What Is Bitcoin Mining?

What is Bitcoin Mining?

We have been hearing about the term Bitcoin quite often these days. Various cryptocurrencies have been inspired by Bitcoin from the time it was first launched in 2009. But if we look from a value perspective, Bitcoin is seen to be standing alone. We see quite a bit of volatility in its price. Still, the monetary policy has been created keeping stability in mind. Bitcoin mining has been limited to at most 21 million Bitcoins across a specified schedule.

But what is Bitcoin mining? Let's find out.

We can define Bitcoin mining as fetching new Bitcoins from circulation. It is the way in which users can create new Bitcoins by showcasing their ability to solve highly complicated mathematical problems, which in turn verifies the transactions in the currency. Once this problem is successfully solved, users are said to have mined the Bitcoin, where the miner receives the pre-defined value of Bitcoins. This way, the network also knows and confirms new transactions. This plays a crucial role in the blockchain ledger's development and maintenance.

To perform mining, sophisticated hardware is used to solve an extremely complex mathematical compute-intensive problem. It's usually the first computer that receives the next block of Bitcoins once it has found the solution to the problem, after which the entire process begins again. Bitcoin implements distributed ledger technology for its transactions, acting as a distinct feature of blockchain technology to ensure no records are modified, offering better transaction transparency. In addition, implementing the cryptographic algorithm techniques of the SHA-256 for the Bitcoin blockchain network is essential for converting the data into a distinct string of characters.

The number of Bitcoins miners receive motivates them to continue assisting in the primary purpose of Bitcoin mining. This helps legitimize and monitor the Bitcoin transactions that make sure the validity is maintained. Bitcoin mining is considered a "decentralized" cryptocurrency, where users from all across the globe share this defined set of responsibilities. This entire process is not dependent on any central authority, such as a government or central bank, that must oversee the regulation.

What is Crypto Mining?

We have been talking a lot about cryptocurrency; let us highlight what crypto mining is in this section of the article. Cryptocurrency mining is the process of creating new digital "coins". Its ability to solve the complex hashing puzzle is how a user could leverage to earn Bitcoins as a reward. Once the problem is solved, the cryptocurrency transactions need to be validated over a blockchain network, after which they could be added to the distributed ledger for locating these transactions.

It is important to note that cryptocurrency mining is costly, requires extra care, and only selectively rewarding. Still, mining has wide popularity among many investors interested in cryptocurrency as miners receive rewards for their efforts and can work with the crypto tokens. It is assumed as mining pennies from heaven. And if you have one of those strong, technologically inclined minds, why not take a chance with Bitcoin mining?

What is Bitcoin?

We have been talking a lot about Bitcoin mining, but what is this Bitcoin?

We define Bitcoin as the first decentralized digital currency offering peer-to-peer transfers without the hassle of any intermediaries implementing the underlying blockchain technology, like governments, banks, agents, or brokers. Transferring Bitcoin across the globe from one person to another can seamlessly be done over the network by simply opening an account over the Bitcoin network containing some Bitcoins. These Bitcoins could be transferred, and users can even buy the Bitcoins or mine them themselves. These Bitcoins could be utilized for online purchases, and these days Bitcoins are considered a perfect investment instrument. Users can buy goods or services from Bitcoins too.

Advantages of Bitcoin

You might be thinking, why should one even mine Bitcoins? What are the advantages of Bitcoins?

• If we compare Bitcoins with traditional fiat currencies, the assets are transferred faster over the Bitcoin network.
• It works on lower transaction fees as it is decentralized without any intermediaries,
• It is cryptographically secure as the sender's identities, as well as the receiver's identities, are hidden, and it is close to impossible to hack or counterfeit the transactions.
• All information is extensively available over a public ledger allowing everyone to view the transactions.

What is Blockchain?

