Bitcoin Mining for Beginners - Bitcoinsmentor.com

Bitcoin mining for Beginners bitcoinsmentor.com/bitcoin-mining-for-beginners/

What is Bitcoin mining and How to mine Bitcoins ?

Are you a Beginner who want to learn Bitcoin mining ? then this Guide is just for you.

We often hear questions like, Can I mine Bitcoins for Free at Home using my computer ?

Mining is more than just getting free Bitcoins or any other crypto currencies at home.

If you want a complete guide about Bitcoin mining, Then just keep reading ! ( I suggest you to bookmark if you can’t read fully in one stretch)

Chapter 1

What is Bitcoin mining ?

The main aspect of Bitcoin (Block chain network) is Bitcoin mining. Miners provide nodes for Bitcoin transactions ensuring security and validating the transactions.

1/25

If it isn’t for Bitcoin miners, the network will be unstable and non functional.

Bitcoin mining can be done using specialized computers. It is important for Bitcoin mining Beginners to read this Full tutorial begore getting started.

When ever a Bitcoin transaction is made it goes to miners who process the transaction and validate it.

Miners do this by solving the mathematical problem called the block. This block later calls for the previous blocks forming the chain, Hence famously called “The Blockchain”.

For the service provided by miners, they are awarded with newly created Bitcoins (mined) from the block and the transaction fees.

Chapter 2

How does Bitcoin mining work ?

2/25

Many beginners confuse Bitcoin mining with Gold mining, its not actually the real case.

Bitcoin miners get paid for securing the network and validating the Bitcoin transaction.

For doing this miners provide their hardware & electricity. In return they get rewarded every 10 minutes in the form of new bitcoins.

How does Bitcoin mining work ?

Why do people mine Bitcoins ? Bitcoin mining beginners ask this question to us daily !

Some of the important features and uses of Bitcoin mining are: 1. Creation of New Bitcoins 2. Validating transactions 3. Securing the transactions

Mining is used to create New bitcoins Currencies like dollars, euros, dinar are issued by central banks. The central banks decide how much cash to generate and circulate in the market based on the economic condition.

But, Bitcoin is far more different.

3/25

When it comes to Bitcoin, miners are rewarded new bitcoins every 10 minutes.

Mentor's Tip Bitcoin mining is not the fastest way to get Bitcoins.

You can Buy Bitcoins instead !

Read our Bitcoin Buying Guide

Miners validate transactions Miners add transactions sent in Bitcoin network into their Blocks.

A transaction will become secured and completed once its included in a Block.

ONLY when a transaction is included in a Block it gets added into the Block chain.

For larger payments more number of validations will make it even more secure.

To get a Visual idea : 0. Transactions with 0 confirmations can be stopped and the Bitcoins can still be credited back to your account.

1. In case of small bitcoin payments (< $1000) , One confirmation is enough.

2. Many exchanges demand 3 confirmations for deposits. mostly enough for payments $1,000 – $10,000.

3. 6 is the standard, most bitcoin payments is considered to be secured when it undergoes 6 confirmations. Considered for payments from $10,000 – $1,000,000

What is the Need of Miners for Bitcoin ?

To be precise, Bitcoin network is secured by miners. So, Beginners please read this Bitcoin mining guide carefully.

If the transaction have to be secure, then the network has to be secure and here is where miners come to picture.

So the number of miners is directly proportional to the security level of the Network.

The only way to stop or reverse a Bitcoin transaction is to own more than 51% of the network hash power. But the hash power is distributed among various miners spread all over the world keeping the network secure and safe.

Chapter 3

How to mine for bitcoins ?

4/25

Do you want to try mining Bitcoins as a beginner ?

Yes ! you can do it. But, Its not profitable with PC or Graphic cards.

Mining bitcoins has become highly competitive with specialized hardwares setup in exclusive warehouses.

Let’s get real.

People who doesn’t have considerable investment, cheaper electricity, specialized equipments should NOT mine Bitcoins.

The thing is anyone can mine bitcoin but with conventional hardware they can only mine 10$ worth of bitcoins an entire year !

