As you can see from the title image, bitcoin mining is no amateur operation today at the competitive levels — but let’s explore how it works.
Bitcoin (BTC) mining means making new bitcoins that get added to the blockchain.
Instead of drilling into the earth, miners create new bitcoins by processing ‘hashing code’ on specialised computers that calculate mathematical equations that end in new BTC.
As a reward for generating BTC, they get added to the blockchain, and miners are also credited with new coins. This system, theoretically, keeps the blockchain network more secure and fraud-proof. Let’s get deeper into the question: What is Bitcoin mining?
How Bitcoin Mining Works?
As a quick summary:
- Although the digital money economy is very volatile, bitcoin mining is one of the fundamentals that keep things as stable as possible. Miners weigh up the cost of creating BTC versus the reward.
- ⛏️ It’s up to you to make sure you are legally and safely mining bitcoin. This requires a technical and risk-intensive use of resources.
- Purchasing your own bitcoin mining computer is generally safer than using a cloudmine scheme, but there will still be risks involved that you need to understand.
Also Read: Best Crypto-Friendly Banks in the UK
BTC mining is all about mathematical problem-solving
No need to worry, there’s software for the maths… Just as with any business venture, BTC miners are awarded based on the speed, accuracy, and problem-solving capability of their operations. Like an archaeologist reconstructing the bones of a prehistoric dinosaur, to create new BTCs — once successful, these coins flood into the blockchain where bitcoin investors can buy them up.
Technically, mining is the process of solving complicated equations that form the BTC code.
For this equation mapping and solving, miners need to use specific computer code and integrate pre-existing “blocks”.
What are blocks?
Blocks are nuggets of data that are necessary for the mining operation. More computational power means that a minor is more likely to solve the equation and earn BDT.
For this, they will need a powerful computer. These always come in the form of 12/12 block award schedules, in other words, they are rewarded with 12 new BTC for each equation successfully solved, ready to cash into your BTC-friendly bank.
How long does bitcoin mining take?
This is dependent on the miner's specific setup — as said above, the greater the computational power (in effect, the power of their hardware and approach), the faster they can crack the equation. Because this mathematical computation is so complicated, some miners have great success in others.
Miners are incentivised to update their approaches by being awarded for greater efficiency. This award is in BTC rather than cash; which further incentivises them to create a complete solution.
How to begin mining bitcoin
- You first need one specific computer code, have a fast Internet connection use a premium graphics card, and have a lot of time on your hands.
- Special computer code can be bought from websites like Genesis Mining. From there, choose the best compatible graphics card you can find from the manufacturer. Once you are ready with your graphics card and the special code, make sure you have a fast Internet connection you can use the bitcoin mining software over — now you can start generating BTC!
- Keep in mind that this costs a fair penny — it is best to be clear that you have a competitive strategy and are technically savvy with coding and machines.
Let’s go through this in more detail.
Getting started mining BTC as a rookie
First off, where do we head in order to get the bitcoin mining hardware? Despite Amazon laying off 10,000 employees near the time of this article being written, you should still be able to find a good selection there.
Once your hardware is sorted, you just need to download the appropriate BDC money software, but this is compatible with nearly any computer. Make sure you connect your software to your personal bitcoin wallet — this is where you will send and receive any mind BTC. Now you can start mining.
As stated earlier in this guide, success in almost any venture at the competitive level involves accuracy at speed and the ability to problem-solve in some shape or form. Success at BTC mining centres on two main things: the cost of your electricity and equipment over time versus your DTC reward.
But before miners can take their profit and anxiously invest in shares — with energy prices in the UK steadily rising, this can be increasingly expensive. For instance, in the US, one point transaction could necessitate roughly 3kWh of electricity. At the time of this writing, with GBP at about £0.88 to the dollar, this is around 8 pennies per kilowatt hour.
Hardware for mining BTC
Your computer needs to be able to handle complicated mathematical equations refer to as ‘hashes’.
For this, the most popularly used minor hardware is the ASIC (Application Specific Integrated Circuit).
ASIC circuit boards are designed for one purpose — solving SHA-256 hashing algorithms, and spitting out bitcoins. You’ll need to tweak your ASIC settings to rev it up to its optimum efficiency. The ASIC miner isn’t, however, very well-adapted to diverse computer tasks.
A bit of a history lesson on bitcoin miner systems… 💽 The first machine was made by Bitmain Technologies in 2009. It eventually became the “King of Bitcoin”. Bitmain still distributes and sells their main site as well as through the following distributors among others: Ebang Technology, Canaan Creative, and Genesis Mining.
Some accuse the Chinese firm of unfairly competing by leveraging its market superiority to give miners no other alternative than the hardware although, arguably, units with more efficiency exist — for instance, FPGAs (Field Programmable Gate Arrays).
Bitmain also creates Antminer S9, a record-level efficient bitcoin miner whose hashrate is 15 TH/s. it’s no wonder that this unit ranks as the most pricey minor in existence, costing roughly £8,000.
The Antminer S9 operates like a standard PC miner, comprised of two circuit boards placed one atop the other with an ethernet connection linking them together. The first board features eight ASICs that do nothing but churn through SHA-256 hashes, and the second focuses exclusively on administrating and directing all hash operations going through the first board.
