How to Mine Bitcoin: The Complete Guide
Cryptocurrency mining could be fun or painstaking, depending on the approach. It could be fun when you put the horse before the cart; that is, integrating capital expenses (electricity, mining hardware etc.) into your profit making calculations/plan and adopt the new strategy (siting your mining rigs in electricity low tariff areas etc.).. It could also be fun when you allow mining companies to mine for you while you’re getting a share of the mining rewards.
Nonetheless, cryptocurrency mining has a magnetic appeal to jump into it or invest even when you have not done your findings well.
If you’re technologically or investment inclined, why not give it a trial.
In this guide, you’ll learn everything about Bitcoin mining, how long it takes to mine a Bitcoin, the technology, how transactions are made and the security of the Bitcoin network and many more!
Grab your cup of coffee, relax and let’s get started.
Table of Contents
1 What is Bitcoin Mining?
1.1 Block Rewards and Miner Fees
2 The Three Ways
2.1 Pool Mining
2.1.1 Size of the Pool
2.1.2 The Minimum Payment
2.1.3 Pool Fees
2.2 Individual Mining
2.2.1 Problems with Individual Bitcoin Mining
2.3 Cloud Mining
2.3.1 Advantages of Cloud Mining
2.3.2 Disadvantages of Cloud Mining
3 How to Mine Bitcoin in a Pool: Tutorial
3.1 Setting up the Gear
3.2 Choosing a Mining Pool
3.3 How to Check How Much You’ve Mined
3.4 How to Calculate Expected Profits
4 Closing Thoughts
- What is Bitcoin Mining?
I guess, you know the basics of Bitcoin or cryptocurrency, to enable us, go straight to the business of the day!
Bitcoin mining is a decentralized computational process that accomplishes two objectives- solving of complex math algorithm and validation of transactions resulting to creation of a new block to be added in the blockchain. This leads to a reward of Bitcoins.
Each set of processed transactions is called a block. Miners secure the block by verifying every transaction through the creation of hash (a 64-digit hexadecimal number) in the blockchain.
Each block is made up of the cryptographic hash of the previous block and also the new cryptographic hash that needs to be verified. Once correctly verified, the miner can add the block to the chain to form a blockchain. This verifying process is called “proof-of-work”.
1.1 Block Rewards and Miner Fees
A new Bitcoin is unlocked whenever miners add a block to the blockchain. They also get rewarded with the fee paid by users in each transaction made in the blockchain.
These rewards enable miners to pay for electricity and mining hardware used in the mining process.
The rewards can be mind-blowing if the price of Bitcoin and other cryptocurrencies keep rising in the market.
- Three Ways of Mining
You must have known what Bitcoin mining is all about, from the previous explanation and why people mine.
Let’s take it further by unveiling three ways to start mining Bitcoin: Pool Mining, Individual Mining, Cloud Mining.
2.1 Pool Mining: This is the most profitable, easiest and reliable way to mine. In a simple term, pool mining is all about, joining resources together to mine and share rewards. The share of reward is dependent on individual contribution to the pool.
Pool mining differs and there’re three factors that need to be considered before signing up with any pool mining site. The three factors include: the size of the pool, the minimum payment and the service fees charged by the mining pool. These three factors determine how profitable, the mining business will be.
Let’s discuss them a bit more in details:
- The size of the Pool– large pool mining tends to get more rewards than smaller ones. In large pool mining, more resources are put together to increase the chances of adding blocks to the blockchain which translate to more Bitcoins. It might be small when the rewards are being shared, but getting rewards consistently pays. The size of the pool is an important thing to consider when joining a pool mining site.
Joining large cryptocurrency mining pools could be considered the best option for beginners who want to grow in the mining business.
2.1.2. The Minimum Payment– miners need to consider the minimum amount that can be withdrawn when joining any mining pool. As a starter, to get your reward regularly helps in confidence building. You cannot afford to spend so much in pool mining, only to wake-up one morning and discover that, the mining pool has disappeared into air. Huh.., it can be heart-breaking!
2.1.3. Pool Fees – Almost all the mining pool sites charge mining fees for maintenance and administration. The mining fee is a fraction of what you earn.
The pool fees could be within the range of 1%-to-5% which is being deducted at every earning. Using our natural intuition, we should know that, the lower the pool fees charges, the higher the profit.
