What Is Bitcoin Mining And How Does It Work – Full 2021 Guide

What Is Bitcoin Mining And How Does It Work – Full 2021 Guide

Many investors think about what is cryptocurrency mining and what is Bitcoin mining. If you want to know how these processes differ and whether it is beneficial for you, read our review to the end. We will talk in detail about Bitcoin mining for beginners. You will also learn how to start Bitcoin or another crypto mining.

What is bitcoin mining?

Bitcoin miners get coins without giving back money directly. The difficulty is that the mining of Bitcoins will still require investments from you. You need not cheap a mining rig. For the venture to be profitable, you need specialized equipment that uses a CPU. With the current competition, the cost of Bitcoin and the increasing complexity of the algorithm, PC and mobile apps will not lead you to the purpose. An even more advanced Bitcoin mining equipment operates based on an ASIC.

Bitcoin Difficulty
Bitcoin Difficulty

The bitcoin mining process generates new blocks in the blockchain. The digital system should be faster than others to guess the 64-digit code from beeches and numbers, which is less than the previous one. Mining coins has two goals:

  1. Authentication of committed transactions with the help of Bitcoin math algorithms.
  2. Create an additional amount of cryptocurrency per turnover as a reward for Bitcoin miners.

How much a miner earns

Bitcoin miners get a block reward. It means that the profit for the operation comes when the block is completed. Today payout per transaction is 12.5 coins. This indicator periodically decreases. Find out the exact data at bitcoinclock.com.

Bitcoin Miner Reward
Bitcoin Miner Reward

To find out how much you earn in fiat currency, you need to multiply price the Bitcoin in 2019 by the cost of one block. This year, Bitcoin is worth more than 10 thousand USD. But do not forget to deduct the expenses of hardware and electricity to get real profitability.

Global Cryptocurrency Mining Sites
Global Cryptocurrency Mining Sites (Source: University of Cambridge)

The effectiveness of the equipment is affected by the hash rate and energy intensity of Bitcoin getting GPU. To calculate how much BTC or cash you will get, use the online calculator.

It is unlikely that you will be able to make many coins yourself. So you have to join the power mining pool. Some calculators include a fee for using a similar service in advance.

What Coin Miners Do

To answer the question, how to mine Bitcoins, you must first understand how mining Bitcoin works. Cryptocurrency developer created a system in which participants verify the authenticity of each other’s transactions. For this (if you were the first) you get a reward. Similarly, the mine systems of the remaining altcoins work.

What miners do
What miners do

What is mining for bitcoin? Bitcoin miners with their actions provide:

  1. The emergence of new units of cryptocurrency.
  2. Audit and authentication of transactions.
  3. The security guarantee of the Bitcoin network.

Mining Is Used to Issue new Bitcoins

Mine Bitcoin is possible every 10 minutes. To do this, the miner must use the processing power of its computer or rig. Mining for Bitcoins cannot be carried out more often or at the time you wish (in contrast to the issue of paper money by the central banks of countries).

How Does Bitcoin Mining Work
How Does Bitcoin Mining Work

Consider a simplified diagram; how does mining work.

  1. You need to verify a transaction that does not exceed 1 MB. Theoretically, it can be only one transaction or several thousand (it all depends on the amount of data).
  2. You must also be the first of miners who solve the problem. This item in the crypto community is called proof of work.

Only by completing both requirements will you receive a reward.

Miners Confirm Transactions

Mining for Bitcoin is a verification of transactions and their inclusion in blocks. These blocks form the Bitcoin network. It means that a deal is considered absolutely safe only after it falls into any of the blocks (this means that the transaction fell into the blockchain and return coins or using them twice is impossible).

Average confirmation time
Average confirmation time

In order for Bitcoin transaction to be considered safe and entered the blockchain, one or more confirmations are necessary. According to the transaction amount, the required number of proofs is equal to:

  • One – if the amount is less than 1000 USD;
  • Three – a deal within 10,000 USD;
  • Six – the transaction amount is limited to 1 million USD.

