As the cryptocurrency industry exploded, Bitcoin and various digital tokens and currencies have drawn more attention from the general public than ever before. Obviously, mining as one of the ways to acquire such currency has been increasing interest as well. Everyone new to virtual currencies wants to know what mining is, how it’s done and whether or not it is profitable. Another block of hot questions is about cloud mining as an extremely effective tool for crypto mining activities.
How to mine Bitcoin? As the top digital currency, Bitcoin is also the oldest: it has been around since 2009. In Bitcoin’s case (as with other cryptocurrencies), mining is a record-keeping service aimed at keeping the blockchain in shape, complete and safe, as well as unalterable. Miners are the ones who verify, collect and add newly broadcast transactions to blocks, which are linked to already existing blocks through cryptographic hashes. The linked-up nature of these blocks means that in order to alter one, all subsequent ones need to be altered as well – a feat which is obviously extremely difficult to pull off.
The bane and at the same time a friend of the miners is the nonce. A nonce is a number that miners need to find in order to generate proof of work for their newly mined blocks. Such blocks are not accepted into the blockchain without this proof of work. The proof of work is designed to be extremely easy for the network nodes to verify, but it is very difficult to generate. To find the nonce, miners need to try many different nonce values before the right one is located, as the difficulty target is met. The difficulty target is artificially induced, to keep the Bitcoin ecosystem in balance, and the coin valuable, due to scarcity.
Approximately every two weeks the difficulty target is re-assessed, based on the performance of the Bitcoin network. The goal here is for new blocks to be allowed into the blockchain every 10 minutes. The more computing power exists on the network, the bigger the difficulty individual miners have to overcome to pick up their Bitcoins.
For every newly added block, miners are rewarded with 12.5 newly minted bitcoins – this number is halved roughly every four years though, so it is definitely not a constant. These bitcoins are distributed through coinbase transactions. Every single Bitcoin in existence has been earned through such a coinbase transaction.
Is Bitcoin mining profitable?
Now that you know by and large what Bitcoin mining is and how it works, the question “is Bitcoin mining profitable?” inevitably rears its head. All crypto coin mining is a sort of arms race. Those who get in early and bring more powerful hardware to bear, are those who reap the real rewards. Obviously, in Bitcoin’s case, getting in early is no longer an option. Whether or not mining Bitcoin is profitable depends on how much one is willing to invest in the effort. One way to determine whether or not Bitcoin mining is something you may want to engage in is to use a profitability calculator. When it comes to this, you should get acquainted with a number of variables used by these calculators.
The cost of your hardware and the cost of electricity are the simplest profitability factors. If you intend to mine bitcoins, you will indeed have to start out by acquiring proper hardware. Mining on your computer/laptop has not been profitable for years now. When looking for specialized cryptocurrency mining hardware, you should keep your eyes on the following factors: power consumption (the smaller, the better), hashrate, and obviously: price.
Hashrate or hash rate
What is the hashrate (hash rate)? The hashrate describes the speed at which the mathematical problems associated with Bitcoin mining (hashes) are solved. The Bitcoin network features a hashrate of its own, but the hashrate also depicts the number of such problems your ASIC can solve, thus essentially defining its efficiency. Hashrates are measured in GH/s, TH/s and even PH/s (Peta-hash per second). More about hashrate
1 kH/s is 1,000 (one thousand) hashes per second
1 MH/s is 1,000,000 (one million) hashes per second.
1 GH/s is 1,000,000,000 (one billion) hashes per second.
1 TH/s is 1,000,000,000,000 (one trillion) hashes per second.
1 PH/s is 1,000,000,000,000,000 (one quadrillion) hashes per second.
1 EH/s is 1,000,000,000,000,000,000 (one quintillion) hashes per second.
Common Hashrate Conversions
1 MH/s = 1,000 kH/s
1 GH/s = 1,000 MH/s = 1,000,000 kH/s
1 TH/s = 1,000 GH/s = 1,000,000 MH/s = 1,000,000,000 kH/s
and so forth
What about other cryptocurrencies?
In its beginnings, BTC was relatively easy to mine, too. There are other digital currencies out there whose “beginnings” are right now. If one intends to get in on the ground floor with these digital tokens, the time is indeed now. Actually working out which altcoin is the most profitable from the point of view of the miner is quite the exercise though, given that there are hundreds of such altcoins out there. What to mine? Altcoins like Monero, Litecoin and Ripple do in fact appear quite attractive in this regard, but if you’re seriously considering getting involved with such currencies, you need to know that Bitcoin mining rigs aren’t exactly optimal for the mining of other currencies.
Ethereum mining is an entirely different ballgame, though it too rewards GPU power. What that means is that if you want to mine Ethereum, you’ll need to purchase a powerful graphics card. With it goes a good motherboard and at least 4GB of RAM. The good news is obviously that your Ethereum mining rig is essentially a PC. The process of building such a rig is the same as building a gaming PC for yourself. The bad news is that you won’t really be able to use the computer for anything other than ETH mining. Solo mining isn’t particularly rewarding in ETH’s case either. Joining a mining pool is the answer to this question. Mining pools reward miners for the mining power they make available, and they smooth out the variance when it comes to ETH earnings.
Softwaring the mining rig is another challenge for miners, and those who want to set their operation up under Windows will find it especially difficult. There are guides available out there in this regard though, which take miners through the software setup process step-by-step and which are indeed easy to follow. Ethereum mining is ASIC-resistant, meaning that out of policy considerations, the network aims to keep ASIC-mining out of its equation. Ethereum – and some altcoin mining – is very memory-intensive. Memory forms a bottleneck in the process which simply cannot be bridged by throwing more GPU-power into the mix, thus ASICS simply does not make much sense with this type of crypto mining.
There are cryptocurrencies which can be mined with ASICS as well as with PC-rigs, though profitability at this point is questionable for the entire altcoin scene. Digital currencies using Scrypt as their hashing algorithm all belong in this category. Litecoin is currently the most interesting such altcoin. Newly mined Litecoin blocks are allowed into the blockchain every 2.5 minutes and the reward per block is currently at 50 LTCs. Some 82 million LTCs will be issued, and currently, it is indeed possible for miners to generate a small revenue using consumer-level mining gear. It has to be noted though that only AMD Radeon video cards should be used, as nVidia mining isn’t profitable.
There is an alternative
Cloud-based mining is a choice for those who don’t want to get their hands dirty with the technical details of BTC mining. Cloud mining is about renting computing power from a company and then using this power for cryptocurrency mining. This sphere has some mining scammers but it is a really attractive alternative to “traditional” digital mining.
If you’re interested in becoming a Bitcoin miner, you may enjoy reading about the best Bitcoin cloud mining providers and services available. Check with our independent, trusted сloud mining reviews and exact cloud mining comparisons.