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Bitcoin (buy BTC) mining is a sector in its own right in the world of cryptos.
On this subject, it’s important to know that not all crypto-assets can be mined, and that it’s an activity that has become highly professionalized, extremely competitive, and requiring complex forethought to calculate its profitability.
How do I mine Bitcoin?
What equipment do I need?
Is it profitable?
At any time of day, people are sending each other bitcoins from their respective wallets.
In the conventional financial system, your bank is able to check whether your balance is sufficient to carry out a transaction.
On the Bitcoin network, anyone can plug one or more computers into the network and start doing the tedious work of verification.
These computers have basically the same function as banks: for each transaction, they check whether the wallet that issued it was the right one, and whether it had sufficient funds.
Each miner will therefore be able to submit a new block of transactions to the network, including all those he has validated.
But how to prevent dishonest miners from submitting invalid blocks?
Miners have to solve an algorithmic problem, and countless calculations and combinations have to be performed to arrive at the right result.
The first person to find the right solution provides a “Proof of Work”.
The network will only accept the block of transactions from the machine that has proved it has done this work.
Since launch, this blockchain-based security process has been carried out in exchange for a certain number of tokens, specially created for miners.
This reward in the form of bitcoins is ideally intended to generate a profit after covering all the costs involved in mining.
Given that the complexity of the exercise requires the use of powerful computers to perform the calculations, and that this is the one and only method of creating new bitcoins, the reward plays an essential role in the smooth running of this ecosystem.
Once a block of transactions has been verified, it is included with the others already validated and linked to the previous block.
The term blockchain comes directly from this: it’s a chain of transaction blocks.
Over time, mining has become more complex and difficult.
If you want to mine bitcoins yourself, you’ll need special equipment and a costly initial investment.
However, there are mining pools to better mutualize expenses, as well as cloud-based mining services that allow you to mine more cheaply and remotely.
Here’s how to mine Bitcoin!
Note: You can consult the Bitcoin price live with Coinhouse. Make informed decisions and develop your financial potential today!
This is the simplest and most economical method of mining Bitcoin.
It involves exploiting the hashing and data storage capacity of a cloud company, specialized in digital currency mining, by renting it via a subscription or purchasing a package.
There’s no need to buy sophisticated, expensive hardware, nor to have the technical skills to install them.
Energy costs are borne by the cloud company, and passed on in the subscription or package price.
Thanks to the pooling of servers, these costs are generally lower than for an individual, isolated installation.
What’s more, many service providers are investing in renewable energies to power their servers.
The procedure for cloud mining is simple.
Simply open a wallet to secure your Bitcoins, if you don’t already have one, then create an online account on the platform of your choice.
You can then start mining Bitcoin straight away, or after a few hours, depending on the platform.
All you need to do is take out a subscription or buy one of the packages on offer, which entitle you to a certain amount of hashing power, depending on the amount you’re prepared to invest.
Note: this solution is still fairly new on the market, and it’s important to choose your cloud mining platform carefully.
Don’t hesitate to ask the experts at Coinhouse for advice and assistance.
If you want to mine Bitcoin on your own, either at home or in a room, you’re going to need an ASIC – a custom-designed integrated circuit adapted to mining activities.
Admittedly, during the early years of blockchain, it was possible to mine Bitcoin using your personal computer.
But this is no longer the case.
The energy cost would be such that you’d lose out, even if you won Bitcoin.
The difficulty of calculation has reached such a level that you need powerful hardware that can perform a large number of calculations per second.
Your mining ASIC needs to be as efficient as possible to mine bitcoins, without blowing up your electricity bills.
Problem: the most efficient ASIC miners are also the most expensive to buy.
This initial investment can run into several thousand euros if you want to get the very best equipment.
All these devices, once plugged into electrical outlets and connected to your router, make up your mining rig.
On-line configurations are required to start mining.
When choosing equipment, pay particular attention to power consumption.
