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How to Mine Bitcoin
You've probably heard of bitcoin mining by now — the process through which new bitcoins enter the market. However, mining Bitcoin actually achieves two vital things for the network:
- New bitcoins enter circulation
- New transactions are verified and confirmed
In this comprehensive guide, we'll tell you all about BTC mining and how it works. We'll explain the job of a miner, how mining pools function, and how you can start mining bitcoins. Let's begin.
The Basics: What is Bitcoin Mining?
Bitcoin mining is how new bitcoins enter circulation and how new transactions on the network are verified. However, it's also important to mention that it's the only way new bitcoins enter the market.
Furthermore, mining is crucial for the continued maintenance and development of the entire Bitcoin network.
Anyone can be a bitcoin miner, but to achieve significant results, you need to invest heavily in complex hardware, similar to regular computers, but with a lot more power. The task of that hardware is to solve complicated computational mathematical problems. The first device that solves a problem receives a block of bitcoins, and then the whole process starts again.
However, around 90% of all bitcoins have already been mined (yes, the total number of bitcoins is limited). And since mining new ones have become more challenging as more BTC enter circulation, mining today is mainly about verifying new transactions.
This second aspect of bitcoin mining is crucial to the network, as it's the way through which:
- New blocks are created
- New transactions are added to blocks, and the BTC public ledger is called the blockchain.
This solves the ubiquitous double-spending problem. In other words, this process ensures that no one can create the same BTC more than once and that no one can spend the same BTC all over again. Mining confirms all new transactions, regardless of where and what they are made for. This includes everything from regular transactions between two traders to transactions on crypto gambling sites.
The mining process is arduous and requires a lot of power. However, it's still attractive to many enthusiasts and investors as it leads to rewards, i.e., new bitcoins. The prizes may be small, but they can be huge for serious investors with enough mining rigs.
Description of Bitcoin Miners
To describe bitcoin miners and what they do, we need to explain two things:
- How they mine bitcoins, and
- What they use for mining
Mining refers to effectively solving complex computational problems. It's typically done using specialised hardware called application-specific integrated circuits or ASICs. We'll explain the mining process and these hardware solutions later in the article. Let's focus on why someone would want to mine BTC and how much you can earn.
Reason for Mining Bitcoin
Mining bitcoin today is hard, and it's a sizable investment. It effectively serves three purposes:
- Supporting the Bitcoin network
- Bringing rewards in the form of bitcoins for the miner
- Putting entirely new bitcoins into circulation
As you can probably guess, the main reason for miners is the second one, as it effectively creates a profit for the miner.
However, the first and the last reasons are still important, as, without them, the whole Bitcoin ecosystem wouldn't exist, and it wouldn't be valuable enough for miners to do their job. It's worth mentioning that miners will still have to confirm transactions once the last bitcoin has been mined (it's estimated that this will happen in 2140 with the current progression of difficulty for creating new coins).
This will also continue to yield rewards. However, they will be paid entirely through the fees that a person pays when making BTC transactions. For instance, when you deposit or withdraw in a BTC casino, you pay a small fee to the network. The size of this fee changes constantly and depends on the size of the transaction. As of 2022, the average price is around $2.
When it comes to gambling, the use of BTC in no account casinos or other purposes could also potentially be the reason for mining bitcoins. Depending on how much bitcoin you want to use, it might be easier to buy it than mine.
How Much a Bitcoin Miner Earns
As previously stated, mining Bitcoin yields miners a reward for their services. However, this reward has changed over time, and it is reduced by half every four years. When Bitcoin was created, and the first coin was mined, the reward for mining a single block was 50 BTC. It was first halved to 25 BTC in 2012. Then, again in 2016, to 12.5 BTC. The last time, on May 11, 2020, it fell off to 6.25 BTC.
As for the actual amount a miner can earn, it's different and depends on too many factors for us to give you an exact number. At the time of writing, the price of BTC was around $39,000. That means that the reward for a single block is currently $243,750 or 6.25 BTC x $39,000.
It sounds like a lot, but you need to consider that mining consumes much power. For instance, in 2021, it was estimated that it would take you nine years to mine a single bitcoin using a typical household equivalent of electricity.
How to Start Mining BTC
If you want to start mining BTC today, the main thing you need is money. That's because you need to invest a sizable amount in mining equipment to make the whole operation profitable. You can still use a regular computer to mine bitcoin, but since the difficulty has risen so much, it would take ages to mine a single BTC.
