Bitcoin mining is a great way to leverage your skills and earn a healthy income, but only if you know what is good and what is bad. Many of you may not even be aware of bitcoins and mining, but trust us on this – it is a really good freelance side business that you can take up.
Ok, before we move further, understand one thing, if you are a bitcoin user then bitcoin mining is a superb option. However, most bitcoin users don’t mine. When it comes to bitcoin mining, earning a profit can be a competitive affair. And you cannot gain monetary values unless you take a risk on speculating price.
Our guide will make you understand what bitcoin mining is, what you require and how you can start mining.
What is Bitcoin Mining?
In layman’s terms, bitcoin mining is similar to lottery tickets, but a giant one. You choose a mining hardware and compete with everyone on the internet to earn bitcoins.
In technical words, bitcoin mining refers to recording transactions to bitcoin’s public ledger account, which is popularly referred to as Block Chain. The function of the blockchain is to confirm each transaction having taken place to the rest of the people on the network.
Then there are Bitcoin Nodes which goes through the Block Chain to find out or differentiate legitimate bitcoin transactions from attempts to re-spend bitcoins that have already been spent.
Bitcoin mining is quite resource-intensive, and the faster the hardware is, the more tries a miner can attempt per second to win the lottery.
When bitcoin mining was started back in 2009, mining the first cryptocurrency was simple and all you needed was a home PC with average speed. However, with time, the barrier has been raised and it is not a homebrew industry anymore.
That doesn’t mean it is impossible. You need to be aware that anything to do cryptocurrency is not guaranteed and is quite volatile. Any investment you make could be lost and so, you can just do it for fun or you need to be a big risk taker before you take the lead.
How Does it Work?
In Bitcoin mining, a random lottery is being conducted where the price of admission is electricity and highly specialized hardware. The lottery scales the cost of disrupting the bitcoin network with the amount of hashing power spent by each miner.
Your Bitcoin Mining Hardware would run a cryptographic hashing function on block header. For each new hash, the mining software will generate a nonce as the random element for the block header.
Based on the Nonce and other elements of the block, the hashing function will yield a unique hash, which is a hexadecimal number. A target difficulty will be set so that blocks are found every 10 minutes roughly. If you want to create a valid block, you have to find a hash that is below the target difficulty. For instance, if your target difficulty is 20000000, any number that starts with 1 or O should be your target.
Then there is Mining Difficulty that expresses how much harder is it to generate the current block when compared to the first block. The difficulty is adjusted using a shared formula to keep the block coming in.
It is a bit confusing for non-bitcoin users, so invest in bitcoins before you jump into mining.
How Can We Start Mining?
Basically, you can start mining in two ways. You can either mine with Bitcoin Cloud Mining Contracts by being a part of the mining pool or you can mine on your own. Cloud mining is considered better as it smooths out the luck inherent in the process.
Before you start mining Bitcoins yourself, note that everything related to cryptocurrency is uncertain and mining is most volatile. Changes in Bitcoin difficulty, hardware fluctuations and lack of pay-out guarantee at the endmake Bitcoin mining a risk investment, more so than buying Bitcoins.
Buying Bitcoins at least gives you a little monetary assurance. With mining, you can either be a millionaire or stay a pauper, just like buying and winning lotteries.
Cloud Bitcoin Mining
In here you get to rent a mining hardware and have someone else do the mining for you. When you rent a mining hardware, you can also rent a portion of their hashing power. Cloud mining requires a much smaller investment than personal mining as there will be many hecklers of Cloud Mining. Therefore, you must do your research before you sign a contract because even the best and largest companies have their detractors.
Even if you don’t use the hardware for mining bitcoins, you will be typically paid for the investment you make.
Step 1: Choose a Cloud Mining Company
If you invest in the right company and at the right time, you may end up making more money. You can start with Genesis Mining, which is arguably one of the best and largest Bitcoin and script cloud mining provider. They have three exclusive mining plans, which are all cost-effective.
If not Genesis, we definitely vouch for Hashflare. Hashflare offers several features, such as SHA-256 mining contracts, profitable SHA-256 coins for mining, and automatic pay-out options. However, the only criterion is customers must buy at least 10 GH/s.
You can also try Hashing 24 or log in CryptoCompareto find a list of mining companies, with suitable reviews and ratings.
Step 2: Choose the Best Fit Mining Package
Once you have chosen a bitcoin mining provider, you have to look for a suitable mining package and invest in it.
Choosing a package will involve considering options like the amount of hashing power, cross-referencing that with how much you can manage to pay and so on.
Generally, the more you pay the better returns you get and the more profit you make. This is a general principle. But we don’t assure you whether this funda will always work.
Most cloud bitcoin mining companies will help you select your package by giving you a general calculation on returns based on current market value, the mining difficulty and the cross-referencing. The companies will only be able to provide approximate figures, the numbers can change anytime. So, like how we conduct research in share markets, you have to keep up with the latest Bitcoin mining trends and estimates.
Step 3: Selecting Your Mining Pool
Like we had said earlier, as soon as you choose your contract, you have to pick a mining pool to participate. It will be a global mining team, which will increase your chances of earning Bitcoins through cloud mining.
Each pool has their own pros and cons that you really need to clearly scrutinize. However, an established and proven pool should be your best choice.
Once you have joined your Global Mining Team, your cloud mining should be activated within a few weeks if not days. Once that happens, you will start to see bitcoins filling your cloud mining account. There are two options that you can do with your Bitcoins; you either can put in a secure bitcoin wallet as soon as enough is collected, or you can reinvest your bitcoins for greater hashing powers.
Personal Bitcoin Mining
Most miners are opting out of this method because of the high cost and greater risks involved. The trend and parameters of mining in 2018 have extremely changed. Today, we can mine only through specialized hardware built with ASIC (Application Built Integrated Circuit) that are designed for mining purpose alone.
ASICs Bitcoin Mining Hardware is not easy or cheap to buy. The only advantage is you can mine alternative cryptocurrencies with consumer hardware.
If you are a millionaire yourself and have ready access to super powerful and cheap internet connection, plentiful money, and very cheap electricity, only then we recommend you to choose personal bitcoin mining option.
Step 1: Your Hardware
First of all, you have to buy yourself an ASICs Bitcoin Mining Hardware. All the latest ones have the same chips but different power options and efficiency quotient. You can also go for a second-hand hardware. However, there is no guarantee if this will be a good bargain as most second-hands prove to be burnt-out parts.
You can also work with older hardware and gaming rig GPU.
Step 2: Your Mining Pool
You have to next decide if you want to mine alone or join a pool with collective miners. Both have its own pros and cons. For instance, if you do it by yourself, you can garner greater rewards, but if you fail or get unlucky, you will have to bear the brunt alone and earn not even a single bitcoin.
There are guides that can help you choose an established, low- fee pool that caters to your specific needs.
Step 3: Download Right Mining Software
The last step is to download the most suitable software and link your hardware to your secure bitcoin wallet. There are several types of software out there; however, all do the same stuff essentially. The setup process of your hardware and software may slightly vary, depending upon your choices so far.
The final step includes connecting your miner to your computer, logging-in to your pool, starting the software and start mining.
From here it is all about what you do and how you do it. Don’t go into a loss; make sure you stay profitable as your bitcoin difficulty goes up. Don’t burn your pockets paying electricity bills and make sure your Bitcoin miner temperature stays low enough and quiet enough.
If the article helped you, please share your bitcoin mining experience in the comments below.