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What is bitcoin mining? Bitcoins can only be created as a reward for payment processing work, called mining, where users collectively offer their computing power to verify and record all transactions into a public ledger and is called the blockchain. How to mine bitcoin? Mining bitcoins is a relatively straightforward process. If you don’t wish to delve into the details or learn how to optimally configure your bitcoin mining hardware, you can easily just download bitcoin mining software, start it up on your computer, and you’re already mining bitcoin. You could even start mining a few Satoshi at http://bitcoin.stackexchange.com/questions/114/what-is-a-satoshi before finishing this read. Where do bitcoins come from? Before starting your mining operation, you might want to learn a little bit about where bitcoins come from. The full answer to this question is a little abstract, so let’s break it down. Every time a transaction is made between two bitcoin addresses, it is broadcast throughout the network. Bitcoin mining computers at https://www.bitcoinmining.com/bitcoin-mining-hardware/ running specialized software see these transactions and collectively add them to the current ‘block’ of transactions, while also collecting a miner’s fee contained in each transaction. This is the first incentive for bitcoin miners.
The second incentive comes from mining the blocks. For every block of bitcoin at https://en.bitcoin.it/wiki/Block transactions generated, miners compete to solve a very ‘difficult’ math problem. The winner of this competition is awarded some newly minted bitcoins. About every 4 years, the number of bitcoins generated in this way is halved. As you can see in the chart below, the total number of bitcoins approaches about 21 million bitcoins and will never exceed that number. In addition, the difficulty of solving each block increases over time which place a significant constraint on the supply of bitcoin. In this design, inflation is kept at bay while miners continually are incentivized to run their machines on the network. And with all that said, we can safely move on the details of how to mine your own bitcoins. A few concerns for bitcoin miners. The main concerns for bitcoin miners at https://www.hobbymining.com/mining-hardware/ are energy consumption and hash rate, where both play a crucial role in the profitability of bitcoin mining at http://www.coinwarz.com/calculators/bitcoin-mining-calculator. If you are able to balance the two such that your ramping energy costs don’t overtake the bitcoins you earn through mining then your operation will be successful.
The hardware that miners use has evolved over the years from using small form factor PCs with certain model graphics cards, to specially engineered bitcoin mining rigs at https://en.bitcoin.it/wiki/Mining_hardware_comparison touted for their hash rates and energy efficiency. The latter are optimally configured and easy to setup for bitcoin mining. However, for the novice bitcoin miner, it was profitable for many years to simply run one or a small cluster of bitcoin mining machines out of your home but those days have come to end for the most part. As the difficulty of computing at https://bitcoinwisdom.com/bitcoin/difficulty the hashes for mining has increased and the rewards for mining have diminished, it has become much less profitable and in most cases unprofitable to run mining hardware from your home. Energy costs cripple novice miners, while those in countries with heavily subsidized electricity can enjoy sustained profits and successfully run large scale bitcoin mining operations at https://www.youtube.com/watch?v=95JfYFIRPZU. Be sure to take these costs into account when deciding if you want to start mining bitcoin.
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