So its only waste of energy, time and sweat. However If you are very keen in mining then Buy the right hardware and setup properly.

Most miners have specialized hardware setup in warehouses that looks like this.

5/25

So this might be your competition ! so most likely you wont make a profit unless you have a huge investment for a mining farm.

This problem is for Bitcoin mining only. However you can mine other coins like Ethereum, Monero, Litecoin etc with specialized Graphic card Rigs.

Lets say you want to try mining, Follow the steps below !

Step 1 : Get a Bitcoin Wallet If you are a beginner and want to get into cryptocurrency world then you should first get Bitcoin wallet.

Want to know how to get a Wallet ? Read our Bitcoin wallet Guide to get a wallet !

When you are mining Bitcoins, The mined Bitcoins directly goes to your wallet.

So, don’t forget to create a Bitcoin wallet.

Step 2 : Find a Safe exchange Once you start mining, you start getting operational costs such as electricity, ROI on mining hardware, maintenance cost etc. you need to sell your mined bitcoins to make it up for. So register in an exchange to sell your mined Bitcoins.

Wondering which Bitcoin exchange is the best ? We have done our research for the past 4 years and curated the best exchanges below !

6/25

Popular exchanges

Coinbase High buying limits and liquidity Easy for Beginners to Buy Highly reputed exchange “Instant Buy” option with debit card BUY NOW

Binance SWIFT Bank Transfer Earn interest in Bitcoins Credit / Debit card payment P2P trading with 100+ cryptocurrencies BUY NOW

7/25

Coinmama High spending limits SWIFT Bank Transfer Available worldwide 0% processing fees on orders over $1,000 BUY NOW

BlockFi Buy Cryptocurrency using Credit / Debit card Deposit Cryptocurrency to earn interest at up to 8.6% APY Borrow cash, buy or sell crypto.

BUY NOW

Step 3 : Purchase a Bitcoin mining Hardware Rememeber the specialized hardware we talked about before ? The name of this specialized Hardware which is used to mind Bitcoins is called ASIC miner machines. As a Beginner you won’t be aware of Bitcoin mining hardwares. So read this tutorial to get an idea of Bitcoin mining and specialized hardwares used for Bitcoin mining.

8/25

ASIC machines are like computers, it doesnt look like conventional computer but like a mini box with chips and processor inside.

The chips and Processor are built in such a way that the sole purpose is to process the bitcoin transactions and mine Bitcoins.

I am making it clear that using GPU ( Graphic cards ) for mining Bitcoins is not profitable and advice you not to do it !

But you can use GPU for mining other coins like Ethereum, Monero, Litecoin etc.

If you want a sneak peak of How you can do mining with GPUs watch this video !

This video is from 2018 shows how much you can make with Bitcoins / month using GPUs, mining Ethereum. you will be paid in Bitcoins !

Step 4 : Choose a mining pool Once your mining hardware is setup, connected to power and internet, you need to choose mining pool. Bitcoin mining beginners should understand about mining pool and the background of it.

Mining pool joins together a pool of miners which makes them easy to find a Block.

Otherwise its called solo mining.

In solo mining you have to get a mass of machines say, 100 ASIC machines and setup a mining farm which makes it easier to find your own block and start mining. But, setting up a mining farm does take a huge lot of investment. That’s totally upto you !

How does bitcoin mining pool work ?

When you join a mining pool, you get to share your machines capacity (hash rates) with the pool. There are many miners like you who share their hash rates too. Now the entire set of hash rates appears as one.

Lets assume you contribute to 1% of the pool of hashrates When the Block is rewarded with 15.6 BTC reward then you will get 0.156 BTC as Block reward to your wallet.

Mentor's Tip Bitcoin mining is not the fastest way to get Bitcoins.

You can Buy Bitcoins instead !

Read our Bitcoin Buying Guide

Step 5 : Download a Bitcoin Mining Software

9/25

Beginners should do a proper research about the bitcoin mining softwares before starting.