Miners secure the network

The cryptocurrency network has a distributed structure. The more individual participants, the more reliable the protection. To mine Bitcoins, you need a lot of computing power (and a high hash rate, respectively, to be the first). If anyone wants to hack into the network, it will be difficult and expensive. A hacker will need the power of at least 51% of the entire network. Thus, the more participants connect to the network (each brings additional power), the more difficult it is to crack the system.

51 Attack
51% Attack

What Is a 64-Digit Hexadecimal Number?

An example of such a record:


Since using only digits limits us to a range of 0-9, the hexadecimal system requires to start to use letters of the Latin alphabet a, b, c, d, e, f.

How to Mine Bitcoins

The most natural Bitcoin mining guide: this industry is only profitable for large Bitcoin mining companies. They have many powerful installations, combining their capabilities, and cheap electricity.

Mining Farm
Mining Farm

The process of meaning guesses the target hash in the shortest time. You need to generate a hash below the target randomly. With every guessed hash, complexity increases.

Get Bitcoin Mining Hardware

The easiest answer to the question: What is a miner? Any GPU or ASIC rigs. Moreover, ASIC equipment is designed specifically for efficient Bitcoins mining. GPU can be used for other purposes (in particular, to obtain Ether).

The Most Produced Mining Hardware Equipment
The Most Produced Mining Hardware Equipment (Share of Manufacturers)
Supported Mining Algorithms
Supported Mining Algorithms (Share of Hardware Equipment)

A modern installation cannot cost less than a few thousand dollars. Older models are affordable for around $ 500, but people will only get losses by using them.

Select a mining pool

To start earning at least a little money, it is not enough for a beginner to buy and set up the necessary equipment and software. It is guaranteed that your computing power will not be enough for a successful hashing.

Hashrate Distribution
Hashrate Distribution
( An estimation of hashrate distribution amongst the largest mining pools )

Mining Pool is a community in which a lot of such small members as you have joined forces. When the pool wins the race, all participants receive a reward in proportion to the contribution that each of them made. For participation, you pay small commissions (most often, about 2%).

What are Coin Mining Pools?

Theoretically, mining is possible for every participant separately. But even the newest equipment for several thousand dollars (for example, Antminer) has a capacity of less than 0.001% of the total network capacity. You can never recoup your expenses.

Diversification small and large miners
Diversification small and large miners

Even large mining pools do not always achieve the goal. But they have many more chances. These communities unite the forces of all participants and distribute income between them. In this way, each newcomer, having joined the pool, begins to receive income almost immediately.

Get a Bitcoin wallet

If you still do not know where to store the coins that you are to mine, then study digital wallets in more detail. It can be:

  • Hardware wallets that connect to your computer via USB;
  • Software that you have to set up on your home PC;
  • Mobile applications that work on your phone (they are most accessible of all and convenient, but less than others protected from a scam).
Wallet options between 2017 and 2018
Wallet options between 2017 and 2018

To work with a digital wallet, you will need a public address from / to which coins will be received. To access transactions, you will use a secret key (password).

Get Bitcoin Mining Software

There is software for popular operating systems. Using software, the user connects to the pool. In the settings, you must specify such data, such as the hash rate and the wallet address to which the reward will be credited.

Account setup BTC.com
Account setup BTC.com

Is Bitcoin Mining Legal in your Country? Make Sure!

If in doubt, is a Bitcoin mining legal in your country, check your local laws or contact a lawyer. In most states, buying, selling, and mining coins is legal. But some governments have banned cryptocurrency activities.

Bitcoin Legality Around the World
Bitcoin Legality Around the World

Is Bitcoin Mining Profitable for You?

To calculate and compare profits and losses, you must understand: “What is Bitcoin and how it works.” Your profit depends on three main factors:

  1. The cost of cryptocurrency;
  2. The price of electricity that your installation consumes;
  3. The cost of buying equipment.
Miner Revenue
Miner Revenue

You also need to predict a rise or fall in the value of coins. On the one hand, growth can entail an increase in profits. But on the other hand, the competition will increase, so it is difficult to predict anything.

Is Bitcoin Mining a Waste of Electricity?

