Mining Bitcoin 2018

As you saw earlier, transactions on the Bitcoin network get confirmed by computers that compete to solve cryptographic puzzles. This process is called mining, because whoever solves the problem gets a reward. It's sort of like digging into the earth to get gold. Now, you might be asking, who are these miners, and how can I claim some of those rewards? I'm sorry to say that mining is now such a competitive activity that individuals have very little chance of doing well in it, unless they're willing to invest a lot to get machinery and expertise.

If that's you, here are some places to go for it. All the places you'd go to learn about Bitcoin also have areas where people talk specifically about mining, and a good place to find them all is on bitcoin.org. Just go to Resources, and click Community, then go to the Forums. For example, here's the mining forum on bitcointalk.org. As usual, the knowledge and intelligence levels vary tremendously, so don't take anything as absolute truth. There are also some good calculators for miners.

I like the one at TradeBlock. Just go to the site of tradeblock.com and click Mining. One thing I like about this site is that it has a calculator that'll show you how long it will take you make back your money after you buy your equipment. So for example, lets say that we have an ASIC miner, the block erupter USB, and these are all the things that we're paying for, the shipping cost, the electricity, and so forth. According to this calculator, we won't actually make back our money. One important thing to note for each piece of hardware is the hash rate.

It's measured in gigahashes per second. A gigahash is a billion calculations that the computer runs through for every second, and in this case, it runs through about 336 million calculations per second. One thing that that makes absolutely clear, is that an ordinary computer, like the one on your desk, has virtually no chance of competing. If you just use the CPU or central processing unit you'd be lucky to get about one tenth of a gigahash per second. Some of the mining hardware available today gets thousands of gigahashes per second.

Even specialized graphics processors, which are especially good at math can't compete against mining chips. And the thing is, it's an all or nothing situation. You only get a block reward if you're the first to solve the entire block. So, small players usually get nothing. That's why miners band together in mining pools. They split up the problem, solve it cooperatively to win the race, and then divide the reward. This page at blockchain.info/pools shows you which mining pools are getting the most block rewards. The original Bitcoin paper was brilliant in so many ways, but I think its writer really missed the point with regards to mining.

The paper implies that mining would always be done by empowered individuals on their desktop computers, and it even mentions CPU power several times. The paper's author also didn't realize how quickly and completely mining would become the work of specialists. Fortunately, there are resources available if you want to become one of them.