The aim is to find the optimum ratio between hashing speed and power consumption.
If you opt for a home-based mining rig, it’s best to join a mining pool.
This increases your chances of success, while pooling certain expenses.
This space, well suited to beginner miners, enables you to work cooperatively to extract blocks.
They are designed to make mining easier and to cope with its growing complexity.
The mining pool provides several advantages: faster processing, which speeds up the discovery process and mining speed, and more stable and regular income, as blocks are accepted more quickly.
The only downside is, of course, that you have to share the rewards with all the other members of the pool.
However, a few questions remain.
For example, if anyone can check the completeness of transactions sent over the network, how can we prevent a malicious or simply negligent person from validating transactions that should not have been validated?
How can we prevent the risk of fraud?
To understand this, we need to introduce another type of machine: blockchain nodes.
These machines present, on a vast peer-to-peer network containing a copy of the blockchain, the record of all transactions carried out since the beginning, and thus guarantee the robustness of the system.
As with miners, anyone can become a blockchain node, simply by installing the right software and connecting a computer to the Internet.
This abundance of nodes guarantees the integrity of the blockchain.
Each time a mining machine creates a new block of transactions, it sends it to any node on the network, which verifies the validity of the miner’s work, records the new block and propagates it to its neighbors.
From one node to the next, the new block is verified by each node, recorded and propagated.
And therein lies another problem: a malicious miner could deliberately generate thousands of invalid blocks per second, and the nodes would spend all their time checking them one by one, which could easily paralyze the whole system.
Fortunately, an elegant solution has been found, by creating a mechanism that severely limits the frequency with which miners can send blocks to nodes.
This mechanism is called the “Proof of Work”, and obliges miners to perform a calculation that requires a great deal of computing power, the result of which, known as the “hash”, is included in the block they send to the nodes.
Here, the block itself constitutes the proof of work, and is provided with an identifier that enables it to be verified.
The number of leading zeros contained in the identifier represents the average number of possibilities the miner has tried to arrive at the result provided.
In this way, each node can, from the block data alone, ensure that the miner has found a valid solution, and know the number of combinations that have been tested.
The node receiving the new block first checks that the hash is valid, which is very fast, before checking the block’s contents.
And every other node receiving the new block does the same.
In this way, nodes only have to check a block once in a while, and are never overwhelmed.
This asymmetry between the cost of computation and the speed of verification by the node is the key to the blockchain’s success.
The Bitcoin protocol has been designed in such a way that a new block is generated once every 10 minutes or so, so that all the machines on the network have time to synchronize.
But the computing power of the miners is constantly increasing: every day, more powerful machines are added to the network.
However, solving the cryptographic problem for the proof-of-work depends directly on the computing power available.
In theory, blocks should be found faster and faster, which would jeopardize network synchronization.
To counter this problem, there is an automatic mechanism which, every 15 days or so, recalculates the difficulty of the cryptographic problem to be solved so that a new block is sent every 10 minutes on average, whatever the overall computing capacity of the network.
A new question then needs to be asked: how do you convince people to run machines, by making them perform costly calculations, to carry out this work of verifying transactions?
Of course, they have to be paid!
Each miner, when generating a new block, enters a unique transaction called a “coinbase”, which sends newly-created bitcoin to the address of his choice.
The first miner to solve the proof-of-work problem and present a valid block therefore receives this payment.
This is what motivates miners to keep on doing this work, despite the time and difficulty involved.
Since 2020, this reward has been set by the Bitcoin protocol at 6.25 bitcoins per block.
But it is scheduled to be halved every 4 years or so.
From April 2024, it will be 3.125 bitcoins per block.
Following this procedure, we’ll reach a total of 21 million bitcoins around the year 2140.
All money created on the Bitcoin network is therefore used to pay miners.
Discover the 2024 cryptos selected by Coinhouse.
