Technology has evolved to a great extent in the present world. Now, when everything is becoming digital, why should monetary elements remain an exception.? So, we have digital currencies, better known as cryptocurrencies. When we come across the term cryptocurrency, the next thing that strikes our mind is Bitcoin.
Bitcoin literally brought along a notable disruption after it gained prominence in the fintech domain. It provides the scope of decentralization that doesn’t require an intermediate for transactions. With bitcoin, the concept of the bank is totally eliminated.
So, a curiosity will hover in the mind of anyone who has the slightest interest in the world of crypto about how exactly one can create bitcoins.? Well, the creation of bitcoin is technically termed as mining. Basically, when you follow the mining algorithm and execute it you get rewarded with bitcoins. Bitcoin can be exchanged for other regular currencies, products, and services.
In this post, we will know about Bitcoin Mining and the exact process that outlines how to mine Bitcoins.
What is Bitcoin Mining.?
If we simply put it the process of mining happens like this. Miners have to solve a computational problem that will enable them to link or chain together a block of transactions. Mining of bitcoin primarily involves,
- Generating new bitcoin
- Confirming transaction
Legal Side of Mining Crypto
This is an important aspect of Bitcoin that should never be underestimated. You have to confirm whether the region you’re thinking to operate crypto or bitcoin mining, is legally allowed or not. Depending on the rules in your region you may have to pay taxes for your mining activity. You can contact your local authorities for information on this.
However, there are many such regions around the world, where cryptocurrencies have been banned by the government. So, be careful about carrying out bitcoin mining in these areas. In case you get caught, you may face criminal charges.
How to Mine Bitcoins.?
Now, let’s see what are the exact steps to mine bitcoins. It may sound like generating some quick bucks but it is an intense process that is executed at an enterprise level mostly in warehouses. In the specific warehouses, there are stacks of GPUs being used to mine bitcoin. Let me tell you that these setups are super expensive. Most importantly a lot of electricity will be consumed to mine bitcoins with higher hash power.
Before jumping into knowing the process for mining bitcoins, we must know about the hardware required for the mining process. We are basically referring to the Bitcoin Mining Hardware.
Use of Bitcoin Mining Hardware
Usually, traditional mining requires the use of shovels. When it comes to mine bitcoins or cryptocurrencies in general, the shovel we need is the Bitcoin Mining Hardware. Back when bitcoin came into existence, it was to be mined using computer CPUs. However, when the mining was carried out on an enterprise level, it was discovered that by using dedicated graphics card much more hash power can be generated.
This is the point when the graphics card made an entry and became an integral part of bitcoin mining. Later ASIC (Application Specific Integrated Circuits) took over GPUs.
Current scenario of mining makes extensive use of ASIC. Usually, the procedure is carried out in the data centers with proper thermal regulations.
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Process of Mining
Like we mentioned you need to grab your Bitcoin Mining hardware to begin mining this popular crypto. Remember that you cannot really use your laptop or PC to mine bitcoins. Even if a year passes by, you will barely make any crypto. To add to the loss, you will spend your money on a huge amount of electricity bill. Bitcoin mining is a power consuming process.
So what exactly you should use..? It is an ASIC miner that you have to use. These are dedicated systems for crypto mining.
Now that we have our weapon for bitcoin mining, we will talk about Mining pool. After you set up your hardware, either you can begin mining by your own or join a mining pool.
Let’s describe the situation. If you’re a one-man army with a simple computer system, there is no way your system is going to generate enough has the power to mine bitcoins. So, you have to look for the bitcoin mining pools. After you join in such a pool you will basically share your hash rate with the mining pool.
You will get a payment when the pool solves the algorithm and finds a block. The pay will be based on your contribution of hash rate to the pool.
So, we have a Bitcoin mining hardware and now we are part of bitcoin mining pools. So, obviously, by now we will start mining and earning bitcoins. Well, Bitcoin is a digital currency and it doesn’t require any bank to store it. Then where to keep it.? For that, you will need a cryptocurrency wallet. Also, you will need a Bitcoin mining software which is essential to establish a connection with the mining pool.
The software provides information about mining hardware’s work in the bitcoin network. Also, it carries the mining information from all the miners on the network. The mining software also keeps a record of the mining speed, hash rate, fan speed, and the temperature. Bitcoin mining software is separately available for various platforms like Windows, Linux, and MacOS.
So, that was a quick and brief insight into the bitcoin mining process, hardware, and software involved in it. Stay tuned with us for more such informative posts.