Just to repeat: both of the ASIC chips are hyper-specialised for efficiently mining bitcoins, which means that you cannot efficiently use this for any other computer task. However, not all bitcoin mining boards are the same — for instance, the S9 is too specialised to be much else than mining BTC, but FPGA boards such as the Avalon Nano (modelled around Altera FPGA) can be trusted to handle many computer activities totally unrelated to bitcoins.
The Antminer S9 operates on 20nm ASIC chips. These are tinier than the standard 28nm chips, which means that your machine will be less likely to overheat. There’s also a fan inbuilt which operates at 100% power constantly even in idle mode, furthermore cooling your double boards. This is important to prevent any serious damage to your core components from silicon wafer stress fractures!
In this field, the details matter. So it pays to do your due diligence. The cost and specifications you get may very well differ according to whether you buy your mining machine from the manufacturer or from an online retailer like Amazon.
How risky is crypto mining?
Crypto mining can be dangerous for both your data privacy, security, and the machine itself. Mining machines churn through demanding calculations that push the processor to its limit — even for a powerful computer.
We’ve already mentioned that some of the more sophisticated mining computers feature (ASIC) processes that are designed to more quickly handle blockchain equations.
But what is the risk? Mining can be dangerous for several reasons. The first is that you need to push your computational resources to the limit, which stresses your system. This isn’t illegal, it’s a totally legitimate way of making cash. But it can be very time-consuming, which itself is a risk. The complexity of mining is increasing as time goes on, meaning that miners need to invest more and more to keep up.
This very fact means that the starting investor capital needed to play in this race is high:
- Mining computers cost a lot — but although they are very adroit at solving complex equations quicker and more efficiently than standard machines, they still fall prey to the same technical problems as regular computers.
- ⚡ Furthermore, your hardware can get permanently damaged or ruined by failures when pushing it — the biggest risk is perhaps hard drive failure, which potentially erases all of your live data.
- Your electricity bill can drive up as the economy gets more unforgiving and energy costs compile.
Advantages of mining
On the flip side, you have to weigh up the costs of not getting involved.
The value of your setup will be proportional to your competition and the value of BTC. Getting a head start now — when, at the time of this writing, BTC is not near its all-time high — could pay dividends if the price climbs back up again. This makes it a regular crypto investment stream where the value of your bitcoin is in your wallet could appreciate over time.
If you have the spare capital to make this investment, it may or may not be lucrative in the near term but surprise you in the future. You have to weigh up whether it’s best to invest directly in BTC or to do mining.
Is Bitcoin Mining Legal in the UK? … (The Story of West Midlands’ Stolen Electricity)
Answer: Yes
Although legal, the increasing energy costs needed to mine a single BTC has led to electricity theft in order to illegitimately mine crypto.
The story of a police raid on a West Midlands bitcoin miner that was mistakenly thought to be a cannabis farm is one such example… West Midlands police were tipped off that there were strange visits of people at what hours of the day in an industrial unit.
Police thereby flew a police strong overhead and found what they thought was a “considerable heat source”, which normally is associated with cannabis plant eaters, according to the force.
What was discovered was a crypto operation that fed off stolen electricity in order to my BDC. The estate was busted on 18 May, 2021. No arrests were made but they found roles of computers connected together — each had fans leading to the ventilation ducts. Nearly 100 computer units were working in tandem.
As we’ve said before, in economics there’s no such thing as a free lunch.
Although the mining operation was not illegal, the perpetrators were found to be stealing electricity worth thousands of pounds from the network operator Western Power. The Sandwell Police Sergeant, Jennifer Griffin, said that the operation was “certainly not what we were expecting”.
The equipment was seized — some reportedly credible estimates put the energy consumption of the BTC network, a year or so ago, at the same energy consumption size of Argentina or Norway.
Average Earnings of Bitcoin Miners 📈
The total number of BTC in existence on the chain is fixed, once the numbers reached normal can be generated. What is remaining will be divided into smaller and smaller divisions.
On top of this, the BTC reward halves each 210k blocks or roughly every four years. Which means that returns diminish with more time. After roughly 10 years, about 98% of all BTC possible will have been mined.
Some estimates put the most optimum setup at about £100,000 per year — if somebody was able to mine one BTC per day. Miners would have the factor in crypto tax and electricity expenses. Any BTC created would go into the miner’s wallet, which they could then sell on the exchange at a profit, which is referred to as “mining with profit”.
What is BTC mining? The Verdict
‘Mining with profit’ is the aim of bitcoin mining.
It simply means that your mining efforts have — in sum — led to a profit (for instance, after deducting crypto taxes and electricity costs). Mining with a profit is perhaps the most viable when mining coins that are appreciating in value steadily.
Much of this happened during the time of “easy crypto money” where minimal technical proficiency was needed and simply being an investor at the right time led to considerable profits. Miners would create BTC and then though on the exchange for a direct profit to add to their personal savings accounts.
There are many popular exchanges that deal in various crypto — and even crypto-friendly banks — with one of the most popular being Binance which has more than 100,000 users.
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