What is Cryptocurrency Mining and How does it Work?

Cryptocurrency or Bitcoin mining is how new transactions are confirmed when coins enter circulation. The process is powered by the network and critical components used to maintain and develop a blockchain ledger. Mining is performed using sophisticated hardware that can solve the complex computation math puzzle. These puzzles are so complicated that they can not be solved by hand, taxing powerful computers. Nowadays, people use complex machines to speed up mining. This article has outlined a few facts you should know about bitcoin mining and what to look for when buying or selling.

Bitcoin Block Reward

After solving the complicated mathematics problem, you can be rewarded with 6.25bitcoins plus a transaction fee. Some people claim that this award will reduce to 3.125 bitcoins comes 2024. This process of mining repeats itself after every 10 minutes in every mining machine on the network. A complex puzzle in the network is adjusted for every 2016 block to ensure that an average device can solve a problem puzzle in 10 minutes,

Mining Hardware

We have computers hardware that is created for bitcoin mining. Robust hardware with more energy-efficient generates enormous profits compared to less powerful. An example of hardware machines is Antminer S19 which costs $6k; Antminer S19 Pro, which costs $8k, Whatsminer M30S+, which costs $2.2k; WhatsMiner M30S++, which costs $2.8 and AvalonMiner 1246, which cost $5.5k. The price of these machines is not constant; it depends on the seller and country the buyer is in.

Hashrates

It is a unit measuring miners' computation power. When there are many miners in the network, computing power becomes high. Therefore, it becomes harder to solve the puzzle. Hence the hope of getting a reward is low.

Hashrate is like a computational arms race, so the one with the most computing power will mine most coins because when the machine has higher computing power, the more solutions a miner is likely to find.

Hashrate is measured hash per second. For example, these are commonly used SI units for Hashrater Kilohash (thousands of Hashes/ second), Megahash (millions of Hashes/second), Gigahash (billions of Hashes/second), Terahash (trillions of Hashes/second), and Petahash (quadrillions of Hashes/seconds).

Ways of Earning

For a miner to make a profit, revenue for mining should be higher than all factors used as original investments. Factor such as cost of energy consumption and initial investment used to buy a mining hardware.

Mining Revenue

We have several cryptocurrencies like Ethereum. Bitcoin is not the only one. In 2020, a modern machine was introduced known as ASIC. It was like Whatsminer M20S. This machine generates around $8 in revenue every day. If you compare this revenue with revenue generated from other cryptocurrencies is more than double them. After the miner has collected revenue, they safely and securely record their transaction into the blockchain, which other users can buy.

Block Reward

After every ten minutes, a specific number of newly minted bitcoin is awarded to the person with a quick mining machine to discover the new block. Initially reward for the block was 50 BTC, but it is reduced by half every four years. For example, in late 2012, it was 25BTC; in mid-2016, it was 12.5BTC; in the last year, 2020, it was 6.25BTC.

Transaction Fee

Bitcoiners have to pay the transacting fee when they are transacting bitcoin to one another. Every transaction is recorded in an unchangeable blockchain that is copied to every machine used to the miner that bitcoin. Miner will benefit from the transaction of bitcoins they mined.

How to Recognize Your Profit from Bitcoin Mining

A lot is going on in cryptocurrency mining, so some prefer buying bitcoin to make an easy profit. When you are careful and mine bitcoin effectively, you will end up with more coins.

1. Efficient Hardware

There is hardware that has been manufactured you can use to mine bitcoins. Some machine has higher computing power, so they mine more bitcoins.

2. Cheap Electricity

Some bitcoin machines consume a lot of electricity. For example, machine-like Whatsmine M20S can cost up to $110 per month on electricity alone. It would be best to consider power consumption and the price of electricity before buying a machine, or else you won't make a profit.

3. Reliable Mining Pool

There are two mining pools Slush Pool and F2Pool. F2Pool pays the miners regardless of whether the pool has successfully mined each block or not.

4. Fee When Selling

If you are a smaller miner, you are likely to sell your coins on a retail exchange. Sometimes the fee is low because it depends on the fee structure of exchange. Professional miners have advantages because they sell their coins depending on the state of the market and, most time, high.

Conclusion

Choosing the right pool is essential because you will receive coins sent from the pool every day. If you can access cheap electricity and modern tools or not be involved in mining, it will be expensive.