A Bitcoin mining software will help you link you ASIC miner / GPU miners to a best mining pool.

This software will bridge the gap between your Hardware to the mining pool.

In this software you can enter your bitcoin receiving address to receive your Block rewards (BTC payments).

Step 6 : Caution ! First make sure Bitcoin mining is Legal in your country This is not a problem in most of the countries. Many beginners trying to learn bitcoin mining do this mistake. They invest the money, do all the setup only to get blocked by their country’s law and tax issues.

It’s better to lookup in internet or local news websites about the legality of Bitcoin mining and tax implications in your country.

Step 7 : Find whether Bitcoin mining is profitable to you Bitcoin mining beginners should first calculate their profitability. You should do some calculations at first depending on your budget, investment and electricity charge in your country.

1. Hash rate: Purely depends on the equipment you are using. The more Hashpower you have the more Bitcoins you receive.

2. Power consumption: The power consumed by your ASIC miner. Remember the Bitcoins you mine should be greater than the cost of the power consumed and amount invested on buying ASIC miner.

3. Mining pool: How many miners are there is your mining pool, how easily your pool finds a block and fee of the mining pool.

There are many other factors too. It keeps changing. For instance, Bitcoin halving will be done every four years which makes the mining fees reduce to half.

There is also a doubling in profit if you accumulate your mined bitcoins in your wallet and the price of bitcoin doubles.

Chapter 4

Bitcoin mining Hardware

10/25

ASIC mining machines are Highly specialized machines which has their own computing capacity. These hardwares computes and solves the mathematical problem that processes the block and reward you with Bitcoins for the work done.

ASIC industry is becoming more competitive and complex in time.

It is especially more profitable if you have access to cheap and unlimited electricity.

Evolution of mining hardware As a Bitcoin mining beginner, you would be wondering why would I need specialized mining hardware ? Can I mine Bitcoins with my computer simply like how people did in 2009 ?

Satoshi originally invented Bitcoin to be mined in PCs. But, Rookie coders found out they can get more hashing power from graphic cards. They coded dedicated mining software to enable it.

GPUs then leveled up to ASICs. The only problem with GPUs and ASICs are the heat produced them. So, they are installed in thermally controlled data centers aided by low cost electricity.

11/25

Bitcoin mining now is concentrated into fewer hands due to the scale of adaptation aided by financial power.

Chapter 5

Bitcoin mining pool, what is that?

Mining pool makes it appear a network of miners operating from a single place. This makes it easier for people who doesn’t have the infrastructure of data centers to find blocks easily.

Ofcourse, the people who setup the mining pool charge some fees. But, people with 4-5 ASIC machines can join with others to compete with data centers that have 100-500 ASIC machines.

Satoshi didn’t anticipate the raise of mining pools.

Mining pools are network of miners who agree to share the reward in proportion to the hash power contributed by them.

Here is a pie chart which shows current mining pools and total hash power contributed by them.

12/25

Chapter 6

Whats going on inside Bitcoin mining Industry

13/25

For the past decade Bitcoin mining has gone through soo many transformations. From computer mining to GPU mining to ASIC mining.

Today, There are several small scale and large scale mining farms spread all around the world.

How does a mining farm looks like ?

Beginners who are interested in Bitcoin mining wonder how a Bitcoin mining farm looks like. Take a look at this Bitcoin mining farm in Iceland.

Bitcoin mining farms have Huge numbers of ASIC miners to mine various coins. AS of today many of these mine Bitcoins as it is the most reliable crypto currency.

How much does Bitcoin mining farms earn ?

Many Beginners who are interested in Bitcoin mining ask this questions. How much a mining farm earn ? It depends on many factors.

Cost of electricity.

The age of mining hardware (latest the better) Number of ASIC machines.

Price fluctuation of Bitcoin. The miner have to sell when the price is high.

14/25

The level of difficulty of finding the block.

The main factor is the price of electricity. As all the mining farms have same kind of ASIC miners. The best mining farm have access to the cheapest technology.