However, as money creation becomes increasingly scarce, it will become less and less attractive for miners to carry out their activity, and the security of the network could suffer as a result.
The Bitcoin protocol provides for a second source of income for miners: a commission on each transaction processed by the miner.
This form of remuneration will become more important as money creation declines.
To get started, bitcoin mining software needs to be installed on a computer that will use the processor, graphics card or both to solve the cryptographic problems mentioned above.
The more powerful the computer, the greater the mining capacity, so the higher the probability of finding the solution to the problem at hand.
The other option is to use cloud mining, as mentioned above.
In both cases, the calculation of profitability for a miner can be relatively complex: you need to take into account the cost of purchasing equipment, the price of electricity, or the cost of subscriptions or packages on cloud solutions, the price of the cryptocurrency being mined, and possibly the not inconsiderable amount of time spent setting everything up.
With the ever-increasing difficulty of solving problems and the computational capacities required, and in turn the costs involved in mining activities, profitability has become more complex to achieve.
The business is rapidly becoming professionalized.
For an individual, mining Bitcoin could be very profitable and easy, back in the early days of the adventure in 2009 or 2010.
But this is no longer the case.
What’s more, as early as 2013, machines called ASICs appeared on the market.
Specialized for this task, they are far more efficient and cost-effective than the most powerful PC, but represent a significant initial investment.
The ecosystem has evolved and today, crypto-assets like Bitcoin have become too difficult for a single individual to mine.
The sector has become professionalized and ultra-competitive.
The main players are often entrepreneurs who rent gigantic hangars in which they install tens of thousands of ASICs, and consume as much electricity as a small town…
However, it is still possible for individuals to mine cryptocurrencies, and come out on top, thanks to mining pools, these Internet-based services to which you can connect your mining equipment, and which enable you to share the difficulty as well as the profits with other players in this market.
Don’t expect to make a fortune, however: it’s very difficult to earn much in this complex market, when you factor in all the expenses, especially the electricity needed to run these machines.
Even if you manage to mine in good conditions, the first 10 or 12 months will necessarily be spent paying off this equipment, before you start making a profit.
So ask yourself: would it have been more profitable to buy bitcoin or ETH and hold them over the same period?
In most cases, this is the case.
The Proof of Work, essential for guaranteeing the security and integrity of Bitcoin transactions, requires immense computing power.
Traditionally criticized for its environmental impact, this mechanism has evolved in recent years with an increasing share of renewable energies.
In 2024, around 54.5% of the energy used to mine Bitcoin will come from renewable sources such as hydroelectricity, wind and solar power.
This increase is marked, not least due to the massive adoption of sustainable energy by large-scale mining farms, particularly in regions such as Texas, where the renewable energy mix now stands at 31%.
This trend towards cleaner mining has reduced CO2 emissions per kilowatt-hour to 299 grams, from nearly 600 grams in 2021.
This ongoing transition enables the Bitcoin mining industry to reduce its ecological impact while remaining competitive.
Satoshi Nakamoto created Bitcoin with the aim of decentralizing the currency.
Today, the centralization of mining in a small number of companies is often singled out as a major threat to the security and stability of the Bitcoin network.
This position needs to be qualified: while it’s true that the major players in mining could band together to cancel certain transactions and pretend they never existed, such an action would be visible to all users, and the immediate consequences would be extremely damaging for the entire community, starting with the miners themselves.
While in the past it was conceivable for an individual to invest in hardware to earn money from mining, today such a proposition is very difficult to sustain, mainly because of professional players saturating the market with colossal computing power.
It seems to us that a much better proposition is to invest in cryptos, whose value can evolve fast enough to offer much more appreciable gains than through mining.
If you’d like to contribute to the security of a blockchain in exchange for rewards, but don’t want to become a miner with all the constraints that entails, staking seems to be for you.
Coinhouse offers a staking solution to enable you to generate rewards on various crypto-assets.
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