As already mentioned, the underlying technology behind Bitcoin is Blockchain. It is a publically distributed ledger where the Bitcoin transactions are chronologically recorded. It must be noted that no transaction or record added to the Blockchain (ledger) can be altered or modified, reflecting that these transactions are completely safe from hacking. The smallest unit of the Blockchain is known as the block, and it is this block that holds the transaction details and acts as a container. The SHA-256 algorithm is the cryptographic hash algorithm utilized for generating a unique 256-bit alphanumeric hash value for a given input.

The SHA-256 algorithm is the digital signature over the block. This SHA-256 is the unique feature of the cryptographic algorithm where the input you provide always outputs a 256-bit hash.

The Blockchain has four distinct fields or primary attributes:

• Previous hash
• Data
• Nonce
• Hash

Let us discuss each of these attributes in detail:

Previous Hash:

It is this previous hash attribute of the Blockchain where the value of the previous block's hash is stored. It showcases how the blocks get linked to one another.

Data

This attribute of blockchain technology is where the aggregated transactions are set in the block. The transaction stores the mined records verified, validated, and placed in the block.

Nonce

The nonce is the parameter utilized for generating the hash values. In the "proof of work" consensus algorithm that Bitcoin uses for its transaction, nonce acts as the random value to vary the hash value output. Each block generates a hash value, where this nonce generates the random value. With this proof of work, the transaction is verified in the Blockchain.

Hash

The hash is another critical attribute of blockchain technology, which could be defined as the value generated by passing the data, previous hash value, and the nonce via the SHA-256 algorithm. The SHA-256 algorithm is the digital signature over the block.

3 Concepts of Blockchain

To continue our discussion on blockchain technology, let us quickly capture the three essential blockchain concepts.

Public Distributed Ledger

It is defined as the distributed ledger where all the transactions are recorded and maintained in the blockchain network worldwide. The validation and verification are done before recording the transaction entry via the Bitcoin users in the network.

SHA-256

To prevent any unauthorized access by any Bitcoin users, the hash function popular as SHA-256 is implemented. This SHA-256 algorithm ensures that traction blocks are secured and signed digitally. The hash value can never be modified or altered once it is generated. SHA-256 takes a string of any size as the input and outputs a fixed 256-bit result where you cannot go back and reverse the function to derive the input from the output. The SHA-256 algorithm is the digital signature over the block. This SHA-256 is the unique feature of the cryptographic algorithm where the input you push always outputs a 256-bit hash.

Proof of Work

When the Bitcoins are mined, Blockchain is the underlying technology being implemented. Therefore, the miner could validate the transactions by solving the difficult mathematical puzzle, also known as the proof of work. This can be done by determining the nonce value. This nonce value is defined as the mathematical puzzle where the Bitcoin miners have to solve the problem of generating a hash value that is less than the target specified by the network for that particular block.

Bitcoin Profit and Bitcoin Mining Profitability

Two critical aspects linked with Bitcoin mining are Bitcoin profit and Bitcoin profitability. We define Bitcoin profit as an automated crypto robot that offers help trading Bitcoins and other cryptocurrencies to earn profit. It utilizes the Artificial Intelligence algorithm for identifying trading opportunities. This algorithm applied in the crypto market will automatically open and close the trade, saving time and manual intervention while trading. It is claimed that approximately 85% of the trades generate profits in normal market conditions. Hence, having the proper technical knowledge to calculate the profit produced via Bitcoin mining is good.

Note that the actual money / profit made in the Bitcoin mining process could depend on:

• Cost of AISC hardware
• Consumption of electricity
• Effectiveness of the Bitcoin mining software

Recently, it has been seen that the profitability of Bitcoin mining has significantly decreased compared to the last years as the electricity and hardware costs have increased along with the tough mining process due to the increase in competition and drastic decrease in Bitcoin prices. Previously, Bitcoin mining was initiated via the CPUs and simpler AI algorithms, contributing to its profitability and cost-effectiveness.

How does Bitcoin Mining Work?

So far, we learnt about Bitcoin, Blockchain, cryptocurrency mining, and more. Let us dive deep into how the entire process of Bitcoin mining works.