However, the reward for finding the block is fixed, The difficulty of finding the block is depends on the processing power that is available. If you own a largest mining farm then you difficulty level will be the lowest. To have the efficient mining farm either increase the mining output or spend less for operation by reducing the electricity cost.

How much does Bitcoin mining farms consume in electricity ?

Beginners who are interested in Bitcoin mining get skeptical about the power consumption of the process. Mining farms consume a powerful electricity. The scale of operation decides how much electricity they consume. Since most of the mining farms use same kind of hardware they all consume same amount of electricity / hardware, but the returns they get for the electricity they produce much depends on the scale of operation. ASIC miners consume 1350 watts.

The estimate of mining farms consuming electricity in 2020 was 75 terrawatt hours. That’s equivalent to 15 times the electricity consumption of denmark.

Location of mining farms ?

Mining farms are distributed worldwide. Not every mining farm are publicly advertised so we dont know the pinned location of every mining farm.

65% of mining farms are located in China. Especially because the ASIC miners are manufactured in china and readily available in the market for them than other countries.

Bonus chapter 1

Bitcoin mining terminologies

15/25

In this bonus chapter, we will learn about some of the most common terms associated with bitcoin mining.

As a beginner in bitcoin mining it is crucial for you to understand these terms.

If you are thinking about mining at any level, understanding what these terms means will be crucial for you to get started.

Miner Mining farms consume a powerful electricity. The scale of operation decides how much electricity they consume. Since most of the mining farms use same kind of hardware they all consume same amount of electricity / hardware, but the returns they get for the electricity they produce much depends on the scale of operation. ASIC miners consume 1350 watts.

The estimate of mining farms consuming electricity in 2020 was 75 terrawatt hours. That’s equivalent to 15 times the electricity consumption of denmark.

Block Reward The block reward is a set quantity of Bitcoins that get rewarded to the miner or mining pool that finds a given block.

16/25

Mining Pool A collection of individual miners who ‘pool’ their efforts or hashing power together and share the blockreward. Miners create pools because it increases their chances of earning a block reward. learn more about mining pools.

Block Reward Halving Roughly each four years, the block reward will get lower in half. The primary block reward ever mined was in 2008 and it it was for 50 Bitcoins. That block reward lasted for 4 years, the place in 2012, the primary reward halving occured and it dropped to 25 Bitcoins.

In 2016, a second halving occured the place the reward was diminished to 12.5 Bitcoins.

And as of the time of this writing, we’re on the cusp of the third halving (ETA Could 11th), the place the reward will probably be lower down to six.25 Bitcoins. You’ll find the hottest estimation of precisely when the following halving will happen on our bitcoin block reward halving clock.

ASIC Miner ASIC stand for “Utility Particular Built-in Circuit”. In plain english, that simply means it’s a chip designed to do one very particular sort of calculation. Within the case of of an ASIC miner, the chip within the miner is designed to resolve issues utilizing the SHA256 hashing algorithm. That is against GPU mining, defined beneath.

Be taught extra about ASIC Miners

GPU Mining GPU mining is if you mine for Bitcoins (or any cryptocurrency) utilizing a graphics card.

This was one of many earliest types of mining, however is now not worthwhile because of the introduction of ASIC miners.

Hashing Power (or Hash Rate) Dear Bitcoin mining beginners, Please note this term as it very important to calculate your profitability. What number of calculations (hashes) a miner can carry out per second.

Or it may seek advice from the overall quantity of hashing finished on a sequence by all miners put collectively – often known as “Internet Hash”.

You may be taught extra about Hash Fee by studying our article about it.

Difficulty

17/25

Measured in Trillions, mining issue refers to how onerous it’s to discover a block. The present degree of issue on the Bitcoin blockchain is the first cause why it’s not profitable to mine for most individuals.

Difficulty Adjustment Bitcoin was designed to supply block reliably each 10 minutes. As a result of whole hashing energy (or Internet Hash) is continually altering, the issue of discovering a block wants to regulate proportional to the quantity of whole hashing energy on the community.

