So you’ve probably heard of the global cryptocurrency phenomenon, and now you’re looking to see how you can get in on the hype. Getting involved with bitcoin just takes a little know-how, and there are various ways to get started. While many are already engaged with trading and purchasing crypto, fewer people know how mining works.
Bitcoin mining is integral to how the highly sought-after cryptocurrency comes into circulation. But how do you start bitcoin mining? And is it easy to mine for cryptocurrency?
You likely have many questions about how to mine for bitcoin and what’s involved in the process. This article outlines the fundamentals of bitcoin and provides a high-level overview of the process and the equipment involved in mining.
Table of Contents
A Brief Note on Bitcoin
Bitcoin is far and away the most popular cryptocurrency out there –– and for a good reason. When bitcoin was invented in 2009, it was revolutionary in that it was the first ever decentralized digital currency. This removed the need for intermediaries like banks, governments, and the like to involve themselves in purchases and peer-to-peer trades.
Like other currencies, you use bitcoin to trade for goods and services. More businesses are accepting cryptocurrency as a form of payment, and crypto itself continues to become more accessible. In particular, people admire Bitcoin because it can’t be counterfeited and is easy to trade.
However, most use bitcoin and crypto as a means of investment. Trading and tracking the value of various cryptocurrencies is prevalent and a great way to potentially make extra money.
While many services simplify trading bitcoin, mining is much more involved and resource-intensive.
The Basics of Bitcoin Mining
When you mine for bitcoin, you are “mining” what is known as a blockchain. You are essentially extracting data from the blockchain in a series of steps and solving randomized cryptographic puzzles to earn bitcoin.
While the process is undoubtedly complicated, it is far less demanding than people perceive. Before moving forward on how to mine for bitcoin, let’s briefly overview blockchain technology.
What Is Blockchain?
Blockchain is a branch of financial technology and the foundation of what makes mining possible. The blockchain serves as a publicly distributed ledger recording transactions and trades in real time. It is impossible to modify the ledger, which helps keep transactions genuine and safe.
Blockchains are a series of “blocks.” Each block is a data structure within the blockchain database and is the smallest component in a chain.
Mining a block involves successfully working through various steps. The components that make up a block are as follows:
- Previous hash: This component works like a rope and links blocks together in a series — to begin mining, the process starts by pulling the preceding block’s hash value.
- Data: The collected set of transactions within a block. This data is used to verify the validity of a block.
- Nonce: This attribute works with the hash by varying the value output. The nonce is essentially your “proof of work,” verifying the transactions within the blockchain.
- Hash: The fourth element is like a digital signature for a block. In the last part of the process, the hash is the value obtained by passing the preceding principles through the SHA-256, the foundational cryptographic algorithm.
More on Bitcoin
Users can only bring new bitcoin into circulation via mining, and there is a finite amount of bitcoin within the Bitcoin Network. Mining for cryptocurrency, in general, involves completing a complex cryptographic puzzle. To solve these puzzles, miners use special software and services to work through the abovementioned principles.
A common misconception about mining is that people believe they must work through intense mathematical equations. But the actual process is much more random, and instead, miners compete to guess a block’s hash value. In reality, rather than working through intense puzzles yourself, your computer is doing the heavy lifting.
Bitcoin mining is a twofold operation, so miners validate trades and transactions in the process each time a bitcoin comes into circulation. Through verifying transactions, miners are rewarded with a fragment of Bitcoin. The digital signatures created via mining keep the ledger trustworthy and genuine.
What You Need to Mine for Bitcoin
As one might suspect, mining for bitcoin is not something you can do with just any entry-level PC. Often users build their home mining computer rigs specifically and solely for mining. Only specific and high-grade computers are capable of mining, with the most important component being the graphics processing unit (GPU).
Proper research is an absolute must if you decide to build a mining rig, as GPUs can be difficult to find and are expensive. Besides that, mining demands a great deal of electricity, so it is essential to be conscious of power consumption.
Alternatively, some miners opt to use an application-specific integrated circuit (ASIC). These machines are built with only one purpose, so some miners have multiple devices operating frequently. But this option is not cheap either –– if anything, high-end ASIC devices run more expensive than building a mining PC.
Sometimes your best option is to work with a mining operation or services that can provide you with specific resources. While this option also incurs costs, it is a more accessible and less demanding way to start mining.
Closing Thoughts Before You Get Started
It’s easy to understand why bitcoin mining is exciting, as people worldwide have seen positive results from their crypto endeavors. If you’re already an experienced bitcoin trader and investor, it may be appealing to want to start mining.
However, mining is much more resource intensive and requires far more research than just trading. Powerful mining PCs and dedicated machines are expensive, and with so many options out there, it’s worth it to take the time to find the right choice for you.
Miners are crucial to the Bitcoin Network, as they bring new currency into circulation and keep ledgers truthful. So, now is a better time than ever to get involved.
