Bitcoin has held interest of people in recent months due to its stratospheric rise in value. people who own bitcoins that was worth a couple of hundred dollars a few years ago are practically worth hundreds of thousands of dollars today. This has generated a lot of interest on how bitcoin could be earned.
One of the ways of earning bitcoin is to generate it. the generation of bitcoin is referred to as mining. People mine bitcoin because it is supposedly the surest way of earning and owning bitcoins without buying them with out of pocket expenditure. In a sense, this is correct. If a miner knows what it takes to mine bitcoin, and is able to deploy appropriate hardware such as computing equipment connected to the internet and adequately supplied with power, that miner should generate bitcoins.You may view the above as a preamble. In reality, bitcoin mining is challenging and quite expensive. It takes adequate knowledge and skills to engage in profitably.
This is because bitcoin mining has come a long way and may be compared to mining actual gold in a minefield that early miners have been working on for years. With such an analogy, mining such gold ingots would be more labour intensive, meaning that the miners would need to put in more effort and get deeper into the earth to reach the gold deposits, unlike in the early days when the mine was discovered.Bitcoin mining is the process by which bitcoin is generated or earned without buying it with money. It is the process of gathering bitcoins using mining equipments which in this case are hardwares that are computational and fast. Mining equipments are very specialized these days unlike earlier on when Bitcoin was discovered. The essence of mining is to generate new coins without it the number of bitcoins in circulation would be static. The miners are rewarded by confirming bitcoin transactions.
Confirmation of transactions involve proving that the bitcoin sent by a sender has not been used or sent by that sender. this is called double spend.In essence, miners ensure that the integrity of the blockchain, an ever growing ledger is maintained by proving the authenticity of every transaction. When confirmed, the new transaction block is added to the chain. The way bitcoin is designed, the miners’ incentive is the transaction fees paid by users and block reward. Bitcoins are mined in units called blocks, these are the units that miners confirm and are appended or added to the blockchain. One block reward is valued at 12.
5 bitcoins. With the value of bitcoin today at about $10,000, a block reward is about $125,000.Seeing that figure would attract everyone who is technically savvy to try mining bitcoin. However, there are other intricacies involved which makes it not so easy for any random person to earn that sort of money. Bitcoin mining is competitive because the program was designed to make the mining difficulty to increase with time.
For instance, in 2009 when the first bitcoin called the Genesis Block was mined, the block reward was 50 bitcoins. The mining difficulty is designed to increase with time and halve every four years. so the block reward halved from 50 to 25 in 2013 and halved again to 12.5 in 2017.The total number of mineable bitcoins are 21 million, of these 16 million have already been mined.
These are some of the bitcoins in circulation today. Some, because some coins are lost because the owners have lost access to the wallet keys. I am sure that you have heard some people say that miners have equipments that solve difficult mathematical problems. That is not strictly true. Rather, what happens is that the first node (computer) that verifies a transaction is rewarded with the block. To earn the block reward, that miner’s node would have verified 1 MB size of transaction. In essence, for a miner to earn the block reward, their node must be the first to verify this 1 megabyte size transaction first. So mining is a function of speed.
In the early days of bitcoin, normal desktop computers could mine the coins, but today to mine bitcoins, you’ll need very fast specially designed mining machines called application specific integrated circuits (ASIC). These cost between $500 and a few thousand dollars. To get started with mining bitcoins, you’ll first have to purchase your ASIC mining hardware. Then download a bitcoin mining program such as BFGminer or CGminer which are programs that use command line. EasyMiner is a plug and play Linus/Window/Android program that is easier to use.
However, bitcoin mining is barely profitable going solo. You may spend many months without solving a block. this why you should join a mining pool Slush Pool or CK Pool among other where you add your computing power with that of other miners in the pool and share the profit.