Mining Bitcoins: How to mine, what is it, and how does it work?

How to mine bitcoins: equipment and methods?

Initially, Bitcoin mining was possible with ordinary computers and their processors (CPUs). However, with increasing difficulty and competition, this method became completely inefficient. Mining evolved to use graphics cards (GPUs) that offered greater computing power, and eventually the era of ASICs (Application-Specific Integrated Circuits) arrived, machines designed exclusively for mining with high efficiency. Today, this is the only profitable option for mining Bitcoins with competitive possibilities.

Mining bitcoin from home, in a pool, or in the cloud

1. Mining at home: Investing in a home ASIC may be the most straightforward way to get started, but it comes with high electrical costs, cooling issues, and difficulty competing on the grid. Furthermore, noise and heat can be a drawback in home environments.
2. Mining in pool: A mining pool combines the computing power of several users to increase the chances of solving blocks and earning proportionally shared rewards. This is the most commonly used option for those without massive infrastructure.
3. Cloud mining: It allows you to rent mining power from specialized centers without owning physical hardware. This avoids technical and maintenance issues, but you must be careful about the legitimacy and profitability of the providers.

Role of mining

Because cryptocurrencies are a decentralized system, we need a formula that allows us to check all the operations carried out. The mining mission is vital to prevent someone from using the same amount of Bitcoin more than once or being able to introduce fake coins to the market.

Thus, the miners review the transactions and gather the last ones that have been generated in a group called block. The set of blocks could be compared to the set of pages of a ledger (ledger) or ledger, which certifies all the movements and the balance of the users.

Mining pool

The more computing power you have, the easier it is to solve a block and therefore get a reward. For this reason they created the mining pools, to carry out joint work and obtain a fair reward among all members for the work done.

Joining a pool guarantees us more chances to solve a block and get the reward. If we did it individually, we might never get a reward, either by sheer chance or because we had less computing power than the competition.

So partnering with other users who contribute mining machines ensures that we are more likely to get a reward.

The reward for the miner

As we have explained before, we have to take into account that each 210.000 blocks, the amount of Bitcoin offered as a reward is halved, something known as halving. This implies that the value of each Bitcoin has to increase for mining to continue to be profitable.

Within the Bitcoin code it is established that when a block is validated, a certain amount of coins is obtained. Currently, 3,125 BTC is earned for each new block validated. We must bear in mind that the commissions for each of the transactions are added to this fixed amount of Bitcoin. Additionally, it is important to note that, depending on the dynamic difficulty of the blockchain, the mining of each block happens approximately every ten minutes.

It is this economic benefit that has led to an expansion of mining activity, which can be seen very clearly in this global map of the power of Bitcoin mining hashrate globally.

What do I need to mine bitcoin?

The first bitcoins were mined using the processors or CPUs of computer equipment because very few people were mining. In fact, initially only Satoshi Nakamoto mined on the Bitcoin network and other miners gradually joined the process. But as people joined mining, the difficulty increased due to the increase in computing power of the network, a situation that made it very difficult to obtain a reward. This is how the jump to graphics cards occurred because the GPU (graphics processor) have more computing power than the processor.

On December 16, 2009, version 0.2 of the Bitcoin software was released, which incorporated an interesting novelty, which is that it allowed the use of several processors in the same system.

What Bitcoin's v0.2 enabled was the development of specialized machines for computing: the ASICs. Basically, an ASIC is a specialized computer that has many processors. The computing power of each of these systems is much higher and it made mining using graphics cards completely obsolete. Although an ASIC cannot serve us like a normal PC, it can perfectly execute the necessary instructions to carry out mining, extremely efficiently.

Difficulty and hash rate

We must understand that the more computer equipment is added to the network, the more its computing capacity increases. And at the same time, more competition is concentrated to obtain a reward.

La difficulty it is the necessary calculation to guarantee that the blocks are obtained every ten minutes. If new blocks were suddenly generated in less than 10 minutes on average over 2.016 blocks, Bitcoin would automatically reset itself to increase the complexity of the problem. The opposite would happen if the average in those 2.016 blocks exceeded 10 minutes.

Thehash rate on the other hand, it is the processing capacity of the Bitcoin network for each of the computers that are added to it. The sum of the power of all the computers in the network gives us the total hash rate in the network.

Bitcoin mining profitability

Depending on the power of the ASIC we have and the pool we are in, we will have more or less possibilities of obtaining Bitcoin. Profitability depends on the value of Bitcoin, the difficulty of the network and the determining factor: the cost of electricity.

The price of electricity will be the one that really determines if it is viable or not to mine Bitcoin, that is, if we will obtain compensation for the work done. Large mining farms are usually installed in countries or areas where there is access to cheap electricity, especially based on renewable energy, mainly hydraulic. Unfortunately in Spain, the high cost of electricity makes it practically unfeasible to mine Bitcoin.

How much does a bitcoin miner earn?

We must not only take into account the direct electricity necessary to power the miner's equipment. We also need to cool all the heat they generate, so the electrical cost goes up significantly.

We must take into account the cost of acquiring the equipment and the competition. What is the same: the number of machines that are operating in the network and that tends to increase over time. This can cause our mining operation together with the electrical cost to be profitable or not.

Finally, the development of new specialized systems must be taken into account. Bitcoin mining systems are still under development and this may mean that our ASIC is obsolete at any time or, in other words, profitability is reduced.

And all this for what?

All the work miners do creating new bitcoins and validating transactions makes sense so you can fully enjoy the Bitcoin experience.

If you're thinking about buying your first Bitcoin satoshis, you can do so at Bit2Mewhere you also have an exclusive promotion waiting for you.

Practical examples and real use cases

How much can you earn today by mining 1 BTC?

The reward for a validated block is 3,125 BTC, but mining a full block can take a significant amount of time and resources. For an individual miner with an average ASIC (e.g., an Antminer S19 Pro with 110 TH/s), and considering the current network difficulty and electricity costs, the daily net profit can vary widely.

Example:

• Approximate BTC price: €120.000
• Estimated daily proportional reward: 0,0005 BTC (adjusted for power and pool participation)
• Gross daily profit: €60
• Daily electricity consumption: 3 kW (assuming €0,15/kWh → €10,8)
• Net profit: €49,2 per day, or approximately €1476 per month (other costs apply, such as maintenance).

Comparison between home, pool, and cloud mining

Now we can see a simple comparison between mining in different contexts, such as mining at home, in pools, or in the cloud.

 Table of estimated profitability with costs

Let's take for example, a table of estimated profitability of mining costs with an ASIC miner, AntMiner S19 Pro.

With this data, you can clearly see the enormous impact that electricity costs can have on the economic sustainability of Bitcoin mining. Therefore, miners seek to operate in countries where energy costs are much lower or generate their own energy in order to overcome this problem.

FAQ – Mining Bitcoins