It's important to understand that the Bitcoin network forks out a new block every ten minutes or so. However, it doesn't necessarily mean that you will be the miner who mines it. All bitcoin miners are effectively competing for a block every ten minutes. And since this competition is based on solving computational problems, you need to be the quickest one to solve them. Therefore, the more computing power you have, the quicker you'll be. However, with more mining rigs entering the fold, the difficulty of solving these problems has to increase for the network to create new bitcoins at a stable rate.
That's why, as time passes, everyone needs to use more computing power to solve a computational problem. This brings us to the actual equipment you'll need to use — BTC mining hardware.
BTC Mining Hardware
As we've stated, mining bitcoins can be achieved with a simple computer. But since the difficulty has levelled up so much, you can mine bitcoins successfully only by using specialized hardware with a lot more computing power to solve the mathematical problems behind the Bitcoin network.
You can invest heavily in:
- A larger number of strong graphics processing units (GPU) or
- An application-specific integrated circuit (ASIC)
GPUs are regular graphics cards, the cost of which has been on the rise for a while now, primarily because more and more miners are investing heavily in their cryptocurrency mining equipment to improve its performance. As for ASICs, their price is even higher and can reach several thousands of dollars. Some of the cutting-edge ASICs out there cost between $3,000 and $4,000, but that price is likely to rise in the future as they get better and stronger.
As their name suggests, ASICs are specialized circuits designed to do a single thing. In the case of bitcoin mining, they are solely built for mining bitcoins, or in other words, solving computational problems that lead to the creation of BTC blocks. As a result, you won't be able to use them for other things like playing games on online gambling sites.
Due to all the requirements and rising mining difficulty levels, almost the entire bitcoin mining ecosystem today comprises ASIC machines and setups. They are much more potent than regular GPUs, and you can update them over time as new chips with even more computing power get released.
Description of the Mining Process
In general, bitcoin mining and blockchain mining provide economic incentives for third parties to mine bitcoins and, more importantly, confirm transactions. So, when you play at a casino with bitcoin and make deposits and withdrawals, it entails, by extension, that a miner needs to confirm that transaction for you to make a quick withdrawal on a fast payout casino.
This is necessary as Bitcoin and most other cryptocurrencies using blockchain mining are decentralized. In other words, independent parties need to voluntarily participate in the network and confirm transactions for the whole system to work.
A bitcoin miner effectively uses hardware to solve computational problems, resulting in new blocks of bitcoins. Every block uses a corresponding hash — a standardized method for encoding data. The hash is a specific string of letters and numbers used to prove a block is valid and hasn't been tampered with.
The whole hashing process was designed to solve algorithms. However, over time, these have become more challenging to solve. As a result, they now require even more computing power.
Understand the Mining Hash
A hash effectively verifies the validity of a block of bitcoins meaning that it's an invaluable part of the whole mining process.
To understand how it works, you need to fully grasp what a bitcoin miner does. They effectively use the computing power of their mining rig to cycle through trillions of different hashes every second. The device does that until it finds the correct difficulty — or, in other words, until it satisfies the underlying condition. This is why it's said that a mining device has to solve a computational problem. It effectively needs to find the right combination for a specific hash.
The difficulty mentioned above increases every two weeks, which is essential for keeping the block time constant — for each block of bitcoins to be mined every ten minutes. Besides that, it's crucial to understand that each hash has something called the Merkle root. This is effectively another hash that incorporates signatures for transactions in its corresponding block, plus the previous block's unique hash.
What this means is that it's nearly impossible to change the hash. Altering even the smallest detail of one block would change the expected hash and every other hash of the following blocks. If this actually happened, the nodes in the network would reject this tampered, incorrect blockchain version to protect the correct Bitcoin network.
So, to successfully change anything, a hacker would have to effectively recreate all of Bitcoin's mining power to change the hashes to their liking. As you can imagine, this is nearly impossible, and that's why mining is essential for the integrity of the Bitcoin ecosystem.
Mining Pools for Miners
Mining pools are groups of miners operated by third parties. The goal is for miners to work together in a pool and share the block rewards. This is useful, as with the ever-increasing difficulty level, it's getting harder to be the miner who'll discover the next block of bitcoins.
The miner who solves the puzzle behind the block is the miner who reaches the solution the fastest. But to be the fastest, you have to have enough mining power. And since it's hard to have enough computing power on your own, it's better to join forces with other miners through mining pools effectively.
Together, the miners in a pool can have enough power to solve the puzzle and get the next block of bitcoins. What's more, as the rewards are shared, miners have a steady influx of bitcoins from the day they join a pool, whereas, on their own, they'd likely have to wait for a much longer time to obtain rewards.
