Bitcoin mining is a process that supports the Bitcoin network and rewards participants with Bitcoin currency. Bitcoin mining is a highly technical process that requires significant computing power, but thanks to a strong community that supports an open, decentralized currency system, nearly anyone can mine Bitcoin. You only need to invest in dedicated Bitcoin mining equipment and learn how to run your own mining operation.
But it’s important to temper your expectations for how much you can earn. Bitcoin mining equipment is expensive and Bitcoin miners require a lot of electricity. It’s possible to lose money by mining Bitcoin depending on your equipment, internet connection, and power costs. But if you approach Bitcoin mining strategically, you can perhaps make a little money while supporting the Bitcoin ecosystem.
- Bitcoin miners validate transactions on the Bitcoin network and get paid in Bitcoin. This is called mining.
- Bitcoin miners compete against each other to solve complex mathematical equations.
- It’s possible to mine Bitcoin at home, though you may spend more than you earn.
- Profitable miners often own many mining rigs and work together in mining pools.
What Is Bitcoin Mining?
Mining is the technological process that processes Bitcoin transactions and mints new Bitcoins. Bitcoin mining adds new blocks to the Bitcoin blockchain, which is an electronic public ledger that tracks every Bitcoin transaction. The Bitcoin blockchain is operated and maintained by Bitcoin miners.
Bitcoin miners in possession of extensive computing power compete against each other to verify the next block of Bitcoin transactions. The winner gets paid a small amount of Bitcoin for successfully solving a complex mathematical equation in the shortest period of time.
The reward for successfully validating a block is 6.25 BTC, which is expected to reduce to 3.125 BTC in 2024 as the amount of mined Bitcoins get closer to its total supply of 21 million. This process is called halving.
Bitcoin miners can work alone or in mining pools to earn Bitcoin rewards. Bitcoin mining requires extensive computing power, and organizing into groups of miners is a way to mine crypto more successfully. Bitcoin mining pools connect many computers into a single network of miners, and when the network validates a block, the Bitcoin rewards are divided among the pool’s participants.
How to Mine Bitcoin
Bitcoin miners use mining hardware to generate a new Bitcoin block every 10 minutes. For solo Bitcoin mining, these are the basic steps to follow:
Anyone can mine Bitcoin with their computer and a fast internet connection, but it may not be profitable.
Choose and Set Up your Bitcoin Mining Hardware
Start by choosing the hardware you’ll use to mine Bitcoin. While you can use an old computer or laptop, you’re unlikely to earn any Bitcoin unless you invest in a more powerful setup designed specifically for Bitcoin mining. Antminer, made by Bitmain, is an example of a popular cryptocurrency mining hardware. You may be able to find used mining hardware online to save money.
Note that many mining rigs run on the Linux operating system and require extensive computer knowledge to set up and operate. If you’re new to advanced computing, plan on extra time for learning and troubleshooting.
Create a Dedicated Bitcoin Wallet
If or when you successfully validate a Bitcoin block, you need a valid Bitcoin wallet to get paid. Consider creating a dedicated wallet for your crypto mining activities, separate from any other Bitcoin investments.
You can create one or more different types of Bitcoin wallets, all with varying levels of convenience and security. As a Bitcoin miner, you may want to establish a hardware wallet—the safest kind—for additional security.
Configure Your Mining Equipment
Once your mining hardware is in place and you have a Bitcoin wallet, you can install and configure your Bitcoin mining software. This too requires some technical knowledge, particularly if you’re linking together multiple hardware miners to boost your Bitcoin mining capacity.
Some mining hardware has a software component in the form of a graphical user interface (GUI) that allows you to use a mouse to configure the hardware. Other mining hardware requires command-line knowledge—another advanced computer skill commonly used by programmers and developers. Spend some time looking at what works best for you needs as you select the Bitcoin mining software for your hardware.
You can start mining as soon as you download a local copy of the blockchain for the cryptocurrency that you want to mine. Once you click the right button to officially start mining, you can go take a break. Your mining setup, known as your rig, does the hard work of mining crypto for you. You should still check in periodically to make sure that your rig is still mining, but you don’t have to do any more work yourself. Your mining hardware can mine crypto 24/7, even while you’re at another job or asleep.
Should You Mine Bitcoin?
You can mine Bitcoin at home, but that doesn’t mean you should. Bitcoin’s supply is fixed at 21 million, and as more of it is mined, mining will get harder and more expensive. Large Bitcoin mining operations are generally the most successful and profitable. Your old desktop or laptop is likely no match against these sophisticated operators.
As a solo miner, you can join a Bitcoin mining pool where you can join your computing prowess with other miners to collectively mine Bitcoin.
Many miners consider the mining pool fees to be worth the expense, although you still need to purchase and operate mining hardware. Or you can decide to skip Bitcoin mining altogether.
Alternatives to Mining Bitcoin at Home
You don’t necessarily need to set up your own Bitcoin mining rig to benefit from mining. There are other ways to gain portfolio exposure to mining
With cloud mining, you can pay someone else to do the mining for you via cloud computing technology. Cloud miners contract with mining companies that enable access to mining hardware located remotely in data centers. Some cloud mining companies also manage the mining operations for you.
Cloud mining is different from mining pool.Biggest difference is that in cloud mining you’re contracting an organization to mine while in a pool you combine forces with other miners.
Invest in a Bitcoin Mining Company
You may also consider investing in public companies dedicated to Bitcoin mining. Riot Blockchain is an example of a Bitcoin mining company that trades publicly in the stock market.
Mine a Different Cryptocurrency
Bitcoin is not the only cryptocurrency that is mined. You can opt to mine Ethereum, Monero, Litecoin, and many others. Each coin has its own mining rules but varying economics and competition, which may produce greater cryptocurrency rewards than Bitcoin mining.
Frequently Asked Questions (FAQs)
How long does it take to mine one Bitcoin?
New Bitcoin is mined approximately every 10 minutes, every time a block is added to the Bitcoin blockchain. Currently, around 900 Bitcoins are created per day, with the number of new Bitcoins created per block set to decline as more Bitcoin enters circulation. With a new Bitcoin block created roughly 144 times per day, 6.25 Bitcoins are created per block. By that logic, one Bitcoin is created on average every 1.6 minutes.
How much does it cost to mine Bitcoin?
Miners must invest in mining hardware and pay internet and electricity costs on an ongoing basis. New mining hardware can cost thousands of dollars, depending on the equipment you choose. Power and internet costs vary by location and usage. As a result, it’s possible to make or lose money when mining Bitcoin.
How do you mine Bitcoin without hardware?
It’s possible to mine Bitcoin without hardware by paying to use cloud computing resources, which is what cloud miners do. Cloud miners trade the cost of mining hardware for mining fees paid to cloud mining companies.