You may have stumbled across some articles lately that report that the value of Bitcoin has breached the 4,000 USD mark. Not surprisingly, this has lead to many Bitcoin or cryptocurrency-related forums exploding with activity, with those looking to get into the cryptocurrency scene asking veterans the ways to own bitcoins, so to speak.
Everything You Need to Know About Bitcoin
Many netizens have heard of bitcoin, the digital currency. This means it exists electronically. To be more precise,…Read more
For a lot of people, the idea of purchasing Bitcoins is a bit out of reach. After all, a single Bitcoin costs way too much money than most could afford. Seeing as buying in is not a feasible option, many have turned to the idea of “mining” Bitcoins instead.
Considering the fact that anyone that has a decent computer can turn it into a “Bitcoin miner”, surely mining for Bitcoin will be an easier way to get in on the whole cryptocurrency fad right? While there is no denying that the actual act of mining for Bitcoins is easy, those who are actually looking to profit from mining Bitcoins will soon be met with one simple truth: mining Bitcoins is by far the hardest way to make a profit out of Bitcoin.
How do you mine Bitcoins?
Before we get into why mining Bitcoins won’t be making you rich anytime soon, let me give you a brief breakdown on how someone can mine Bitcoins.
So let’s assume that the someone looking to mine Bitcoins have taken all the prerequisite steps (acquired the necessary hardware and Bitcoin wallet), the person will now need to download a mining program. Most of these mining programs are open source, with the more popular ones being the CGminer and BFGminer, both of which are command line-based. For those who aren’t as fluent with command lines, EasyMiner is a popular GUI option.
Once the miner has been configured to the user’s specification, all the person needs to do is let the miner run. Just like that, the person has begun mining Bitcoin.
Going by the short description above, many of you would think that Bitcoin mining isn’t all that hard. Unfortunately, much like many things in life, the difficulty in turning a profit via Bitcoin mining lies in the details.
Why is mining Bitcoin so hard?
Once upon a time when Bitcoin, and cryptocurrency in general, was still in its infancy, it was possible for people with decently powerful computers to mine them without too much of a hassle. Fast forward to 2017, mining Bitcoins requires you to invest in some very specialized hardware in order to go anywhere.
The reasoning behind the hardware requirements lies in the way a Bitcoin is mined. Without going into too much detail, in order to successfully mine a Bitcoin, one must first solve a mathematical problem. This problem is referred to as a Hash, and solving it requires the use of computational power that is provided by the miner’s computer.
In the early days of Bitcoin, there were fewer people who were mining for Bitcoins. As such, those who mined Bitcoins could usually get the coins in a reasonable amount of time using decently powerful hardware. As more and more people started jumping into Bitcoin mining, it directly lead to a surge in computation power.
Actually, the creator of Bitcoin has designed the currency in such a way that only a certain number of Bitcoins would be released every day. So, after four years, the number of Bitcoins generated would be halved. The halving of generated Bitcoins will continue until all 21 million Bitcoins are in circulation.
In order to sustain this model, the Hashes that are generated would get more complex over time, requiring ridiculous amounts of computing power in order to solve it.
With this system in play, mining a single Bitcoin requires an amount of computing power that is not feasible for a run-of-the-mill computer, which is why those who are looking to mine Bitcoins seriously usually invest in special Bitcoin-specific hardware, join a Bitcoin mining pool, or do both of them at the same time.
ASICs – The Bitcoin-specific hardware
When it comes to modern day Bitcoin mining, the world has moved on from the CPU, GPU and Field Programmable Gate Array (FPGA) methods and settled on using Application Specific Integrated Circuit (ASIC) machines instead. These devices are pretty much computers that are designed to do one single thing: mine Bitcoins.
While there are ASICs that are affordable, the top of the line stuff can get pretty pricey with some of them breaching the USD 1,000 mark. But let’s say that you’ve managed to dig up the funds necessary to purchase an ASIC, does that mean you’ll be able to mine up some sweet, sweet Bitcoin? The short answer is No!
Because of how complex Hashes are these days, you’ll need an army of ASICs before you’ll be able to solve them. This is the reason why those who mine Bitcoins will never advocate for someone to do it solo, because it is entirely unfeasible to do so.
Bitcoin mining pool – Sharing the load with other miners
Seeing as mining a Bitcoin requires computational power that no one can provide single-handedly, many miners have since joined up to a Bitcoin mining pool.
As the title may have clued you in, Bitcoin mining pools are groups of miners that cooperate with each other to mine Bitcoins. Upon successfully solving a Hash, the miners in the pool will be rewarded according to the computational power that they’ve provided.
For the average miner, mining pools are pretty much the only way they’ll be able to acquire Bitcoins through mining. Mining in a pool tends to be a better option as it ensures that you’ll get something out of the whole mining process.
While mining pools is certainly a better option than mining Bitcoins solo, don’t go thinking that you’ll be able to make a profit from it either. Because of the way mining pools work, many of the miners in it will receive only a fraction of the single Bitcoin.
As such, if the computational power you provided to the group is negligible, you could very well be rewarded with just 0.00001 btc (0.04 UCD) for your efforts. Forget profits, this amount won’t even be enough to cover your overhead costs.
To put it bluntly, there is no profit to be made in mining Bitcoins these days. Those who are looking to profit in Bitcoin would be better off buying a Bitcoin off an exchange and sitting on it until the price of Bitcoin spikes once again.
If you’re interesting in mining though, I would recommend you to try out other alternative cryptocurrencies instead. However, if you’re hoping that mining cryptocurrencies would be a great secondary income source, be prepared to be disappointed.
How to Keep Your Bitcoins Safe
One of the biggest digital assets, Bitcoin, has its own list of stories of thefts and breaches. With…Read more