Bitcoin mining can be quite lucrative, however, most experts would say that it can be challenging, expensive, but definitely rewarding if done properly. For that reason, a lot of investors have been attracted in cryptocurrency. This may be because a lot of entrepreneurs see mining as pennies sent from heaven, and those who are technologically inclined can benefit from it. Well, for starters, before you invest the time and equipment, it’s very important to familiarize yourself with the basics first and we’re here to help.
How Bitcoin Mining Works
As we talk about bitcoin mining, those who are not familiar with the term would imagine digging coins out of the ground– since it’s called “mining.” It’s actually far from that; for one, bitcoin isn’t something physical.
This brings us to the next question– then why is it called mining? The answer is quite simple. It’s quite similar to gold mining in a sense that bitcoins exist in the protocol’s design, similar to the fact that gold exists underground and they aren’t available above the surface just yet– they have to be dug up. Aside from that, the bitcoin protocol assumes that there will be around 21 million bitcoins that would come into existence at some point, and “miners” are tasked to bring them out to the surface. This process is described as “creating blocks” of validated transactions, making them a part of the blockchain.
How to Start
Step 1: Find the Perfect Bitcoin Mining Hardware
Everything starts with finding a mining hardware that already contains bitcoins. The good thing is that these hardware are available online, and in some of the leading online marketplace, such Amazon. Checking the bitcoin charts can also help you along the process.
Back in the days, miners simply use their computer or high speed video card to mine. Unfortunately, this isn’t enough anymore, but there are custom-made bitcoin ASIC chips that offer better performance than older systems– these are the ones that are slowly dominating the bitcoin mining.
The importance of finding the perfect bitcoin mining hardware is that it will allow you to effectively maximize electricity usage, and earn generously. There are a lot of companies that offer remarkable systems specifically made for bitcoin mining.
The Use of Bitcoin Cloud Mining Services
You can consider purchasing Bitcoin cloud mining contracts that make the process simpler, but it also increases the potential risks, as you wouldn’t be able to handle the actual physical hardware.
Step 2: Download a Free Bitcoin Mining Software
After getting a bitcoin mining hardware, the next step would be to obtain a specific program for bitcoin mining. There are a lot of programs out there that could be used for this purpose, but the most popular ones are the command line programs. For those who prefer the ease of use that can be enjoyed with GUI, then a click and go windows/Android/Linux program works best.
Step 3: Join a Bitcoin Mining Pool
Once you become fully ready to mine bitcoins, then it’s highly recommended to join a bitcoin mining pool where you’ll be able to work with a group of miners to solve a block and share the rewards with each other. Without a Bitcoin mining pool, it might take awhile before you can mine bitcoins– sometimes it can take over a year, and some don’t even earn any. That’s why it’s more convenient to work with other miners and just split the rewards later on.
You can consider using a fully decentralized pool, and the p2pool is perfect for this.
This is also perfect for those who are testing the waters and are not yet fully ready. You’ll be in a group of miners who are probably in the same situation and lack the resources essential for mining. The computer of a lot of users create a formidable resource capable of solving mathematical puzzles that the bitcoin blockchain has. Once this puzzle has been solved, then you can get your reward.
Step 4: Have a Bitcoin Wallet
You should also have a bitcoin wallet, or you can use an existing bitcoin wallet where you can put the bitcoins you mine. Bitcoins are delivered to a Bitcoin wallet through the use of a unique address that only belongs to you. The most crucial part in setting up your wallet is to secure it from any potential threats and this can be done by enabling the two-factor authentication.
Stay Up to Date
Lastly, staying up to date will help you maximize your profits as you’ll know when will be the right time to act and what to avoid.