Think about the issue of paper money as well as financial costs. It consumes paper, ink in the printer, electricity for the printer, paid for the work of employees who put watermarks and other protection on banknotes. It also pays the work of people who develop these measures of protection against fakes and so on.

ProductAdvertised Mhash/sMhash/JMhash/s/$WattsPrice (USD)
AntMiner S91400000010182583313752400
AntMiner U363000100016586338
Ebit E9+90000006900642813001400
Ebit E9++1400000010500360013303880
Ebit E101800000011100344016205230
WhatsMiner M3115000001785

At this time, the costs of creating a cryptocurrency already include the purchasing power of coins, their security, protection against inflation and the release of new coins into circulation!

Mining on a mobile phone – Android or iOS

To try how to mine a Bitcoin, you can use your smartphone. So you get an idea of ​​the process. But it is unlikely that at least something will work, and the battery will be very quickly discharged.

What is Proof of Work?

This process is guessing the desired alphanumeric combination for the shortest time among other network participants. The probability of getting an SHA-256 hash equal to or lower than the target value is minimal. Therefore, the whole process consists of many trial and error.

Mining Bitcoin with pencil and paper

Mining Difficulty

The amount of coins is limited to 21 million. So that continually improving equipment does not speed up the extraction of the last coin too much, the algorithm is complicated continuously. Besides, writing blocks to the blockchain cannot occur more than once every ten minutes.

The correlation between bitcoin price and difficulty
The correlation between bitcoin price and difficulty

How Can You Compete with Millions of Miners?

Before you begin to act, you should think about how to mine for Bitcoin among a large number of competitors. The chance of winning in checking each transaction is approximately 1: 6 trillion and decreases with each transaction. For singles, the only way to compete successfully is to combine their power with the same individualists in mining pools.

How Much Does it Cost to Mine 1 Bitcoin?

For calculation, we will choose one of the modern Antminer S17 Pro devices. By the way, it is not necessary to use your own equipment. You can try cloud mining.

AntMiner S17 Pro 53TH
AntMiner S17 Pro 53TH

Equipment cost Hash rate Power consumption Electricity price Pool membership fee

$ 1900 56 TH / s 2212 W $ 0.1 / kWh 2%

For calculations, we used the calculator https://procrypto.company/mining/548-kalkulyator-majninga-bitcoin. As a result, we see that for the year under current circumstances it is possible to get 0.00043226 BTC. In this situation, it will take about 12 years to get only one coin. If nothing changes, the cost of maintaining the apparatus and electricity will amount to several thousand dollars annually.

How Many Bitcoins Can You Mine in a Day?

The number of daily coins in the previous calculation is 0.00000118.

Block reward halving

Every next, 210,000 blocks reduce the reward by half. It occurs on average once every four years – check Bitcoin Halving Dates.

stock to flow model
stock to flow model

Mining centralization

At first, the system was conceived as entirely decentralized. But specialized mining farms (many connected installations) placed in China began to receive up to 50% of all coins. Then, system participants from other countries started pooling using the software. It has shifted the emphasis in their favor. However, given the distribution of income between all participants, nothing is threatened by the security of the system.


Depending on the cost of Bitcoins and the electricity needed to receive them, the profitability of mining changes. Sometimes it’s more profitable to buy coins on the exchange. Cheaper coins (Ether, Zcash, Monero) can be obtained without highly specialized equipment. For this, it is enough to purchase a graphics processor or several. However, the situation with Bitcoins can change, and their mining will again become profitable for everyone.

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bitcoin mining hardware
bitcoin mining hardware
3 years ago

tcoin or Cryptocurrency!! It was launched in 2009 but actually became popular in 2017 when it hit the value of $20,000. In 2020, Bitcoin is certainly becoming the part of headlines due to its dramatic rise in price in January (expected to be new -2017), high fluctuation amid COVID 19, and then the famous Bitcoin Halving event expected to take place in May 2020. One of the important processes called Bitcoin Mining is captivating the attention of people due to the expected event of Halving when rewards given to miners will be halved. The community of enthusiastic coders is looking… Read more »

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