As we know, Blockchain is the backend technology for Bitcoin mining, and as it is a decentralized peer-to-peer network, it is rather renowned as supremely secure and transparent. This makes it trustworthy among peers as transactions happening in the blockchain network are secured via the cryptographic hash functions and posted timestamps. This happens in a manner that after being added to the transactional ledger, it is close to impractical and impossible for anyone to change, modify or alter the records. Centralized control is absent at the core of blockchain security.

The below illustration shows how Bitcoin Mining works:

We shall now be deep-diving into what exactly is happening during the entire process of Bitcoin mining:

• The Mining Requirements
• Elements of a Bitcoin Transaction
• The Merkle Tree and the SHA-256 Algorithm
• The Block Header
• Solving the Hash Puzzle

The Mining Requirements

You will see that any Bitcoin miner will have a bunch of tools selected and will eventually set it up first. The prerequisites one must be equipped with before one starts the Bitcoin ming process are listed below:

• Hardware: ASIC (application-specific integrated circuit), GPU (graphics processing unit), or SSD for crypto mining
• Bitcoin wallet
• Bitcoin mining software
• Favourable Bitcoin mining pool (only if one selects the pool Bitcoin mining option, rather than solo mining)

When the above-mentioned prerequisites for Bitcoin mining are properly set up and the system is correctly fired up, it shall perform the entire Bitcoin mining process independently. One might need the support of peers in case of network or system failure, regular system maintenance, or power outage.

Elements of a Bitcoin Transaction

We shall now look at the elements that make up the Bitcoin transaction. Whenever a Bitcoin transaction gets initiated across the Bitcoin network, three core elements get involved:

• A Bitcoin transaction/record input
• A Bitcoin transaction/record output
• The transaction amount

Whenever any transaction happens for Bitcoin mining, it is seen that for each input of transaction, Bitcoin mining software generates a distinct cryptographic hash puzzle which is quite tricky and difficult to decode. The software then collates the number of transactions/records needed to form the block as a Merkle tree.

The Merkle Tree and the SHA-256 Algorithm

Let us discuss Merkle Tree and the SHA-256 Algorithm that plays a crucial role in the Bitcoin mining process.

We define a Merkle tree as a data structure for the hashes in a block which then acts as a summary of all the transactions happening in the block. Transactions IDs are the hashes of individual transactions in the Merkle tree that are repeatedly paired via the SHA-256 algorithm. This happens until the one hash is able to identify the entire Merkle tree. This hash is called the root hash or is widely popular as the Merkle root. With the Merkle tree, one can ensure the efficiency of the verification of transactions happening for the Bitcoin network.

The Block Header

We now discuss the block header. The root hash, also popular as the Merkle root, acts as an identifier of the Merkle tree. It is stored as part of the block header.

One must know about the block and information on the below-mentioned components:

• The version number of the Bitcoin software
• Timestamp
• Cryptographic nonce
• The hash of the previous block
• The target
• The Merkle root (root hash)

With this information, miners shall utilize it for solving the hash puzzle and adding the block transaction to it.

Solving the Hash Puzzle

Lastly, we come down to the final step of solving the hash puzzle. It is this complex mathematical hash puzzle that the miners must solve by finding the hash value, that must be below a defined target via the difficulty requirement. The target is usually stored in the block header, that is indicated as a 67-digit number, which shall specify the difficulty of the Bitcoin mining depending on the number of miners that are competing to get the value of the hash function.

The crucial point to note here is that after every 2016 block, the difficulty level is adjusted based on how much time was taken by the Bitcoin miners of the previous 2016 blocks for the equation to be solved. This way, the transaction rate (every 10 minutes) is maintained while the transaction is appended to the Blockchain.

The below image shows the entire process of what steps are performed behind Bitcoin mining:

For hash puzzle solving, miners have to calculate the value of hash for a block by repeatedly adding a nonce to the block header. This must happen until the value of the yielded hash comes out to be less than the target. Once the puzzle is solved by the Bitcoin mining computer, a new block is created successfully, which is then verified and validated across the Bitcoin network. All this is done once the consensus is settled between the nodes reached. The transactions for the block validated are grouped together and verified. Then this block is added to the Blockchain. This cycle happens every 10 minutes.

