Bitcoin has had a fantastic 2017, breaking records multiple times at one time breaching $6000. With its unrelenting surge, a corresponding rise in interest in the alpha cryptocurrency among investors and speculators seems to be gathering steam once more. Does one buy it or mine it? For anyone with interest in exploring the latter, this simplified short piece might just help.
What is Bitcoin Mining?
Bitcoin mining is a game of chance in its essence. Anyone with a good internet connection and specialized hardware can participate in it. But the better hardware you have the higher the chance you stand in getting it. Bitcoin mining is simply the use of humongous amounts of computational power to solve complex mathematical puzzles at lightning speeds on an openly distributed ledger known as the blockchain in order to unlock new blocks rewards. Bitcoin mining is also the means through which the blockchain remains tamper-proof and highly secure, as each transaction gets vetted before it is added by the miners in return for a given fee.
What Do I Need to Start Mining?
A typical bitcoin mining rig consists of a software running pieces of specialized hardware:
• Hardware: Any given computer processor can basically be a bitcoin mining hardware. In its early days, the CPU was all there was to mine bitcoin. However, the need to make the network more secure and hasten the mining process led to the adoption of new hardware like the GPU which came into use about two years into the life of the cryptocurrency. The multiple tunnel process of GPUs meant that mining got over 100 times faster than with CPUs. Though GPUs brought about better yields, they had one huge drawback which was that they were extremely power consuming. And thus in the quest for higher efficiency Field Programmable Gate Array or FPGA (which consumed less than a fifth of what GPUs consumed) were adopted. This newly found power efficiency gave birth to the first bitcoin mining factories that we see all over the world today. The industrialization of bitcoin mining meant that an industry-grade mining hardware became highly needed. This gave rise to the ASIC miners around 2013 which are still in use till date. The ASIC miner unlike other mining hardware before it is specifically meant to be ever used for mining Bitcoins only. They are over 100 times faster while consuming even less power than the standard FPGA. ASIC miners are modified till this day to make them even faster than ever before
• Software: Mining software is of two kinds. The one you use on your own or those you use to tap into a mining pool. Unlike the amounts of power bitcoin mining hardware consumes, a typical pool mining software will consume a negligible 15MB in a given day.
Is Bitcoin Mining Still Profitable Today?
Despite it being open to anyone interested, the profitability of bitcoin mining today favors the big industrial scale miners than the smaller ones. And even among industrial scale miners, profitability varies from region to region majorly due to differences in cost of electricity which is the main capital consumer apart from the mining hardware. If you want to run a successful mining operation, a certain threshold of investment is needed. If you don’t have enough capital, however, you may end up spending in electricity and other costs more than the reward you will be generating in bitcoin at the end of the day.