Mining is the process of adding transaction records to Bitcoin’s public ledger of past transactions (and a “mining rig” is a colloquial metaphor for a single computer system that performs the necessary computations for “mining”.
This ledger of past transactions is called the block chain as it is a chain of blocks. The blockchain serves to confirm transactions to the rest of the network as having taken place. Bitcoin nodes use the block chain to distinguish legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere.
What are the Requirements to Mine Bitcoin
To be able to profitably mine Bitcoin you will need access to the latest ASICs and have cheap electricity. Mining is not for everyone and it often requires some upfront investment to get started.
How Does Bitcoin Mining Work
The purpose of Bitcoin mining is to secure the network and confirm Bitcoin transactions. Individual blocks added by miners should contain a proof-of-work to be considered valid. This proof-of-work (PoW) is verified by other Bitcoin nodes each time they receive a block. Bitcoin uses a PoW function to protect against double spending, which also makes Bitcoin’s ledger immutable.
In order to be able to generate a new block, miners need to solve a so-called proof-of-work problem. For a block to be valid it needs to hash to a value that is lower than the current target. This means that each time a new block is added to the blockchain, the work required to validate it gets harder and harder.
How Much Can You Earn from Bitcoin Mining
The amount of BTC you can earn from mining depends on two things: the current BTC exchange rate and the network difficulty. The current BTC exchange rate can be found here: Bitcoin Price Index
The network difficulty is a measure of how hard it is to find a new block compared to the easiest it can ever be. It is recalculated every 2016 blocks to a value such that the previous 2016 blocks would have been generated in exactly two weeks had everyone been mining at this difficulty. This will yield, on average, one block every ten minutes.
As more and more people start to mine Bitcoin the difficulty will increase. This means that you will earn less BTC for each block mined. However, as the BTC price increases so will your earnings.
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The Pros and Cons of Bitcoin Mining
The Pros
-Mining can be a great way to generate passive income
-Can be profitable if done correctly
-You help secure the network
The Cons
-Can be expensive to get started
-Not everyone will be profitable
-May require some upfront investment
