With all the craze surrounding Bitcoin, there’s no doubt that many investors have pondered how they could mine their own Bitcoin instead of buying BTC at incredibly high prices. Creating Bitcoin is attractive to many investors as they can look forward to a princely reward for their hard work. Creating Bitcoin is no easy task, however, you must have excellent technical knowledge, the right equipment and resources, and a lot of time on your hands to devote to the process.
The Bitcoin creation process?
Bitcoin is created through a process of mining and every Bitcoin that is successfully mined enters into circulation. The process of Bitcoin mining is performed with highly sophisticated computers that solve very complex computational math problems. Bitcoin mining involves verifying Bitcoin transactions and recording them on the public blockchain ledger.
With this process, Bitcoin miners solve complex mathematical puzzles referred to as proof-of-work. For the technically inclined, this mathematical puzzle is solved by varying a nonce that generates a hash value that is lower than a pre-defined condition, commonly known as a target. The miner then verifies a transaction by solving the mathematical puzzle and adding the block to the network once it is verified and confirmed by other users.
This proof-of-work is required to validate Bitcoin transactions and enables the miner to earn a reward. Miners from around the globe compete with each other to mine particular transactions and the lucky miner who first solves the mathematical puzzle qualifies for the reward. All Bitcoin miners are participants on the Bitcoin network, and each has the correct hardware and computing power that is necessary to validate Bitcoin transactions.
Equipment needed for Bitcoin mining
Bitcoin miners use purpose-built computers to solve the complex mathematical puzzles that enable transactions to go through, and these highly specialised devices need a large amount of energy to function optimally. These super-computers are in a computational race against other super-computers from Bitcoin miners across the globe in an effort to record new blocks on the blockchain by solving the complex puzzles discussed above.
Bitcoin miners use a mining rig that is typically setup with either a Graphics Processing Unit (GPU) or an Application-Specific Integrated Circuit (ASIC) device. This equipment is created specifically for Bitcoin mining and is extremely efficient in solving complex puzzles and calculations. ASICs are known to be much quicker with the mining process averaging a hash rate of 100 trillion hashes per second while GPUs average around 800 million hashes per second. While these numbers appear quite attractive, they need a lot of electricity to work properly.
How much energy does Bitcoin mining involve?
A large amount of energy is required because of the competitive nature of proof-of-work blockchains that Bitcoin miners use. To put some perspective on what energy is required for Bitcoin mining, each Bitcoin mined uses the same amount of electricity that could power an average American home for 39 days — truly mind-boggling. Bitcoin miners are very particular about the location of their mining activities, as the price of electricity differs across regions. In light of this, Bitcoin miners flock to developing nations to ply their trade as the price of electricity is not as expensive and their activities are more profitable.
There has been a lot of attention on the copious amounts of electricity that Bitcoin miners require for their activities. Countries like China have brought this energy usage under the spotlight and have subsequently banned Bitcoin mining activities in the country. Kazakhstan is another country that has imposed stringent measures for Bitcoin mining activities due to persistent blackouts in the country caused by Bitcoin miners. It is important to note that not only is excessive energy usage needed for Bitcoin mining, but a significant amount of electronic waste is also generated by redundant equipment once mining activities have ceded.
Final Thoughts
For those investors who are keen to be rewarded for their Bitcoin mining activities, there are some important factors to consider. Bitcoin miners must weigh up the financial risks of not generating profits from their activities while also surveying the technical risks of managing highly sophisticated mining rigs. You must consider the limits of your electricity grid together with the price of electricity, and note the maximum level of power that your sockets will allow. While there are amazing rewards for those Bitcoin miners who crack the code, it is prudent to digest the risks involved before committing to this time-consuming activity.
It is important to note that investing in Bitcoin and Bitcoin mining activities is a risky and highly speculative proposition. This article does not provide recommendations, advice or guidance regarding cryptocurrency investments or mining but is rather our opinion on such activities. Investors must conduct their own research and engage in the services of qualified professionals before making any financial and/or cryptocurrency investment decisions. We do, however, recommend established platforms like Wisly (Link to https://wisly.io/) to monitor and analyse your crypto investments.