As the number of miners cannot be defined or restricted, it is the first miner who gets the correct value of hash that holds the chance of getting the Bitcoins as a reward. This contributes to more Bitcoins being in circulation.

Mining and Bitcoin Circulation

Bitcoin has its upper limit set as 21 million Bitcoin, by its inventor Satoshi Nakamoto in the source code, which is considered puzzling. Experts see this as a huge advantage as this scarcity of a limited number of Bitcoin breeds excellent value and a stable price for its oldest crypto. The Bitcoin architecture was so designed that every 10 minutes, a block could be discovered, and a limited Bitcoin award was offered for every block that was mined.

From the root, the Bitcoin block that has been mined as of 2009 is 50 Bitcoins, and it is expected that more Bitcoins will be mined and released for circulation. This process of passing the Bitcoins from one user to another is known as Bitcoin circulation. With Bitcoin mining, the blocks of transactions are first created, which are then stacked in chronological order to ensure they can be correctly traced and mathematically proven. As the blocks are started, Bitcoins are rewarded for the mining process, contributing to the increase in the number of Bitcoins available for circulation.

Prevention of Hacking

While the rewards linked with Bitcoin mining are high and the value of even one Bitcoin is expensive, you may have a question concerning how we could be prevented from being hacked by any potential threats.

If anyone tries to hack the data, Blockchain is the technology that could help to give you the answer. Consider three blocks: 1, 2, and 3, where each block has the solved mathematical hashing puzzle, and a hash value is generated that acts as the identifier. If any potential threats try to tamper with block 2 and modify the data, the aggregated data is in the block. So when the data is modified in the block, the attached hash value, often referred to as the digital signature of the block, will also get modified. This way, when the modification in value has occurred, the Blockchain also gets corrupted. The blocks ahead of block 2 shall also get delinked, as the previous hash value of block 3 will not be validated and will get rejected.

For the hacker to make the entire Blockchain as verified for block 2, they would also need to modify the hash value of all the blocks preceding block 2. However, this is impossible as a lot of computing power is required. Hence, it shall need a lot of electricity, computing, and high-end software to completely hack Bitcoin. So Blockchain can be determined as non-hackable, along with preventing data changes, as seen in the illustration above.

Why Mine Bitcoin?

You might be wondering why one should really mine Bitcoin.

Simply put, it is the value and the money attached to the same. Users are mining Bitcoins to earn profits as the number of Bitcoins is limited. And it is with this scarcity that the importance of Bitcoins has increased. Apart from this, people curious about the Bitcoin mining technology and those who find this field attractive are enjoying and learning how to upskill with this new technology.

How to Mine Bitcoin?

Now, we have studied so much about Bitcoin mining - that it is quite an interesting field to try out mathematical problem-solving skills and earn Bitcoins as rewards. But how can we mine Bitcoins?

It is recommended that the Bitcoin miners use mining hardware like Antminer, Ebang, AvalonMiner, Minedollars, etc that can be utilized for producing new Bitcoins after every 10 minutes. The miner has to invest extensively in a powerful setup designed especially for Bitcoin mining. To operate the hardware of the system, advanced computer knowledge has to be possessed. After this, the miner needs to create at least one Bitcoin wallet where the Bitcoin can be stored after Bitcoin mining, and this wallet must be secured, robust, and convenient.

The miner has to install and configure the mining software for Bitcoin mining, once the mining hardware is correctly set up and the Bitcoin wallet is created. After that, the miner must apply additional technical knowledge to improve its mining capacity. The Bitcoin mining process starts once the miner downloads the soft copy of the Bitcoin blockchain and initiates the process by clicking the start button. After this, it's the miner's responsibility to regularly monitor the progress to ensure that the Bitcoin mining application is running smoothly. All this does not require any manual effort from the miner's end and the miner needs to rely on the Bitcoin mining hardware once the mining process is initiated. It is the Bitcoin Mining process after which the new blocks are added to the Blockchain.