In quite simple phrases, when you’ve got 4 miners on the community, all with equal hashing energy, and two cease mining, blocks would occur ever 20 minutes as an alternative of each ten. Due to this fact, the issue of discovering blocks additionally wants to chop in half, in order that blocks can proceed to be discovered each 10 minutes.

Issue changes occur each 2,016 blocks. This could imply that if a brand new block is added each 10 minutes, then an issue adjustment would happen each two weeks. The 10 minute block rule is only a objective although. Some blocks are added after greater than 10 minutes. Some are added after much less. Its a legislation of averages and quite a bit if left as much as likelihood. That does not imply that for essentially the most half, blocks are added reliably each 10 minutes.

Kilowatt Hour A measurement of vitality consumption per hour. Most ASIC miners will let you know how a lot vitality they devour utilizing this metric.

Bonus chapter 2

Is Bitcoin Mining a Waste of Electrical energy?

18/25

The media continually says Bitcoin mining is a waste of electrical energy. Many beginners get skeptical about bitcoin mining because of this.

However, there are some issues with their theories as we’ll focus on.

Isn’t Mining a Waste of Electrical energy?

Sure orthodox economists have criticized mining as wasteful.

It have to be saved in thoughts nevertheless that this electrical energy is expended on helpful work: Enabling a financial community price billions (and probably trillions) of {dollars}!

In comparison with the carbon emissions from simply the automobiles of PayPal’s workers as they commute to work, Bitcoin’s environmental impression is negligible.

As Bitcoin might simply exchange PayPal, bank card firms, banks and the bureaucrats who regulate all of them, it begs the query: Isn’t conventional finance a waste?

Not simply of electrical energy, however of cash, time and human sources!

19/25

Mining Difficulty If solely 21 million Bitcoins will ever be created, why has the issuance of Bitcoin not accelerated with the rising energy of mining {hardware}?

Issuance is regulated by Issue, an algorithm which adjusts the issue of the Proof of Work downside in accordance with how rapidly blocks are solved inside a sure timeframe (roughly each 2 weeks or 2016 blocks).

Issue rises and falls with deployed hashing energy to maintain the typical time between blocks at round 10 minutes.

For many of Bitcoin’s historical past, the typical block time has been about 9.7 minutes. As a result of the value is at all times rising, mining energy does come onto the community at a quick pace which creates sooner blocks. Nevertheless, for many of 2019 the block time has been round 10 minutes. It’s because Bitcoin’s value has remained regular for many of 2019.

Block Reward Halving Satoshi designed Bitcoin such that the block reward, which miners robotically obtain for fixing a block, is halved every 210,000 blocks (or roughly Four years).

As Bitcoin’s value has risen considerably (and is anticipated to maintain rising over time), mining stays a worthwhile endeavor regardless of the falling block reward… a minimum of for these miners on the cutting edge of mining hardware with entry to low-cost electrical energy.

Sincere Miner Majority Secures the Community To efficiently assault the Bitcoin community by creating blocks with a falsified transaction report, a dishonest miner would require the vast majority of mining energy in order to take care of the longest chain.

This is called a 51% attack and it permits an attacker to spend the identical cash a number of instances and to blockade the transactions of different customers at will.

To attain it, an attacker must personal mining {hardware} than all different sincere miners.

This imposes a excessive financial value on any such assault.

At this stage of Bitcoin’s improvement, it’s probably that solely main companies or states would be capable to meet this expense… though it’s unclear what internet profit, if any, such actors would acquire from degrading or destroying Bitcoin.

How Does Bitcoin Mining Work?

20/25

This simplified illustration will give you an idea. If you are a Beginner who is interested in bitcoin mining then you have to bookmark the below illustrated guide.

1. Spending

Bitcoin mining tutorial for Beginners

Let’s say the A user desire to purchase some items from the B user. A user sends 1 bitcoin to B user.

2. Announcement

A user sends Bitcoin to B user

A user’s wallet sends a signal that 1 bitcoin is sent to B user’s wallet. This signal is called transaction and it is broadcasted to all the nodes. A full node is a one which processes the transaction and has a copy of present complete blockchain.

