special equipment

The future Bitcoin miner should consider that in order to make a profit, it is necessary to have competitive equipment. Given the technological race caused by high demand, the cost of specialized equipment has grown significantly. In addition to the main elements (video card, chip, module), you will need software to monitor equipment temperature and a cooling system.

Electricity costs

Bitcoin mining involves the operation of equipment for a long time, which leads to a large consumption of electricity. The higher the power of the processor and video card, the more impressive will be the electricity bill. In addition, the need to use cooling elements also leads to an increase in power consumption..

Home PC Power Depreciation

If you plan to mine bitcoin on home computers, you should take into account the fact that the load on the main elements of the machine will increase. Constant overheating of the processor and video card leads to a deterioration in their performance, and faster failure. The miner will often have to repair his computer and buy new parts, which will lead to additional costs, and downtime will negatively affect the profit.

Pros and cons of mining

Before mining bitcoins, you should familiarize yourself with the positive and negative points that you will encounter in the mining process. The advantages of mining bitcoins include:

• Stable passive income. Bitcoins are mined without your participation. By installing a special program you can do your own thing.
• For the extraction of btc, it is not necessary to invest. If you don’t want to risk investing your money, there are free methods of extraction, however, in this case you can’t count on large profits.
• Mined bitcoins can be easily withdrawn from the system (sell, exchange, pay for purchases).

Miners who are engaged in the extraction of virtual coins note the following disadvantages of bitcoin mining:

• Equipment failure. Use for mining a home computer leads to rapid heating of the video card.
• High power consumption. An increase in the level of production complexity requires an increase in the production rate, which became possible with the advent of new technologies. Powerful devices are energy-consuming, so bitcoin miners have to pay large bills for electricity consumption.
• High risk. Investing in time and money in bitcoin mining is a high-risk investment, due to the fact that the price of the cryptocurrency is unstable, and at any moment the exchange rate of bitcoins can drop.