How to Mine Bitcoin at Home?

While it is possible to mine Bitcoins at home, it could still be an extensive and challenging journey requiring certain steps to achieve good results.

• It starts with setting up the hardware correctly, where it needs to search for a strong electricity connection.
• After this, the miner could start to create a Bitcoin mining wallet on any trading platform as per their convenience, and they need to join a Bitcoin mining pool to proceed further.
• The crucial of all steps is installing effective and efficient mining software like Easy Miner, Awesome Miner, and Pionex, after which the miner can start inserting the details in the wallet along with the information regarding the Bitcoin mining pool.
• It must be noted that the hardware required for Bitcoin mining is quite expensive, and not everyone can afford it.
• In addition, a lot of electricity consumption is required for mining Bitcoins, which only makes people having low-electricity costs afford the entire process of Bitcoin mining. Hence, Bitcoin mining is profitable from home when appropriate resources and efforts are set, and costs are regulated.

How to Calculate Bitcoin Profit?

Once you have invested in the entire Bitcoin mining setup and also mined Bitcoin, how would you calculate if the investment made and extra costs incurred were worth it?

To calculate the exact amount of Bitcoin profit, you need to base your calculation on four points:

• Cost of Power
• Time
• Bitcoin value
• Efficiency

Let us discuss each aspect one by one in Bitcoin mining.

The miner performs a cost benefits analysis to calculate how much profit they have actually earned via Bitcoin mining. This helps the miners understand the break-even price before purchasing the costly hardware or other such Bitcoin mining equipment.

To calculate the profit obtained via Bitcoin mining, one must measure the amount that they spent to purchase the Bitcoin currencies. Then, the miner must evaluate how much 1 Bitcoin costs at the time of purchase and verify this with the current value of Bitcoin. The difference that will be observed will be the actual profit earned.

The particular factors that affect the profits obtained from Bitcoins are discussed below:

Time: No time duration is fixed for Bitcoin mining. It depends upon the miner how much time they want to spend, and it could be 24x7 too if they can afford the Bitcoin mining cost.

Cost of Power: As electricity prices vary from country to country and season to season, this also contributes as a factor to the profits earned by Bitcoin. The electricity consumed not only helps to mine the Bitcoins but also prevents them from overheating and helps them to cool down.

Bitcoin value: The value you might see for Bitcoin now vs. what you saw when you mined it or will be mining it can vary extensively as the Bitcoin value are not ascertainable. This sharply affects the Bitcoin profit along with its return on investment.

Efficiency: Mining Bitcoin can sometimes also be affected by the efficiency the software showcases. This can also affect the profit that one miner could earn. Slow computers and low voltages of electricity can also contribute to factors affecting the efficiency of Bitcoin mining.

How Much does a Miner Earn?

You might be wondering how much all this effort a miner puts in helps to earn. To answer this, it is stated that the rewards one could earn by mining Bitcoins are roughly reduced by half every four years.

To support this argument, in 2009, when Bitcoin was first mined, miners would be earning approx 50 BTC for mining one block of Bitcoins. Compared to 2012, this value was reduced to 25 BTC. Cut to 2016, and it was valued at 12.5 BTC. While on 11 May 2020, the amount one would obtain for mining Bitcoins was again reduced to 6.25 BTC for each block mined.

In March 2022, Bitcoin was valued at around $39,000 per Bitcoin, meaning that for 6.25 BTC, a miner roughly earns $243,750 (6.25 x 39,000) successfully after completing a single block of Bitcoin.

With the help of the Bitcoin Clock, one can keep track of what value the Bitcoin is being rewarded as this gets updated in real-time. As a result, the market price of Bitcoin corresponds closely to the reduction in the new coins that are entering circulation. This contributes to increased scarcity, as the lowering inflation rate historically suggests that the price of Bitcoin has increased with it.

