Bitcoin Mining Explained – How to Mine Bitcoins

Share:Tweet about this on TwitterShare on Facebook

The entire Bitcoin network is based on the block chain that’s being mined by the miners.

All transactions that occur on the network are recorded and placed into blocks, then confirmed in the process of bitcoin mining.

Mining means solving individual blocks providing an answer to a complex mathematical problem. Every block in the chain is related to the one before and makes a reference to it.

The problem of every new block is given to the entire network and the one who solves the block first receives a reward of 25 bitcoins (currently; the reward is set to half every 4 years).

There is a block being solved approximately every 10 minutes and in order to keep it this way, the system is increasing the overall difficulty of the problem every 2016 blocks (or every two weeks).

In the beginning, the bitcoin mining hardware used to be pretty basic.

People were using the CPUs (central processing unit) on their computers in order to mine bitcoins. However, CPUs are not very good at this sort of computation and consumed a lot of power for little result.

Soon people realized that GPUs (graphics processing unit) can be used for mining bitcoins aside from gaming, and are a lot more efficient than CPUs.

However, the problem with power consumption still remained. With the current difficulty, it’s nearly impossible to mine with a normal GPU and make a profit – it would take too long for you to solve a block.

The speed that is important here is gigahashes per second or GH/s, for short. The more gigahashes your system can produce per second, the bigger the chance for you to solve the block.

Right now though, if you want to be competitive you need to invest quite a lot into specialized mining hardware, such as ASIC (application-specific integrated circuit) which was created for the sole purpose of mining and consumes a lot less power than normal hardware to get the job done.

Mining hardware is not enough to mine, though. You will also need bitcoin mining software and a bitcoin wallet to keep your earnings in.

There are different software tools and applications you can use based on your hardware but make sure that the software you choose fits your rig. Some programs still only work with GPU-based systems, while others are ASIC-specific.

Do your research and make comparisons before you decide to buy anything. You can use a bitcoin mining calculator in order get an estimate of how many bitcoins you will be able to mine with certain hardware.

It’s also worth to note that you can join a pooled bitcoin mining effort and combine your processing power with that of the entire pool.

Thus you will be paid more regularly because you will be solving more blocks, but you will be paid because the reward will be split. Check pools’ policies before you join, but this is generally the best way to mine. Good luck!

Share:Tweet about this on TwitterShare on Facebook

Leave a Comment

Copyright © 2018. All Rights Reserved.