Bitcoin is a self-contained digital currency system. It has no direct relationship to any real-world currency, and it is not governed or regulated by any government or central authority. However, people can (and do) use it to buy real-world goods from big retailers online.

When you hear the term “bitcoin mining,” your mind probably goes to a Western imagination of pickaxes, dirt, and striking it rich. The comparison, it turns out, ain’t too bad. The mining process is how new bitcoins are produced and placed into circulation and in your mind you which to unravel the question on how does Bitcoin mining Work?

Miners compete to solve mathematically complex problems in order to process these transactions safely. The miner who solves the problem correctly adds a block to Bitcoin’s blockchain and earns 6.25 bitcoins as a reward. A single bitcoin was worth over $18,000 in November 2020, suggesting that every good miner would earn over $100,000 in Bitcoin.

Bitcoin mining has a two-fold impact. To begin, when computers on the bitcoin network solve these difficult math problems, they create new bitcoin, similar to how a mining operation extracts gold from the earth. Second, bitcoin miners render the bitcoin payment network trustworthy and safe through verifying transaction details through cracking computational math problems.

A transaction is when someone transfers bitcoin somewhere. Banks, point-of-sale systems, and physical receipts all keep track of in-store and online transactions. Bitcoin miners do this by grouping transactions into “blocks” and linking them to a public ledger known as the “blockchain.” Nodes then keep track of those blocks in order to validate them in the future.

Part of bitcoin miners’ role is to ensure that new blocks of transactions are correct before they are added to the blockchain. Bitcoin miners, in particular, ensure that bitcoin is not duplicated, a peculiar characteristic of digital currencies known as “double-spending.” Counterfeiting is still a problem with printed currencies. However, if you spend $20 at a shop, the bill is usually in the possession of the clerk. But it’s a different story for digital currencies.

Since digital information is relatively easy to replicate, there is a risk that a spender could make a copy of their bitcoin and send it to a third party while keeping the actual.

Is There Anything I Need to Mine Bitcoin?

Every 14 days, or every 2,016 blocks mined, Bitcoin changes the difficulty needed to mine one block. The overall target is to keep the time it takes to mine one bitcoin to under ten minutes. Since Bitcoin has been around since 2009, its mining difficulty is currently quite strong, necessitating the use of resource-intensive, powerful hardware.

Specialized mining hardware known as application-specific integrated circuits, or ASICs, is the first and most important piece of equipment needed to mine bitcoin. ASICs devices can range in price from a few hundred dollars to $10,000. However, the cost of mining hardware is a small part of the overall cost. ASICs use a lot of power, and the cost of that power will easily outweigh the cost of the computer that uses it.

To enter the Bitcoin network, you’ll also need to choose Bitcoin mining tools. This is a fraction of the cost of hardware. In reality, there are a plethora of free software choices to choose from.

All costs, including hardware, software, and energy, must be weighed when assessing the feasibility of Bitcoin mining. You must also remember the market value of Bitcoin, which fluctuates regularly, as well as any taxes you may owe.

Is it Possible to Make Money Mining Bitcoin?

Bitcoin mining tends to be profitable at first glance. The reward per block was 6.25 bitcoins as of November 2020, and one bitcoin is now worth nearly $18,000. Bitcoin produces over $100,000 in value per ten minutes, according to these estimates. If that sounds too good to be real, it is—to some degree.

Bitcoin mining from home is simply not profitable due to the fact that a single ASIC consumes the same amount of electricity as 500,000 Playstation 3 units. 6

Bitcoin mining profitability is primarily determined by the cost of electricity. Even with top-notch ASICs hardware, if you live in Louisiana and have access to electricity at an industrial rate of 4.58 cents per kilowatt hour—the cheapest in the country—you can lose money. 7

Bitcoin miners who do not have direct access to cheap electricity do, however, have another choice.

Mining Pool

Mining pools are one way, and probably the only way, that Bitcoin mining can still be profitable. This allow miners to pool their resources, increasing their computing power while dividing the complexity, expense, and reward of Bitcoin mining. F2Pool, Poolin, and BTC.com are only a few of the well-known Bitcoin mining pools around the world.

Individual miners earn a very small portion of the payout when a mining pool is rewarded. Since one bitcoin can be divided to eight decimal points, the Bitcoin network can handle a transaction of 0.00000001 BTC, allowing thousands of Bitcoin miners to cooperate via mining pools.

