How can you mine Bitcoins and is it profitable?
Bitcoin mining is still very popular worldwide. Bitcoin mining is the only way to obtain new Bitcoins without buying them on a crypto exchange. But what is Bitcoin mining and can you still make money from it?
Mining Bitcoins on a computer
Right after the launch of Bitcoin, it was possible to mine this digital currency yourself. All you needed then to mine Bitcoins was a good computer with the right software.
Today, you can still use your computer to mine Bitcoins, but this is no longer enough to earn real money by mining Bitcoins. If you want to make money by mining Bitcoins, you need special mining hardware. More about this hardware can be found in the paragraph below.
Good explanation on how to mine Bitcoins
Mining Bitcoins with special hardware
In the first years after the introduction of Bitcoin, it was possible to mine this currency with a regular computer. Later, multiple good graphics cards were needed to mine Bitcoins. Nowadays, even this is no longer enough.
To mine Bitcoins, complex mathematical problems on the blockchain must be solved. Your processor can solve these problems, but it costs a lot of energy. The special mining hardware that has been brought to the market can solve the blockchain math problems more easily and quickly. That is why it is better to mine with special hardware.
If you want to mine Bitcoins, you should leave your computer behind and invest in one or more ASIS. That’s what mining hardware is also called.
2 ways to mine Bitcoins
Individual Bitcoin mining
There are two ways to mine Bitcoins. Firstly, you can choose to mine the digital coins individually. In this case, you buy mining hardware yourself, which you then put to work to solve the blockchain math problem. If successful, you receive a certain amount of Bitcoins.
Mining Bitcoins in a pool
You can also choose to mine Bitcoins in a pool. In this case, you do not invest in mining hardware yourself, but join a large group of people who mine Bitcoins together.
When you mine Bitcoins in a pool, you simply join forces with others to solve the blockchain math problems. If successful, the Bitcoins are distributed among the participants of the pool.
Part of the earnings from mining goes to the owner of the mining pool. So, you don’t keep exactly your share of the mining, but first pay a portion of the bitcoins to the pool owner. The remaining bitcoins are then divided among the group members.
The amount you have to pay to the owner of the mining pool varies per pool. Some owners simply ask for a higher return than other owners of mining pools. We recommend comparing the rates of various pools. The lower the costs that the pool owner charges, the more you will be paid out yourself when bitcoins are mined. Click here for an overview of good mining pools.
Can you still make money with Bitcoin mining?
It is very difficult for individuals to make money by mining bitcoins in the Netherlands. This is because energy prices in the Netherlands are very high. Most mining activities therefore take place in countries where electricity is relatively cheap.
Of course, you can still choose to mine bitcoins in order to support the network. However, you will not get rich from it.
Why are miners so important?
Miners are important because they provide a solution to the double spend problem. When you make a transaction with cryptocurrency, it is 100% digital.
Malicious users could then spend the same cryptocurrency multiple times. A blockchain miner prevents this from happening and checks transactions to ensure that they are not spent twice.
Mining creates new bitcoins
Miners constantly try to find the solution to a complex problem. They must be the first to find a 64 hexadecimal number (a hash) that is equal to or less than the target hash.
The miner who wins this competition receives Bitcoins as a reward. This reward is not stable: roughly every 4 years, as a miner, you receive half as many Bitcoins for solving the problem. This is also known as Bitcoin halving.
In addition to receiving Bitcoins, miners also receive a fee in the form of transaction fees. This allows Bitcoin to continue to exist after 2140, when all Bitcoins have been mined.
This method of verifying transactions on the blockchain is called Proof of Work.
What do you need to mine Bitcoins?
What you need to mine Bitcoins depends on the mining strategy you use. If you want to mine Bitcoins individually, you will need the right hardware. In this case, you also need to install certain software to mine Bitcoins. There are various software programs you can download for mining Bitcoins. By comparing these programs, you can find the best Bitcoin software.
If you don’t want to mine Bitcoins individually, you can join a Bitcoin mining pool. In this case, you only need the login credentials of the pool to mine Bitcoins.
Note: there are many types of Bitcoin mining pools. We recommend that you compare various pools. This way, you can find the best pool to mine Bitcoins and hopefully keep as much as possible from mining the digital currency. Various lists of Bitcoin mining pools have been compiled. Take a good look at the pools on these lists and you will find the best mining pool to create an account with.
What are the biggest disadvantages of Bitcoin mining?
One major disadvantage of Bitcoin mining is that it is very bad for the environment. Mining Bitcoins costs more and more energy, despite the fact that the hardware is becoming more efficient.
The financial risks of Bitcoin mining are also significant. In the past, some countries have banned mining overnight. A profitable mining operation can suddenly become unprofitable due to a falling Bitcoin price or rising electricity prices.
Bitcoin mining is now truly a business venture where you take significant risks. Therefore, it is not recommended to start mining Bitcoins without experience. You can, however, search for other cryptocurrencies that you can mine where the competition is less.
Frequently Asked Questions About Mining
Fortunately, mining Bitcoins is legal in the Netherlands and in many other countries. However, there are also countries where crypto and mining of crypto are prohibited.
Your phone is not powerful enough to mine Bitcoins. Nowadays, you need expensive and powerful hardware to mine Bitcoins.
If you don’t let your computer work too hard, mining Bitcoins should not damage your computer. Make sure, however, that the equipment is stored in a sufficiently cool place.
