Bitcoin is the first ever digital currency based on a chain of blocks. It was created in 2008 by a programmer known as Satoshi Nakamoto. In the case of most cryptographic currencies (including bitcoin), new coins get created by mining. Bitcoin mining generates BTC by performing complicated calculations which maintain the network. The miner receives rewards for participating in the process.
What is cryptocurrency mining?
Are you wondering – what is bitcoin mining exactly? Let us explain. On the 31st of October 2008, a document was published – bitcoin’s white paper. On the 3rd of January 2009, the first BTC block was mined – block genesis. Before we tell you how to mine bitcoin, you need some information about the technology on which this cryptocurrency is based on. We will also tell you how to analyse the cost-effectiveness of mining and how to mine using a pool.
What is crypto mining?
A blockchain is a distributed database which contains a register of all the transactions concluded in a certain network. The blocks which constitute a chain are connected in such a way that prevents the possibility of changing any one of them. Bitcoin mining is a planned side effect of securing data stored in blocks.
Cryptocurrency transactions are added to blocks, and blocks are connected into chains using encryption performed on computers called miners. The encryption method used for mining bitcoin is called the SHA-256 algorithm. Mining stations must work according to it. Every block in the chain includes all of the transactions concluded in bitcoin since the moment of accepting the previous block in the network. Accepting new BTC blocks happens every 10 minutes, and their size is 1 MB each.
Every bitcoin block includes not only the transaction details, but also the information about the previous person. This information exists as a so-called hash – a cryptographical abbreviation. The block hash can be found in the process of bitcoin mining and it is necessary for the validation (confirming the correctness) of each block.
In every case when the machine finds a new block hash, its owner gets rewarded with new BTC coins. We call this excavation system the Proof of Work (PoW) consensus algorithm. This type of bitcoin mining method includes a financial motivation for the mining station owners. These people engage their resources in validating transactions and joining them into blocks – which means they keep the whole network running.
How does bitcoin mining work financially?
Before you start mining bitcoin, you should calculate the profitability of this venture. Online calculators can help you – you just have to input the computing power of your mining stations, the energy they need to work, the electricity cost in fiat currency and the current bitcoin exchange rate.
Based on this information, the program calculates the mining profit, its cost and – roughly – your reward in bitcoin. You can use the online profitability calculator www.coinwarz.com/mining/bitcoin/calculator.
Mining bitcoin using a pool mine
The mining process is very difficult and the computing power of mining stations is limited, which means that miners have to combine their computer performances in order to mine bitcoin effectively. The best way to do this is to cooperate in a pool, where the computing power of many machines is added together and the block mining reward is split between all miners within a certain area.
The calculations needed to validate each transaction within the bitcoin network require huge amounts of work. That’s where they got their name – mining, and the owners of mining stations are called miners. What’s more, excavating bitcoins gets even more complicated by the increased difficulty of mining – rising every 2016 blocks. This is necessary in order to maintain a constant ten-minute interval between the validated transaction blocks.
When planning bitcoin mining, the miner should consider halvings which happen within the BTC network. They are a cyclical splitting of rewards for each mined block by half. Halvings occur every 210,000 blocks, which is more or less every 4 years. The last halving date was 11th May 2020. The reward for the block decreased from 12,5 to 6,25 BTC.
How do you mine bitcoin?
In the days when Satoshi Nakamoto was excavating the first block “genesis”, bitcoin mining could be done at home, using the computing power of a regular computer. Back then, the process was relatively simple which also meant it was very profitable. After a while, it started to get more complicated and miners began using the computing power of graphics cards. Today, mining bitcoins is only really profitable when using FPGAs or ASICs.
Digital coins – how to mine bitcoin using the Bitmain Antminer?
Here we will describe how to mine bitcoin using the computing power of Antminer miners, created by the Chinese manufacturer Bitmain. Antminers are equipped with ASICs designed only for one type of calculation. If you want to mine bitcoin, you have to invest in a cost-efficient Antminer model S19 or T17. They work using the SHA-256 hashing function and have a hashrate that allows you to earn money despite today’s mining difficulties.
In June 2021, the most popular bitcoin mining device was the Antminer S19. This excavator can achieve the following parameters:
- hashrate – up to 110 Th/s;
- electricity consumption – about 3.2 kW;
- energy consumption to hashrate ratio – 34.5 W/Th.
The Antminer S19 should earn you a profit from BTC mining of a dozen or so dollars per day.
You can also choose a cheaper but less efficient excavator for your BTC mining needs – the Antminer T19. This machine has the following performance:
- hashing power of about 53 Th/s;
- electricity consumption – about 2.9 kW;
- energy consumption to hashrate ratio of about 55 W/Th.
Before you invest in excavators, you have to plan the location of the mining project well. Even just one working Antminer produces huge amounts of heat. If you want to start mining bitcoin, you need a room from which heat will be efficiently dissipated. When the miners get overheated, they will simply switch off, which in turn affects the profitability of extraction.
Another challenge you have to overcome is soundproofing the room. Antminer machines generate not only heat, but also noise. Taking all this into account, you should choose a location for bitcoin mining in a quiet area, far from inhabited residences.
Mining bitcoin using the Slushpool mine – configuring the Antminer S19
If you want to excavate bitcoins in a mine, which is a type of cooperative, you have to set up an account in one of them. For the purpose of this article, we’ve chosen the slushpool.com mine as an example – to create an account, you need to give your email address and choose a password.
You start bitcoin mining in slushpool.com by creating your account and connecting your account to the power supply and LAN network. It must be a network to which the computer that manages your mining is also connected to. Of course, you also need Internet access from this network.
Next, you have to install Windows and IPReporter on the managing computer. You will find the program on the Antminer manufacturer’s website. When you turn on the machines, the program will show you the IP addresses of every device. You will need them to configure the machines and start mining bitcoins.
After you obtain the IP addresses of the Antminers, type one of them into the web browser address bar. When you confirm it by pressing the Enter key, you will find yourself in the excavator configuration panel. Here, you must enter the default username and password, which is simply “root” in the Antminers. You should change it to something safer later on. Go through the same process again to configure the access for all of your machines.
Next, you have to set up the following in each machine:
- the host name;
- the static LAN IP address;
- the subnet mask;
- the DNS server address.
You will find all this in the IP Settings tab in the side menu. In the Miner Settings tab, you have to enter the excavator parameters which will be necessary to start bitcoin mining. They will include:
- the address used to connect to the mine via the Internet;
- the name of the mine user;
- optionally – the access password.
The information as to how exactly the excavators should be configured can be found on the slushpool.com website.
After configuring the mining parameters, the Antminers will immediately start bitcoin mining. The mining process can be monitored on the mine’s website, in the side menu – Workers tab. There you will find your machines’ hashrate and other parameters of the bitcoin mining process. In the slushpool.com panel, you also need to set up a payout address for your BTC earnings. Because you will surely want to withdraw your excavated bitcoins, right? You can enter your wallet address in the Settings/Bitcoin/BTC Payouts tab.
The maximum bitcoin supply is 21 million units and there are still more than 2 million 2 thousand BTC left. Thanks to the halving process (reducing the reward for miners by half every four years), bitcoin mining is slowing down and you will be able to continue doing it until the year 2140.
Even though halving reduces the nominal BTC reward, it also contributes to the rate rise, which should make bitcoin mining profitable for the years to come. Even after the year 2140, it will be worth it to take part in the functioning of the BTC network. You will be able to validate transactions using your hardware. The nodes which make up the blockchain will have to be maintained by fees paid by the coin users.