What do I Need to Mine Bitcoins?

In the early days, mining was easier. The concepts around Bitcoin and Blockchain were new and users used to mine as a hobby. The Bitcoin inventor Nakamoto, too, mined the Bitcoin over his primary CPU. But with time, Bitcoin has gained wider adoption, and many people all across the globe are getting interested, like miners, investors, and organizations that want to harness cryptocurrency as their payment mode for products and services. This has made mining competitive, and more and more sophisticated hardware and software are coming up in the market for Bitcoin mining.

Bitcoin mining must be done with specialized tools such as:

• Some widely used Bitcoin mining software is Kryptex Miner, ECOS, and BeMine.
• Hardware like ASIC (application-specific integrated circuit), GPU (graphics processing unit), SSD for crypto mining, or FPGA (Field Programmable Gate Array) chips. It is crucial to validate the hardware's hash rate (performance) as well as the consumption of electricity.
• If one wants to choose the pool mining option over solo mining, then one should also check for the preferred mining pool.
• For an individual to perform a Bitcoin transaction, they must have a Bitcoin wallet.

Bitcoin Mining Calculator, a Bitcoin Profitability Calculator

To evaluate the Bitcoin mining rewards, one needs to understand what expenditure was done for mining and how many Bitcoins were reaped after Bitcoin mining. With the Bitcoin Mining Calculator, one can understand the profit they have made after a defined amount of time, money, and effort spent. Miners have to fill in details as seen in the image, where one needs to type the power consumption in Watts, Bitcoin mining hash rate, electricity costs in $/kWh, and pool or maintenance fees. The hash rate values are volatile and should be checked before calculating the Bitcoin mining profitability.

To offer accurate profitability information and reliability about Bitcoins, one can use the Bitcoin profitability calculator. Miners consider this as critical information for making decisions about Bitcoin Mining. Only if the profitability is high is when the miners put in time and effort to earn profit, which should be over and above the cost of Bitcoin mining.

What Does it Take to Run a Profitable Bitcoin Mining Venture?

If you have reached this far in the article, you have entered into the Bitcoin and Blockchain technology. Well, that's good to know! But to help you out, let us see what it will take to run a profitable Bitcoin business if you are planning to start a venture in Bitcoin mining.

Let us find out.

Two critical factors that must be planned well in advance to run a profitable Bitcoin business are:

• Choice of Hardware
• Location

Hardware: The hardware used to mine the Bitcoin is checked for its performance based on the terms of hash rate. The current new-generation ASIC miners can generate 100 TH/s (trillion hashes per second) which usually costs around $8,000 to $10,000. The daily use of CPUs needs to hold the capacity for generating such fast hash rates.

Location: We all know that mining Bitcoin is quite a power-intensive process, and with the developed nations, this proves to be a plus for people staying there because of the low power cost. For transacting a single Bitcoin, approximately 1,544 kWh of power is utilized to complete the process, nearly equivalent to 53 days of power consumption in a typical American house. This means that it will charge approximately $200 assuming the electricity cost to be an average of 13 cents per kilowatt hour. Thus, figuring out the areas with low-cost electricity (nearly 10 cents per kWh or less) shall help to regulate a profitable Bitcoin mining venture.

Is Bitcoin Mining Legal?

Although there is no straightforward answer to this, you might find an answer as both Yes and No.

We have seen even more acceptance of Bitcoin all around the globe after 2020, but still, it's considered a highly contested asset for some countries as its volatility is highly debated along with its decentralized nature. In addition, the exorbitantly high power consumption needs to be better appreciated.

For countries such as Bolivia, China, Ecuador, and Algeria, Bitcoin is not widely appreciated, and trading Bitcoins is either restricted or defined as illegal, thanks to its decentralized nature. It is associated with illegal activities because of its volatile nature and various other reasons. While for other countries, the status of legality for Bitcoin is yet to be discovered. In contrast, some countries like France, UAE, Finland, Australia, the United States, and Canada welcome Bitcoin and appreciate the technology behind it, along with many transactions of Bitcoin being performed in these countries. El Salvador has also adopted Bitcoin as a legal tender.