3. The transfer

21/25

Bitcoin transaction is broadcasted to Full node

The full node then validates the A user’s spending comparing it with other pending transactions. If there is no mismatches or conflicts (e.g. User A didnt send the same 1 BTC to User B and User C). Now the full node broad casts that the transaction is validated to the Bitcoin community. At this point the transaction is not logged into the Blockchain. So, How do the transactions get completed and enters the Blockchain ?

Thats where miners come into play !

4. Validation by miners

Full node sends transaction to miner

Miners, like full nodes, keep an entire copy of the blockchain and monitor the community for newly-announced transactions. A user’s transaction could in reality attain a miner immediately, with out being relayed by a full node. In both case, a miner then performs work in an try to suit all new, legitimate transactions into the present block.

22/25

Miners race one another to finish the work, which is to “package” the present block in order that it’s acceptable to the remainder of the community. Acceptable blocks embrace an answer to a Proof of Work computational downside, often called ahash . The extra computing energy a miner controls, the upper their hashrate and the higher their odds of fixing the present block.

However why do miners spend money on expensive computing hardware and race one another to resolve blocks? As a result of, as a reward for verifying and recording everybody’s transactions, miners obtain a considerable Bitcoin reward for each solved block!

And what’s a hash? Properly, strive coming into all of the characters within the above paragraph, from “However” to “block!” into this hashing utility. If you happen to pasted appropriately – as a string hash with no areas after the exclamation mark – the SHA-256 algorithm utilized in Bitcoin ought to produce: “6afc21238f2d33e24e168195888721dd5ace05d76196671d6739789af92201ed.”

If the characters are altered even barely, the outcome received match. So, a hash is a approach to confirm any quantity of information is correct. To unravel a block, miners modify non-transaction knowledge within the present block such that their hash outcome begins with a sure quantity (in line with the present Issue, coated beneath) of zeroes. If you happen to manually modify the string till you get a 0… outcome, you’ll quickly see why that is thought of “Proof of Work!”

5. Blockchain Confirmation

Miner validates the transaction

The primary miner to resolve the block containing A user amount to B user announces the newly-solved block to the community. If different full nodes agree the block is legitimate, the brand new block is added to the blockchain and the

23/25

complete procedure begins afresh. As soon as recorded within the blockchain, A user’s transaction goes from pending to confirmed transaction.

B user could now take into account sending the products to A user. Nevertheless, the extra new blocks are layered atop the one containing A user’s payment, the tougher to reverse that transaction. For huge amount of money, it’s advisable to attend for a minimum of 6 confirmations. Given new blocks are produced on common each ten minutes; the wait shouldn’t take for much longer than an hour.

6. A chain of long valid transactions

Prcoessed transaction joins longest valid Blocks

You would have heard that Bitcoin transactions are irreversible, so why is it suggested to await a number of confirmations? The reply is considerably complicated and requires a thorough understanding of the above mining course of action.

Let’s think about two miners, A in China and B in Iceland, who clear up the present block at roughly the identical time. A’s block (A1) propagates by the web from Beijing, reaching nodes within the East. B’s block (B1) is first to succeed in nodes within the West. There at the moment are two competing variations of the blockchain!

Which blockchain prevails? Fairly merely, the longest legitimate chain turns into the official model of occasions. So, let’s say the next miner to resolve a block provides it to B’s chain, creating B2. If B2 propagates throughout the complete community earlier than A2 is discovered, then B’s chain is the clear winner. A loses his mining reward and charges, which solely exist on the invalidated A -chain.

Getting back to the instance of A user’s payment to User B, let’s say this transaction was included by A however rejected by B, who calls for a better price than was included

by User A. If B’s chain wins then User A’s transaction received seem within the B chain – it will be as if the funds never left A user’s wallet.

24/25

Though such blockchain splits are uncommon, they’re a reputable danger.

The extra confirmations have proven, the safer a transaction is taken into account. Because of this, what is called ‘0-conf’ or “Zero confirmations” on the Bitcoin Money blockchain is so harmful.

25/25