Bitcoin Mining

Bitcoin mining ensures the security of the blockchain while at the same time allowing new Bitcoins to enter the system. The main task of miners is to process
Bitcoin
transfers. For this, they need to solve a mathematical problem that allows them to chain transfers in blocks. Miners who perform the task are rewarded with an amount of Bitcoin (currently 6.25 BTC per block) that is halved every four years. Miners process these transfers, ensuring that the circulation in the system remains healthy while adding new blocks to the blockchain, reinforcing the security of the network. Blocks are accepted into the system every ten minutes. (Additional information: Initially, the amount of the reward per block was 50 BTC. the first half of the reward was on November 28, 2012.)

To solve the problem we are talking about, miners do not use complex mathematics or “advanced” calculation methods, but rather try to guess the target number. The number (“hash”) that is being guessed has 64 digits and is in base 16.

Example;

  • 1233a4fbfd3e72a2f37cd301d92b7b6b479858f210c7626eab75f6ffa87b1563

  • (The letters are used to supplement the base to 16, since [0-9] there are 10 different numbers.)

  • The probability of correctly guessing each digit of such a number is very close to zero: 

  • 0,0000000000000000000000000000000000000000000000000000000000000000000000000000863616855509444

In order to receive the reward, a miner must either guess the target number correctly or give the closest estimate to the target number out of all miners. Speed is important when executing this process, as multiple miners can make the same prediction, but the first to make the correct prediction will receive the reward.

While the average home computer is sufficient for these operations when the system is newly installed, a potential miner needs to use devices made for this job because the network makes the miners’ job difficult in direct proportion to the miner’s activity. There are three different models of devices that are popular.

These:

  • ASIC: Only Bitcoin et al. A device prepared for the mining of crypto coins. It has various shapes and prices. The number of forecasts per second is optimal compared to the cost of electricity.

  • GPU: Graphics card. It can also be used for mining. Besides being expensive, they are not very efficient compared to other hardware that offers similar functionality and may require frequent maintenance.

  • CPU: Processor. It is not preferred since it was noticed that the GPU is more efficient and less costly.
     

In today’s mining world, having even the best of this hardware may be insufficient, both because of the profit/expense and because of the people/communities with enormous processing power.

The return on your mining business may be zero for a long period of time (we mentioned the possibility), or your expenses may be far above the budget you plan to allocate for this business. These devices consume a high amount of electricity to work, as well as require continuous cooling. Especially for those who want to mine Bitcoin at home, these processes are quite difficult.
 

                                             How to Mine Bitcoin
                                                                           Figure 1

The amount of processing power can have a direct impact on earnings. Those who can afford it can multiply their own chances by setting up a “mining farm” (Figure 1). Other miners join collective structures called “mining pools” and add their own hardware to the pool’s cumulative processing power. In this way, their chances of seeing a win increase, but the prize won (if won) is shared among the participants.  While miner pools are a good option, there is a price to pay for joining them.

 

                                                 Miner pools by processing power
                                                              Figure 2: Miner pools by processing power
 

In a nutshell, mining is important business for blockchain, but the competition for the incentive reward is far greater than the average individual can bear. Inclusion in miner groups is good and perhaps the only option. If a decision is made to participate, a detailed investigation of these groups should be carried out.