However, miners can have to wait a long time to reap their reward. While this is highly speculative, one study found that receiving one bitcoin from mining efforts as part of a pool would take about 1,200 days on top-of-the-line ASICs hardware.

How to Begin Bitcoin Mining

Bitcoin mining is still possible, despite being incredibly difficult and barely profitable. Although joining a mining pool would produce the best results, the steps below can be taken to get started mining Bitcoin:

• Compute profitability: The cost of energy and mining hardware would be the primary expenses. Any benefit would be primarily determined by the fluctuating value of Bitcoin.
• Get mining hardware: After you’ve done your preliminary estimates, you can expect to spend somewhere between a few hundred and a few thousand dollars on mining hardware.
• Pick mining software: After that, you’ll need a network to access the blockchain and control your mining. There is a wide range of Bitcoin mining applications available.
• Install a Bitcoin wallet: You’ll need a Bitcoin wallet to store your bitcoins after you’ve mined them. Digital wallets allow you to store your bitcoins in the “cloud,” but they are a popular target for hackers. An offline wallet protects bitcoins by storing them on a laptop that is not connected to the internet.
• Enter a mining pool: The highest chance of success is to join a mining pool.
• To start, first: You can begin mining once all of the previous steps have been completed. While this is a relatively passive company, it is still necessary to check equipment on a regular basis to ensure that it is in good working order.

Traditional Currencies vs. Bitcoin

People have a strong preference for printed money. That’s because the US dollar is protected by the Federal Reserve, the country’s central bank. The Federal Reserve controls the production of new money, and the federal government prosecutes the use of counterfeit currency, among other duties.

A central authority backs even digital payments in US dollars. A payment processing company, for example, handles your online transaction when you use your debit or credit card (such as Mastercard or Visa). These firms, in addition to tracking your transaction history, also check that transactions are not fraudulent, which is one reason your debit or credit card might be suspended while you’re on the road.

Bitcoin, on the other hand, is not governed by any government. Instead, bitcoin is supported by millions of computers called “nodes” all over the world. The Federal Reserve, Visa, and Mastercard all use this network of machines, although there are a few key variations. Nodes keep track of previous transactions and assist in the verification of their validity. Bitcoin nodes, in comparison to those central authorities, are scattered across the globe and record transaction data in a public list that everyone can access.

Bitcoin Mining’s Backstory

One block of transactions is checked every 10 minutes, thanks to 1 in 16 trillion odds, growing difficulty levels, and a large network of users verifying transactions.

However, keep in mind that 10 minutes is a goal, not a necessity.

As of August 2020, the bitcoin network was processing just under four transactions a second, with transactions being logged in the blockchain every ten minutes.

Visa, for example, will process about 65,000 transactions per second.

However, as the number of bitcoin users grows, the number of transactions made every 10 minutes will inevitably outnumber the number of transactions that can be processed in that time. Unless the bitcoin protocol is modified, transaction wait times will begin to increase at that stage and will continue to increase in the future.

Scaling is a term used to describe the problem at the heart of the bitcoin protocol. While the majority of bitcoin miners agree that scaling must be tackled, there is less agreement about how to do so. The scaling problem has been addressed by two big solutions. Developers have proposed the following solutions.

1. Adding a “off-chain” layer to Bitcoin to allow for quicker transactions that can later be checked by the blockchain. or

2. increasing the maximum number of transactions per block. Solution 1 will make transactions quicker and cheaper for miners by requiring less data to verify per block. Solution 2 will address scaling by increasing block size to allow for more data to be processed every 10 minutes.

Bitcoin miners and mining companies representing approximately 80% to 90% of the network’s computing capacity voted in July 2017 to implement a program that would reduce the amount of data required to validate each block.

A segregated witness, or SegWit, is a program that miners voted to include in the bitcoin protocol. This term is derived from the words separated, which means “to distinguish,” and witness, which means “signatures on a bitcoin transaction.” Separating transaction signatures from a block — and adding them as an expanded block — is what segregated witness refers to. Although it might seem that introducing a single program to the bitcoin protocol isn’t much of a solution, signature data is estimated to account for up to 65 percent of the data processed in each block of transactions.

