Mining

What is the meaning of Mining?

Mining is a process of providing computer processing power or capacity to ensure operation of blockchain technology for which a "miner" obtains bitcoins.

Issue of cryptocurrency is possible only by means of mining.

Mining can be interpreted as development of deposits or extraction of mineral resources. If we talk about mining of bitcoins, this is actually an extraction of "virtual gold".

Who is involved in mining of bitcoins?

Miners are people who are engaged in mining. This word also means specialized devices for obtaining bitcoins installed in computers.

What is the process of mining?

Miner is partially resemble a participant of a torrent tracker, which, for example, makes it possible to download files (music or movies) by other users by launching a specific program.

If we consider situation with bitcoin, miners perform support for payment system, confirm transactions and store records of smart contracts. Miners obtains bitcoins for the foregoing operations.

Mining process is an insertion of transactions with bitcoins into blockchain, that is a publicly available database responsible for confirming a transaction. In order to understand and distinguish real transactions or next attempt to spend same bitcoins twice, blockchain is applied.

Mining is specifically designed to be complex and resource-intensive, so that a number of blocks found by miners does not change daily.

Essence of cryptocurrency

Nowadays, cryptocurrency is extracted on so-called mining farms (specialized devices). Mining farm is a premise with certain number of computers, which have programs necessary for mining installed.

Necessary temperature must be controlled and maintained in such a premise in order to avoid overheating of computers.

What is benefit from mining?

At the beginning of emergence of bitcoin, its extraction was available to almost everyone domiciliary. With passing of time, competition of miners were increasing, and accordingly their number in a network increased too.

As a result, mining became much more complicated and miners began to receive less.

Economic efficiency of mining is directly influenced by the following factors: electricity costs, computer performance, current complexity, bitcoin rate in comparison with other currencies.

Mining equipment

When bitcoin emerged, it could be extracted by means of regular home computers with good-quality video cards. To date, the foregoing is out of question.

Modern equipment for mining consists of specialized expensive devices and chips, manufacture of which has become a separate multimillion-dollar industry.

Is it possible to be personally engaged in mining?

There is a sense in dealing with the foregoing by yourself, but you have to understand that you need to have enough money to purchase expensive equipment, and mining also includes costs for its maintaining (electricity, premises, cooling). There is always a chance to make money from mining.

There are "Pools" of miners (associations) in order to involve ordinary users in the process. A pool may consist of hundreds or thousands of cryptocurrency miners, who receive appropriate share of reward in accordance with an extent of their contribution. Such pool is represented as one miner for a network, that is actually main server that distributes individual tasks to miners and, as a result, produces hundreds of gigabytes of hashes per second.

According to practice, this approach is the most effective and brings reward faster, albeit in small portions.

Mining reward

Original of Satoshi Nakamoto's technical document states that reward is reduced twice every four years due to finding of a new block, thus: it was 12.5 BTC in summer of 2016. The foregoing means that reward will be reduced by half in 2020.

If your equipment is in a pool, then reward is received by such pool and is distributed among participants. Complexity of finding blocks varies every 2016 blocks or approximately once in every two weeks. Increasing of power of a network leads to an increase in complexity.

To calculate your potential earnings, it is possible to use the Bitcoin Mining Calculator.