How do you mine bitcoins? At the end of the day, the idea of getting bitcoin as a reward for doing a job may sound tempting, but it’s actually a lot more complicated than it might seem to those who have never delved into the subject.
First of all, to mine bitcoin you need to find the hashes that validate a block.
It usually takes 10 minutes for one of these hashes to be discovered, so a block is usually mined every 10 minutes. The miner who manages to find the hash that validates a block is currently being given 6.25 BTC created specifically for this purpose as a prize.
With a BTC price of over $20,000, 6.25 bitcoins equals over $145,000, so a single miner who manages to validate a block is currently being given away over $145,000.
The problem arises here. Since bitcoin mining is a competition, where only the first miner to validate a block is rewarded, such a high reward justifies a very high investment in machines that can discover the hashes before the others.
These machines, which are necessary for bitcoin mining, have the very purpose of discovering the hashes that validate blocks. They do this by randomly generating many billions of hashes per second and examining them one by one to see if one of them is validating the block.
These are not insignificant machines, and you need a lot of them to have any real chance of mining even one block.
There are therefore two ways to actually mine bitcoin: either you equip yourself with a large number of these machines and invest a lot of money, or you pool your money with other machine owners and share the revenue.
In the second case, one participates in so-called pools, i.e. very large groups of users who pool the computing power of their machines and share the revenue in proportion to how much computing power they have shared.
In both cases, however, in addition to the hardware, it is also necessary to have the appropriate software, which differs. In both cases, in addition to the hardware, it is also necessary to have the appropriate software, which differs, however, in that those who mine alone must use specific software compatible with the Bitcoin protocol, while those who mine in a pool must use the software made available to the pool.
It should be noted that, depending on how the machines are configured, they may have more or less computing power, so owning and running them is not enough: one must also optimise their configuration. This last activity is very difficult for non-experts.
Finally, it must be said that these machines consume large amounts of electricity, and if the cost of the latter is not low, there is an easy risk of mining at a loss, i.e. not earning enough to cover all expenses.
So while in theory all you need to do to mine bitcoins is to get the right machines (usually ASICs), set them up and use the right software, in reality it is very difficult to do it profitably.
How to mine Bitcoin with cloud mining
There is however also a third way. This is called ‚cloud mining‘, the renting of the necessary equipment from a third party.
Although cloud mining may seem like a much easier way to go, it has two problems.
The first is that, unfortunately, the companies that ostensibly offer cloud mining services are often fraudulent: they do not actually rent anything, but merely take money from users.
These companies are often recognisable because they promise returns, which cannot be guaranteed in any way with real mining, and because they claim to provide a ‚turnkey‘ service, i.e. without asking the user to send money.
In the case of serious cloud mining companies, however, not only is there no promise of returns, since mining is a competition in which one can easily lose, but they also usually require the user to configure the service parameters himself. That is, they leave it to the user to optimise the configuration of the machines he rents, which implies that only experienced users are able to use the service profitably, generating more revenue than the rental costs.
By now, as can be seen quite clearly from the above scenario, bitcoin mining is an activity only for real professionals.