Bitcoin Mining
What Is Mining?
Mining is the process of using your computer computational power to perform tasks that reward you with cryptocurrencies. This mining is actually your computer doing complex maths to verify actions that happen such as transfers of a cryptocurrency to another user. This process of verification uses whats called “hashing algorithms” that works on a mathematical basis where using 1 number(private key) to encrypt some data can be decrypted by a second number(public key). So if a user performs an action of sending 1 bitcoin to another user this data is encrypted by the private key and sent across the network(blockchain) then when several users on the network decrypt this message they can see that the bitcoin was sent. They can tell this transfer was from the user because only the private key could have ever encrypted that message. If someone else’s private key encrypted the message the message would not work with the public key and the message would be just random text. This is why cryptocurrency is so secure.
So How Can You Start Mining?
Well, first you need some equipment to perform the complex mathematical computations. This could be your own computer(home mining), a computer you buy made specifically for mining(an asic machine) or a computer you rent(cloud mining). The easiest way is to start mining is with the computer you already have and that can be done using a program called the NiceHash miner. The nice hash miner is a program that will first check your computer to see how fast it is then it will start mining the most profitable coin.
The NiseHash Miner.
The NiceHash miner GUI shown above is from the computer I am using right now to write this blog post. As you can see the daily estimates for me are £5.69 per day. That’s £39.83 a week and approximately £160 a month. This value varies from time to time but the range I’ve seen is from £3 to £10 per day. This is the simplest way to start mining and all you need to do is create an account at https://www.nicehash.com and download the miner. Once downloaded you simply run the miner, enter your wallet key in the section labeled wallet and it will sort everything else out by itself. Then all you have to do is wait for your wallet to fill up. For more information on the NiceHash miner view this guide NiceHas Miner – A Step by step Guide
ASIC Miners
An ASIC miner is a special device that is specifically made to mine cryptocurrency. These ASIC miners are very powerful and can mine a lot of bitcoin compared to using your own computer, which is why they are very sought after and expensive. The image above is an S9 AntMiner and will set you back over $2700. Why would you pay over $2000 for a machine that mines bitcoin? Well it because it mines bitcoin at a very fast rate. According to https://www.cryptocompare.com/mining/#/equipment the miner will pay for itself in 165 days and every day after then will be pure profit.
Cloud Mining
Now if you don’t want to use your own computer and don’t want to spend a large sum of money on an ASIC machine you can still mine using a cloud mining service like HashFlare. Cloud mining companies like Hashflare allow you to rent the power of their machines to mine bitcoin. They make money off you by charging you rent for the machine and a small fee for maintenance. This cloud mining service is the one I use and I use a cloud mining calculator to calculate what sort of profits I would get for my initial investment. I use this calculator because I believe it to be more accurate than some of the other calculators which don’t take the full contract term into account or the expected increase in price and difficulty. The calculator shows that for my $220 dollars i could potentially make $567 over 2 years by reinvesting all my original money. Later I will add a full guide to Cloud mining.
As a hashflare user, I have serious doubts regarding hashflare profitability. At the current exchange rate (about $11k/BTC), difficulty (about 2.6 trillion), and contract cost ($220 s/TH), a 1 TH/s contract yields less than $1 per day. It will take over nine months to recover the cost of the contract, and that's if nothing changes. The last several difficulty increases have failed to restore the block solution time to the nominal 10-minute level. Total hashing power in the network continues to increase despite declining profitability parameters. This suggests to me a near certainty of further significant difficulty increases over the next weeks and months. As a result, I think hashflare contracts bought today have a high likelihood of expiring before they pay for themselves. Therefore, I have suspended reinvesting, and am holding my hashflare mined bitcoin pending improvement in the market conditions or reduction in hashflare contract price.
I see your point here and I agree that it may not be profitable with the current price and difficulty changes, however, I do think the risk from cloud mining is lower than some altcoins. I myself have a small contract with Hashflare and I think even with the price drop over the past month the price of bitcoin at the end of my contract will still be profitable for me. I also think its best to diversify when investing so I don't have all my money in cloud mining, I have some in cryptocurrencies, some in stocks and some in cloud mining. Hopefuly the price will go up and the difficulty will equalk out and it will be profitable for both of us.
Agreed on all points, especially your remarks about diversification. I certainly wish you the best and hope you are right about mining profits.
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