Pool fee within the range of 1%-to-1.5% is a fair deal considering the maintenance cost and other over-head costs. Companies offering free pool fees might not be the best when one looks at other factors mentioned earlier. Beware of such mining pool sites.
2.2. Individual Mining
I guess many tried this method, after not being comfortable with the way and the manner; mining fees were being deducted from their little earnings in pool mining. It could be nicer to mine and every bucks earned entered your pocket; what a motivation that could be!
Solo mining could sound good but a miner needs to consider the following: expensive mining equipment to purchase, high electricity tariff and millions of other competitors to face.
If you can afford to set up a profitable solo mining business without putting hole in your pocket, it’s good to start cryptocurrency mining business.
2.2.1 Problems with Individual Bitcoin Mining
I thought, with the introduction of DragonMint T1 miner, power problem in solo mining could have been a thing of the past. It’s far from being a past!
Here are two key problems:
- High electricity spending- If one is not in the areas where electricity tariff is very low; electricity consumption will definitely pose a major challenge. Running hundreds of computer chips (ASIC) together consume more electricity than budgeted.
- Noise pollution- Buzzing noise coming out from ASIC (Application Specific Circuit chips) installations and industrial cooling facilities could cause health hazards. For global best practices, such installations should not be sited in the residential areas.
2.3 Cloud Mining
Cloud mining has enabled miners to go into mining without owning any mining equipment. All the mining are done remotely without the hassles usually experienced with solo mining. Considering how expensive it is to own a mining equipment, leasing out such expensive mining hardware is not for charity but for serious business.
2.3.1 . Pros of cloud mining
- It requires little money to get started; you don’t need to have your own mining equipment.
- You’re not responsible to set up or maintain the mining rig.
- The environment is not hazardous to work, considering that hot mining equipment and humming fans are non-existence.
- With little or no knowledge about cloud mining, you can mine profitably.
2.3.2. Cons of Cloud Mining
- All payments are made upfront and could not be refunded if anything goes wrong-for example, if there’s a heavy drop in the price of Bitcoin.
- Cloud mining account is prone to attack if the cloud miner company neglects cyber security.
- Upgrading or migration of software is an uphill task.
We can only recommend one cloud mining company among 10s of them, this one is Genesis.
- How to Mine Bitcoin in a Pool
Interested reader who wants to mine using pool mining should put all these in place before venturing into it:
- Get at-least one ASIC mining equipment.
- You need mining software.
- You need a cryptocurrency wallet for storage.
- You need ventilation equipment.
- You need Ethernet cables and internet connection.
- You need a computer or a mobile phone.
- You need power splitters
- You need power supply units.
3.1. Setting up of the mining Equipment.
Setting up of the mining Equipment varies when using different equipment especially the ASIC models. One document that’s so important when setting up mining equipment is the “manufacturer’ manual”. With “manufacturer’ manual”, setting up the mining Equipment becomes very easy.
Setting up ASIC miner, no matter the model; these steps will help you tremendously.
- Find out the location of the power draw of the ASIC miner. It’s stated in the manual.
- Let the power supply units be matched with the power draw
- Connect the power supply units to the ASIC miner using connectors.
- Connect the Ethernet cable to the ASIC miner and the router.
- Power on the ASIC miner and use ip scanner to detect the ASIC miner in your computer or mobile phone.
- Type the ip address of the ASIC miner in your browser to navigate to the login page.
- Login and enter the details for mining operations to commence.
The screen-shot below shows the login window of ASIC miner.
Enter the various details for mining to commence.
Once completed, the ASIC miner will begin to mine.
3.1. Choosing the right Mining Pool
One should be guided by the information at his/her disposal to make the right decision in selecting a mining pool that will be profitable. Seeking advice from experienced miners could also help in making the right decision.
The names stated below are reputable names in the mining pool business.
- How to Check How Much You’ve Mined
This information is readily available in any mining pool site. In the “Search bar”, type your wallet’ public address and the amount you’ve earned will be displayed.
- How to Calculate Expected Profits
You can use mining calculator to get your expected earnings. CryptoCompare provides easy steps to follow.
The diagram below gives a classic example of the calculation. The webpage will look like the picture below:
- Closing Thoughts
Bitcoin mining is worth venturing into, considering many innovations introduced in the industry of late. Arm yourself with adequate information about Bitcoin mining; invest wisely and you’ll definitely smile to the bank.
Though, Bitcoin mining is competitive, its mining potentials are yet to be tapped. It requires the right mentality and decision to undercover the treasure beneath it.