Apart from buying Bitcoin from an exchange, there are other ways of buying Bitcoin without having to pay heavily for it. This is made possible through mining. Thus, mining is the approved means of extracting new Bitcoin by adding new blocks on the Blockchain. Miners are usually rewarded with 6.25 Bitcoins for every successful mining session. This work will therefore help you learn how to mine Bitcoin, you will also learn from this work the advantages and disadvantages of mining Bitcoin.
What Is Bitcoin Mining?
Bitcoin mining is the process of adding new blocks to the blockchain which leads to the creation of new Bitcoin. Here miners are required to complete mathematical equations to add new blocks to the Blockchain.
How To Mine Bitcoin
Bitcoin Mining involves solving complex computational works on the blockchain which leads to the addition of new blocks on the blockchain. Miners are expected to solve difficult calculations that enhance the security of the Blockchain. In return, they are rewarded with new Bitcoin on the successful completion of each task.
To increase the efficiency in mining Bitcoin, miners usually join a mining pool which brings them together and makes it possible to share their resources to achieve their target. In the end, the reward earned from mining, will be shared amongst all the pool participants.
At present, the reward for a successful addition of a new block on the Bitcoin network is 6.25 Bitcoins. The reward is halved every four years and will reduce to 3.125 by 2024.
Is Bitcoin Mining Profitable?
Bitcoin mining could be considered profitable only when the mining is successful. That is when the miners succeed in adding new blocks to the blockchain. This is because they will only be compensated if they complete the task. Aside from this, mining could bring losses to miners if they fail to complete the required task. Here, it will be seen as a waste of resources and energy in mining when no new blocks are added in the end.
Added to this, the volatility of Bitcoin prices can also reduce the profits made from mining. Here, the price could fall before the completion of a given mining session.
What Are The Basic Requirements For Mining Bitcoin?
Bitcoin mining consumes both time and energy. It also requires uninterrupted electricity. To mine Bitcoin, the miners will need to put in place the following pieces of equipment.
- Computer: Bitcoin mining often requires special types of computers known as Application Specific Integrated Circuits (ASIC). This type of computer has been built to support complex computational activities needed for mining Bitcoin.
- Electricity: Bitcoin mining consumes so much electricity. The amount of electricity needed to mine Bitcoin in a year is more than 95 terawatt-hours.
- Receiving wallet: A compatible Bitcoin wallet is to be provided for receiving the newly earned reward once a new block is added.
- Mining Software: Miners also need to acquire mining software that makes it easy to mine Bitcoin. Some of this could be downloaded as applications on the computers used for mining. The most common softwares used are: CGMiner, BFGMiner, MultiMiner, Awesome Miner, etc.
Advantages Of Mining Bitcoin
- Strengthens the network
- Tightens the security of the Blockchain making it more difficult to hack or attack.
- Miners are rewarded with new Bitcoins at the end of a successful mining session.
Disadvantages Of Mining Bitcoin
- Not all mining are successful leading to a waste of resources and energy used in mining.
- Miners are only rewarded for the successful mining session.
- The price of Bitcoin is not predictable and could fall below expectations.
- High cost of equipments used in mining.