Buying and investing in Bitcoin is a lucrative proposition, where investors can generate up to 7,000 percent return on their investment. If such is the promise of Bitcoin, would it not make more sense to mine Bitcoin instead of buying?
It is a valid question many beginners to Bitcoin ask. Although the process of how to mine Bitcoin is straightforward, the initial and ongoing costs can be major stumbling blocks. This article presents an overview of Bitcoin mining, giving people the chance to decide whether it is more practical to mine than to buy Bitcoin.
How to Mine Bitcoin
The goal of Bitcoin mining is to update the Bitcoin blockchain or Bitcoin transactions ledger. It is a numbers game that requires supercomputers to guess the correct number to update the blockchain.
Whoever updates the Bitcoin ledger gets a reward, which currently stands at 6.25 Bitcoins. Hence, if one Bitcoin is worth $50,000, guessing the correct number will make the miner $312,500 richer. Bitcoin miners also get a fee for transactions, increasing the profit.
Mining Bitcoins requires supercomputers. In Bitcoin’s early years, a standard CPU was sufficient to make the calculations. As mining difficulty increased, people began switching to GPUs. Increasing mining difficulties prompted miners to use more powerful computers, such as the FFGAs. Today, only Application Specific Integrated Circuits (ASICs) can mine Bitcoin efficiently.
Bitcoin miners or hardware have a hash rate that describes how many ‘guesses’ they can compute per second. For example, the Bitmain Antminer S19 Pro can produce 110 trillion guesses per second, while the MicroBT M30 S++ can produce 112 trillion hashes per second.
Bitcoin miners should also obtain a Bitcoin wallet to store and secure the cryptocurrency once the Bitcoin mining hardware is in place. Finding and joining a mining pool is also crucial because it speeds up solving the math problem. The mining pool shares the profit to everyone, depending on their contribution.
Most mining pools have a Bitcoin mining program, while some might not. In such instances, Bitcoin miners must also install and configure the program to start mining Bitcoin.
How Long Does it Take to Mine 1 Bitcoin?
If one uses the ideal software and hardware, it is possible to mine one Bitcoin in ten minutes. Unfortunately, ordinary computers are inefficient Bitcoin miners, taking about 30 days to mine one Bitcoin. Serious Bitcoin miners require Application Specific Integrated Circuits (ASICs) that cost a fortune. On average, Bitcoin miners spend up to $73,000 in power costs to produce a single Bitcoin.
Can You Mine Your Own Bitcoin?
Yes, it is possible to mine your own Bitcoin, but it will not be economically feasible. Although Bitcoin mining software is free, one needs to spend thousands of dollars on the hardware and several thousands more on security, hardware cooling, internet, and electricity, maintenance, and storage costs.
How Do Beginners Mine Bitcoin?
Newbies to Bitcoin mining can start calculating their mining profitability with a Bitcoin mining calculator. It will give them an idea of how much they will earn given their existing hardware. They can then purchase an ASIC Bitcoin miner. Although Bitcoin miners in the early 2010s were CPUs and GPUs, the mining field is more competitive now that only dedicated Bitcoin miners will produce the expected outcomes.
Beginners also need to get a Bitcoin wallet and join a mining pool. A mining pool is a group of Bitcoin miners pooling their resources to compete with professional Bitcoin mining farms. People can then install a Bitcoin mining program to initiate the process.
Is it Illegal to Mine Bitcoins?
In general, mining Bitcoin is a lawful activity. However, some countries ban Bitcoin mining because it threatens the integrity of flat or traditional monetary currencies and undermines government oversight over financial markets. For example, China, Egypt, Qatar, Bangladesh, Tunisia, Iraq, Morocco, Oman, and Algeria have a complete ban on all cryptocurrencies. On the other hand, other countries have restrictions on using digital currencies.
Bitcoin mining sounds like a better option than buying cryptocurrency. However, the prohibitive cost of the initial setup and the equally-high maintenance expenses make Bitcoin mining an expensive endeavor. Prospective miners also contend with increasing mining difficulty and the cryptocurrency’s high volatility. Hence, most Bitcoin investment experts agree buying Bitcoin is best for the average person, while mining is more suitable for those who can dedicate their resources to mining Bitcoin.