How to Mine Bitcoins: Hardware, Techniques, and Performance

Mining bitcoins? We have been hearing quite a lot about it everywhere recently. This cryptocurrency is based on a decentralized blockchain technology. The system needs computing power: when you put a high-performance computer at the disposal of the cryptocurrency, you can get a small income. The income is proportional to the part of this system in the overall calculation. Moreover, there are machines specifically designed to mine Bitcoins.

In this new file around Bitcoin, we will talk about Bitcoin mining. As the name indicates, it is to obtain Bitcoins whose value becomes more and more interesting even if it remains very volatile. In this case, by providing the network with sufficient computing power. They are miners of greater or lesser importance that operate the blockchain system. Also, who approve and do the calculations necessary for transactions.

Bitcoin miners may be individuals with one or more machines dedicated to this purpose. They might also be professionals with real computer farms, which of course pushes the initial cost up. However, in recent years, we can find individual machines optimized to mine Bitcoins.

To Understand What Bitcoin Is, You Have to Understand What Currency Is

Historically, money has emerged as a cure for barter. It is still more convenient to exchange a good for the money than to put in the balance for another good or service. Currency, therefore, standardizes trade.

However, that’s not the only thing the currency does. For a long time, the value of money has been based on the price of precious materials, such as gold and silver. Then we invented paper money, called fiduciary money.

Making a banknote does not cost, as you can imagine, the value displayed on it. On the other hand, the fact that you cannot make it yourself and that it is difficult to falsify introduces the notion of trust.

You have 10 euros in hand: you know that you can buy once everything that has a value less than or equal to 10 euros. If you give 10 euros to someone, he knows instantly that he can do the same with your ticket. This question of trust is a fundamental property of the currency.

Beyond trust, and since the value of the euro, for example, is not modeled on a standard (a precious commodity), the relative price of one currency vis-a-vis another, depends among other things on the amount of money in circulation and volume of trade.

In such a way that one can provoke inflation or curb it by injecting money into the economy, or on the contrary by limiting the quantity in circulation available. It is also necessary, as a bonus, that savers decide to consume.

Bitcoin modernizes a monetary and banking system that has changed little since the Renaissance.

Bitcoin reproduces these properties in an automated way, without banks, without intermediaries. Each Bitcoin is represented in the order by a block. There are exactly 21 million Bitcoin blocks in the chain that serve the currency.

Its relative value, therefore, depends on the scarcity of available blocks. So as with money, the number of blocks but also the volume of trade.

Owning Bitcoins means having an address in the system under which you can accumulate blocks of Bitcoins. This address does not mean anything particular, and it does not say anything about your identity or address for example.

Namely, the encryption keys associated with your Bitcoins wallet can, also, be transferred or stolen if they are not adequately protected. It is advisable, for example, to keep your bitcoins in computers that are not connected to the internet when you have a lot of them.

The other aspect to be very careful: during crises, like the Greek crisis, people are referring massively to this kind of cryptocurrency. This causes substantial fluctuations in its value. With a prospect of big profits and also significant losses.

Buy and Keep Bitcoins In A Wallet

To start using Bitcoins, you must have a wallet. For this, there are several solutions. First, there are wallets online. They greatly simplify the management of your Bitcoins and take care of their security. Moreover, that’s a bit of a problem: there have already been several cases of suspicious hacking of some sites.

As you can imagine, the customers have finished naked. It is therefore rather advisable to manage the aspect of wallet yourself. What can be done through applications for your computer and smartphone? On the Bitcoin.org site, you will find many resources to secure your money.

It is also advisable not to put your eggs in one basket, and to make backups.

Now, let’s discuss Bitcoin mining and how you can have good profit from it and what you need to know about bitcoin mining.

What Materials Are Required to Mine Bitcoins?

At the beginning of Bitcoin, the mathematical problems that had to be solved were relatively simple. A desktop computer was enough to carry out operations and to provide income to its owner. However, as the network grew, mathematical problems became more and more complicated. Mining actors with more and more computing power were required.

Moreover, so, the profitability has decreased significantly. However, technology has made progress, and miners have started to use graphics cards, much more efficient in parallel computing (which is perfect for mining). Moreover, now, some machines do nothing but mine Bitcoins. These contain application-specific integrated circuit (ASIC) chips that consume less power and perform better.

It’s getting harder and harder to generate revenue, at least when you’re mining alone because you have to solve a block to get the reward completely. The miners, therefore, tend to regroup to stay competitive (we speak of the pool). Revenues are shared according to the effort spent.

It is also possible to outsource hardware and subscribe to mining services in the cloud. In cloud services, the necessary investment can be high, and the risk is necessarily essential. Once you have invested, you will not be able to leave with your machine under your arm … To summarize, we have three techniques: only with your equipment, in the Cloud, or in the pool.

Which Technique for Which Income?

In fact, the Bitcoins you receive in exchange for your mining do not come from anywhere. As we have seen above, it is by solving mathematical problems that new Bitcoins are created. Since it is the miner who solves these problems, an algorithm pays him for his effort. However, as new entrants arrive, the number of Bitcoins spent on mining decreases and the difficulty increases.

A block is generated in the world (thus calculated) approximately every 10 minutes. Today, every time a miner manages to create a block, he gains about 12.5 Bitcoins. A few months ago, you could win 25 BTC per block. What happens is that to limit inflation, adjustments are made every 210,000 blocks. The income per block is then suddenly halved. This happens about every four years.

So today, you can expect to earn 12.5 BTC per block. That gives about 101,665 euros at the time these lines are being written (1 February 2018). Of course, solving a block is not as easy as it sounds. Moreover, as a rule, a minor can only solve a block fraction a month. Additionally, until he finishes the block, he gets nothing. That’s why the pools are so successful, since joining them can start making money immediately.

For A Sufficient Return, The Initial Investment Required Is High

Where it gets tough is that the more miners there are, the more adjustments the system has to make to stay afloat. So, we have a difficulty coefficient, which allows us to estimate the number of hashes needed to solve a block. Currently, the entire network uses between 15 and 20 million tera hashes per second. Imagine what it will take to power for a single miner.

The most powerful machines found on the market allow a return of +/- 13TH / s. This is the case of the Antminer S9 whose purchase price is around € 2,300 each. The efficiency of the machines fluctuates according to the coefficient of difficulty and any changes in the yield per block.

Because with the time, the yield decreases, and it is necessary to deduce from your income the next machines of a miner that you will have to buy and not to mention electricity. This problem makes cloud mining services interesting.

You will necessarily save money. For example, at Genesis Mining, an essential investment of $ 4,940, you can reach 40 TH / s. It also means electricity included. On the downside, the service also takes a percentage of your BTC revenue to perform system maintenance.

Bitcoin Is Not the Only Cryptocurrency

So, you see, to start in 2018 in the mining of Bitcoins requires being able to invest a reasonable sum of money, and to consider everything: electricity, maintenance, depreciation … Making profits today is still possible at the condition to have enough money under the mattress, and to calculate everything as accurately as possible.

That said, Bitcoin is not the only cryptocurrency. In the future articles, I will discuss competing, and especially new, currencies that also need miners, with sometimes better returns.