But what makes mining so interesting? The act of mining is incentivized economically in order to keep the blockchain running and provide reliable results. In a decentralized blockchain where third parties order these transactions to be processed, to ensure a trustworthy outcome, correct behavior must be rewarded and misbehavior punished. Hence, correct behavior, such as mining, will be rewarded with economic resources, and misbehavior will be punished with the loss of these economic resources. So in simpler terms; the process of mining shall be rewarded with fair pay, in bitcoin’s case with bitcoins.
A good comparison to bitcoin mining can be found in the old-school gold mining — it’s the incentives of acquiring some of that gold but only with the difference of bitcoin mining being more consistent with the financial gain. But how can a miner acquire these rewards? As bitcoin mining is a computer operation creating new bitcoin while tracking the currency’s transactions and ownership, it does require energy. Whereas gold mining is tiring for your muscles, the muscle power of bitcoin mining lies in one’s computer’s physical abilities. Hence, to start mining bitcoin, you do need the suitable hardware. However, the suitable hardware alone does not get you there. Bitcoin mining is energy-intensive, and a computer has to be plugged into a power grid. And the cheaper the energy, the more profitable the mining gets. Besides these necessities, a miner needs mining software and a cryptocurrency wallet for the mined bitcoin.
Besides actual hardware and energy-based optimization, miners can increase the likelihood of their rewards by combining these efforts in mining pools where cooperation increases the likelihood of profits that will be shared. Joining a pool does come with a cost though in the form of an entrance fee.
What if we told you that the financial gain might not be the only profit of bitcoin mining? Besides the financial gain, a miner will gain a lot of knowledge in the process, shaping a more technical and back-to-basics understanding of blockchain. Diving into the world of crypto mining is very educative on the computer hardware side too. So, if you are curious about it, you should maybe go for it while possibly earning a buck or two!
So, what steps should a beginner follow to start bitcoin mining? By following the next steps, you can get started already today!
- Gain basic knowledge of crypto mining. 123Miners.com provides a beginner’s guide useful for those less experienced.
- Get your crypto mining hardware and low energy costs, and up-to-date firmware. Make a cost-benefit analysis to evaluate the possible profit in relation to the effort and time.
- Look for a mining pool. In mining pools, cooperation increases the likelihood of profits which can be a good idea for a beginner.
- Make a decision between self-mining, managed mining, and cloud mining