Cryptocurrency mining is easier said than done; it demands a lot of effort, expenses, and time and the rewards are not guaranteed at all times. Yet, Bitcoin mining seems to have a magnetic appeal and miners have engaged in it to get incentives in the form of “rewards”.
The biggest reason why miners carry out cryptocurrency mining is in the hope of earning rewards; this however does not mean you have to mine on your own to get the crypto coins. You can buy Bitcoins at cryptocurrency exchanges in exchange of traditional fiat currencies, or even trade it for another crypto coin at the exchange. The “rewards” of mining however works as an incentive to miners to mine more.
How is Bitcoin mining done?
Bitcoin mining can be performed only by specialized computers; miners have the job of securing the network and processing Bitcoin transactions. To do so, they must solve complex cryptographic puzzles that enable them to chain blocks of transaction into a “blockchain”. In exchange, miners will get new Bitcoins for every block successfully mined. So, miners really get paid for auditing work; they verify Bitcoin transactions and avoid what is called a “double-spending” problem.
Mining is done for two key reasons, namely, to produce new Bitcoins and to solve complex mathematical problems that will make the payment network secure. This is called “proof of work” and they need to produce a number that is termed as “hash” which is equal to or less than the target hash. The miner’s computer will generate these hashes at mega hashes per second rates, depending on the kind of unit being used. Mining difficult will continue to escalate as more and more blocks are mined. The difficulty level gets adjusted after every 216 mined blocks; this implies that when there are more miners vying against one another for solutions, the problems become more and more complex. This automatically implies demand for higher computing powers.
Traditional currencies like the GBP or USD are issued by centralized banks in their native countries; this institution is responsible for releasing new units. But the Bitcoin is different as miners will be rewarded with new coins every 10 minutes. Transactions are complete and secure only after they have been included within a block. And, when transactions are part of a block will they be included in the blockchain. Miners help to make the network secure, by protecting it against attacks.
For those of you who wish to mine the Bitcoin you will need to invest in a specialized computer and mining rig to get started. You will need mining hardware like an ASIC miner that is exclusively designed for Bitcoin mining. But, the entire process if very expensive and mining is not really profitable for individual miners. This is why most mining is carried out in very large warehouses with multiple computers and where electricity is cheap. The idea is not to mine individually today, rather to join mining pools. Solo mining does not fetch many rewards but in pool mining, you can get a decent payout. You will also need mining software that tells you the pool hash rate and where the payouts will be sent to.