Risks and Limitations of Bitcoin Mining

With good money comes its own set of risks and limitations. Bitcoin, no less, falls in the same category where certain risks must be avoided and one must be aware of the limitations. It might seem that people are solving puzzles and earning Bitcoin, which might make you think that this is easy money.

Bitcoin's share of risks and limitations are discussed below:

• As Bitcoin, like any other cryptocurrency, is highly volatile, one must determine what value it has reaped as it fluctuates.
• Hackers could still exploit the security vulnerabilities.
• No guarantee of success. Either the miner could end up earning more than they thought, or the miner might also invest a vast amount of money for the necessary equipment creating no ROI virtually.
• Requires high computing and utility costs.
• Transactions made via Bitcoins are irreversible. Once the money is sent to the wrong account, your options to reverse the situation are close to zero.
• The concept of cryptocurrency is built around decentralization, meaning no interference from the government or its regulation applies here. In contrast, this also means no legal protection is given in case of fraud.
• Bitcoins and the concepts around them still need to be widely accepted. Hence even if you have loads of Bitcoins sitting there with you, they might only reap value to you once the acceptance is seen by society.

Bitcoin Mining Electricity Cost Calculator

As we know, it is not only the efficient hardware with seamless software that contributes to the Bitcoin mining process but also the electricity required to make the entire process work.

Calculating the profitability that one could get from Bitcoin mining is quite extensive. It is because various factors affect the profitability of Bitcoin Mining. Let us talk about how electricity is utilized in the Bitcoin mining process and how this electricity cost must be calculated to get the final profits for the miner.

With the electricity cost calculator, one can determine the amount of electricity consumed in kWh. For example, this calculator could estimate the kW utilized for the entire day. After this, the kWh cost is calculated based on the user location's energy prices and multiplied by 30 to find the monthly electricity expense. Based on these results, many miners have shifted to locations where electricity prices is lower.

A Pickaxe Strategy for Bitcoin Mining

Now, you might be excited and want to shift to the location where you can start mining Bitcoins and earning money. But hear this before you make your decision.

It was back in 1849 when many people went to the West Coast during the California Gold Rush to search for gold, thinking their fortune was set. Though, this was a risky proposition as everyone might not be successful.

Something which most people couldn't strategise was investing in companies that were making the "pickaxe" tool that every prospector would have to buy in order to start their search. Similarly, in the scenario with Bitcoin, if you think of shifting to a location with low electricity costs, cheap hardware, and all, you might not find success, but if you try and figure out ways to create or invest in organizations that are selling pickaxe for Bitcoin then making a fortune is not far. Investing in manufacturing organizations that produce the hardware used in Bitcoin mining could be a good strategy. These are organizations dealing with GPUs or ASIC equipment. Although, it is highly advised to do your own research before diving into any investment or money-making strategy.

Pooling Resources for Bitcoin Mining

Now that you know how to develop strategies to earn and make a fortune with Bitcoin, let us discuss how pooling resources for Bitcoin mining could be a great idea.

Miners might want to go solo, but joining a pool has immense benefits. With pool Bitcoin mining, joint hardware capacity could be utilized, thereby allowing the Bitcoin miners to spread the energy costs and risks simultaneously. This relatively costs less, given that the various miners' capital requirements and expenditures are spread. This increases the stakes of discovering a block which also helps to earn a block reward.

It also means that income earned from mining the block is shared between the miners, making this smaller payout a stable way to the higher-earning stakes. The amount earned is not just divided by the total number of miners and distributed. Calculations are made based on individual share difficulty and the pool's share time. The miners who have the most significant proportion of reward are those who are assigned a higher-difficulty of the task. The network automatically calculates this share difficulty and share time. However, every miner is required to submit their share of records.