Are Mining Pools Valuable?
In simple terms, yes — but only for specific people. If you are a single miner with limited funds for mining equipment, you'll have a much easier time getting mining rewards by joining a mining pool. Consequently, you'll get BTC more quickly than usual, so you'll be able to use it for trading or playing games at new online casinos.
However, if you do have considerable amounts of money to invest, your profits could be high enough if you were to mine on your own. In essence, it depends on the miner, so you should consider a few factors before you decide if joining a mining pool is something you should do:
- Mining pool fees: Most BTC mining pools charge a fee to their participants, and they are usually acquired through mined block rewards. In general, fees range from 0% to 4%.
- Reliability: By joining a mining pool, you're effectively sharing the funds you're supposed to get and opening yourself to a potential hack.
- Size of the pool: In simple terms, the bigger the pool, the more frequent the rewards.
Our Thoughts on Bitcoin Mining
Bitcoin mining is essential for the continued success of the Bitcoin network. However, the way the system works requires more and more computing power and, consequently, more miners. Being a miner is essential, especially if you believe in Bitcoin and want it to continue improving and increasing in value.
However, when considering the financial side of things, if you're only in it for the profits, bitcoin mining can only be useful if you're willing to invest in good mining equipment. If not, you should consider joining a good mining pool.
If none of that works, becoming a bitcoin miner does likely not suit your interests. Plus, if you only need bitcoin to use it for, let's say, playing the best casino games on the web, it's easier to buy BTC on an exchange than to mine it.
Even though mining is open to anyone interested, it's clear that it's not for everyone, considering the increasing difficulty and the way the whole Bitcoin network functions. It's entirely up to you to choose if becoming a miner is the right course of action. If you're in it for the money, you need to consider how much you need to invest and when the investment will become profitable.
Naturally, if you're planning on trading your BTC on exchanges or gambling it on online casino slots, you should also factor in the BTC you will earn through those activities. If you believe in the concept of Bitcoin, it's important to give your contribution, but you should still ensure you are not losing money with your current setup.
On top of that, there's the environmental element you need to consider. Bitcoin mining requires a lot of energy, and even though each new chip consumes less power, the growth of the mining community is much higher, so the energy consumption is still getting bigger and bigger.
To understand how much energy is used, consider that some estimates from 2021 state that bitcoin mining consumes about 121 terawatt-hours of electricity every year. This is more than what the entire country of Argentina spends every year, a country with more than 45 million people.
Bitcoin Mining FAQs
Do you have any questions about mining Bitcoin?
Why do Bitcoins need to be mined?
The reason is simple. It's the only way for new bitcoins to enter circulation. Plus, it's the only way to verify new transactions. In other words, the entire Bitcoin network wouldn't be able to function without mining.
How does mining confirm Bitcoin transactions?
Mining refers to the usage of computing power to solve complex cryptographic hash problems, which results in the creation of new blocks of bitcoins. Besides that, the blocks contain information on new transactions. When a new block gets written into the blockchain, transactions become unchangeable and are consequently confirmed.
Why does mining use so much electricity?
Solving the computational puzzles that lead to new bitcoin blocks requires the computing power of actual hardware devices. These devices need electricity to function, and they use a lot of it since solving the puzzles is incredibly taxing for a device. What's more, since the network's difficulty is continuously increasing, more and more computing power is needed to mine new bitcoins, which effectively requires more and more electricity.
Is Bitcoin mining legal?
It is, at least in most countries of the world. If there are no explicit laws regarding it, it's simply not appropriately regulated. Still, in most places, it is considered legal nonetheless. The only countries where it's specifically banned are China, Egypt, Morocco, Tunisia, Qatar, Nepal, Algeria, Bangladesh, and Iraq.
Does crypto mining damage your computer?
Mining itself doesn't damage a computer, but it is taxing on the GPU, meaning the mileage is the issue. With constant use, specific card parts, like the auxiliary fans, degrade faster than usual. The only way to stave off damage is to clean them more often.
Can you mine Bitcoin on your phone?
It's possible to mine bitcoin on a mobile phone, but that doesn't mean you should. Mobile BTC mining is not nearly as practical as using dedicated mining hardware. Furthermore, it won't provide you with enough profits compared to how much time and energy you spend on it.
Is mining cryptocurrencies profitable?
In general, yes. But it still depends on the person and various factors like the power of the mining equipment, the price of the crypto you're mining, and the amount of money invested.
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