A community of miners and developers launched a hard fork less than a month later, in August 2017, leaving the bitcoin network to create a new currency based on the same codebase. While this group agreed that a scaling solution was needed, they were concerned that using segregated witness technology alone would not be enough to solve the issue.

Solution 2 was selected instead. The resulting money, known as “bitcoin cash,” increased the block size to 8 MB to speed up the verification process and allow for about 2 million transactions per day. Bitcoin Cash was worth about $302 on August 16, 2020, compared to $11,800 for Bitcoin.

How Much Processing Power Does It Take to Create a Bitcoin?

Bitcoin is a convenient way to send and receive money, but cryptocurrency isn’t free. Bitcoins are generated by a group of computer-based miners who consume large amounts of electricity. Some analysts say bitcoin is not an environmentally friendly endeavor due to its reliance on electricity.

So, how much energy does it take to build a bitcoin? Bitcoin mining consumes about 1% of the world’s electricity, according to written testimony submitted to the US Senate Committee on Energy and Natural Resources in August 2018.

Bitcoins are generated (mined) by people all over the world using computers to solve the same mathematical puzzle. Someone solves a puzzle every 10 minutes or so and receives bitcoins as a reward. The process then repeats itself, with a new puzzle being created each time.

The People’s Power

More people are mining bitcoins with their machines as they learn more about bitcoin and mining—and as the bitcoin price rises. You could expect each puzzle to be solved faster as more people enter the network and try to solve these math puzzles, but bitcoin isn’t built that way.

The bitcoin mining program is set up so that everyone on the network must solve the puzzle in 10 minutes. This is accomplished by adjusting the puzzle’s complexity based on the number of people attempting to solve it.

while the time it takes to create a bitcoin is constant, the computing power required to do so varies. As more people enter the bitcoin network and try to mine bitcoins, the puzzles become more difficult, and each bitcoin generated requires more computing power and electricity. The best bitcoin mining software not only allows you to run the hardware, but it also lets you mine more effectively by reducing downtime.

Expense Estimate

To figure out how to measure the amount of electricity used to run the bitcoin network, you’ll need to know how bitcoin is created. Calculating how many amounts are performed per second to solve bitcoin’s mathematical puzzles, and then determining how much electrical energy it takes to do each number, is one way to look at it in terms of the amount of electricity used.

Hashes are the individual sums, and there are a lot of them—so many that you have to think in terms of millions or billions of hashes to make sense of them. The bitcoin network’s computers were producing about 120 exahashes every second in early 2020.

Many companies have concentrated on Application-Specific Integrated Circuit (ASIC) mining computers, which use less energy to perform calculations. When mining for bitcoins, mining companies that use a lot of ASIC miners say that they use just one watt of power per gigahash per second of computation.

According to this prediction, the bitcoin network would consume 120 gigawatts (GW) per second in 2020. This equates to around 63 TWh per year.

This massive amount of energy is equal to 156 million horses (1.3 million horses per GW) or 49,440 wind turbines (412 turbines per GW) producing power at peak output per second.

It takes 10 minutes to mine one Bitcoin, regardless of the number of miners. Using the average power consumption given by ASIC miners, mining a Bitcoin would take 72,000 GW (or 72 Terawatts) of power at 600 seconds (10 minutes).

Since a large number of residential miners use more power than one watt per gigahash per second, it’s likely that this is a conservative estimate. The accuracy of recorded power usage is sketchy at best, as various media outlets and bloggers have provided various estimates of the electrical resources used in bitcoin mining.

The Costs of Bitcoin Mining Vary by Region

To find out how much power it would take to make a bitcoin, you’ll need to know how much electricity costs in your region and how much power you’d use. Mining machinery that is more energy efficient uses less energy, which results in lower electricity bills. The lower the energy price, the lower the cost to miners, increasing the appeal of Bitcoin to miners in low-cost areas (after accounting for all the costs associated with setup).

The price of bitcoin has fluctuated widely over its history, but as long as it remains above the cost of producing a coin, performing the work in an environment with low energy costs is critical to making the practice worthwhile.

The Real Cost of Bitcoin Mining
The value assigned to bitcoin in terms of energy use and therefore environmental effect is determined by its utility to society. The problem with calculating and judging bitcoin’s energy consumption is that it will change over time.