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How BTC Mining Works? Explained in 5 Minutes

How BTC Mining Works? Explained in 5 Minutes

Anyone interested in Bitcoin must have heard the term “BTC mining”. Unlike coal miners, crypto miners don’t need to carry tools or work outside. Instead, they can start mining with a computer or a mining rig at home. That said, what exactly is BTC mining?

In short, BTC mining is a process of record keeping.

Bitcoin is a blockchain-based system collectively maintained by computers distributed around the world. Anyone can contribute to the building of this ecosystem by providing his/her hashing power. To ensure its normal operation, the network requires the deployment of specialized computers to function as nodes. More specifically, they generate new blocks by validating transactions in the BTC network while keeping records on the blockchain. This can be seen as a bookkeeping process in which the blockchain serves as the ledger and participants function as bookkeepers.

The BTC network generates one new block about every 10 minutes. To draw more participants, the network rewards bookkeepers (participants who earn the right to update blocks) with the bitcoins generated in the new block. This process is called “BTC mining”, while those who perform computations are called “miners”. At first, the block reward for mining a new block was set at 50 bitcoins. To control the market circulation of Bitcoin, Satoshi Nakamoto (the founder of Bitcoin) specified that the block reward will be halved every 210,000 blocks (about four years). In 2020, the BTC block reward dropped to 6.25 bitcoins.

Mining is essential for the BTC network.

BTC mining uses a consensus mechanism called PoW (Proof of Work), which allows whoever processes the data first to update blocks and receive BTC rewards. During this process, miners collect and verify transaction information regularly (every 10 minutes or so) and finally pack them into a block. After packaging the block, miners need to solve a series of cryptographic problems to become the only miner allowed to update the block. In the BTC network, to make sure the blockchain stays unique, only the blocks that are first solved will be added to the blockchain and replicated by other nodes.

The advantage of PoW is that any malicious act requires the majority of network hashing power. In other words, unless the attacker has more than 51% of all the hashing power, he cannot tamper with any data in the BTC network. Therefore, the higher and more distributed the BTC hashrate is, the more secure the network will be.

Miners keep the entire BTC network secure while receiving BTC rewards through mining. Meanwhile, mining is also one of the primary means to mining is also one of the primary means to acquire bitcoins.

How to participate in BTC mining?

Step 1: Get a good BTC mining rig

Mining rigs, the hardware used for mining, come with three major parameters: electricity price, hashrate, and power consumption.

Power consumption determines how much electricity is consumed when running mining rigs, whereas the hashrate affects their overall potential energy.

Step 2: Find a stable mining site to host your mining rigs

To reduce the mining cost, miners centralize their mining rigs for easier maintenance and management in places with cheap electricity, such as Africa and Kazakhstan. The practice of pooling multiple mining rigs forms a mining site. The BTC mining sites as we know are facilities that bring together dozens, hundreds, or even thousands of mining rigs for mathematical computation (mining).

Step 3: Choose a wallet

The next step to mining bitcoins is to set up a BTC wallet or use your existing BTC wallet to receive the bitcoins you mine. Copay is a great BTC wallet and functions on many different operating systems. BTC hardware wallets are also available.

Bitcoins are sent to your Bitcoin wallet by using a unique address that only belongs to you. The most important step in setting up your Bitcoin wallet is securing it from potential threats by enabling two-factor authentication or keeping it on an offline computer that doesn’t have access to the Internet. Wallets can be obtained by downloading a software client to your computer.

Step 4: Choose a mining pool

A mining pool centralizes the hashrate of miners in a virtual space, which significantly raises the block probability. The pool then distributes the revenue to each miner according to their hashrate share. The most important task of a mining pool is to assign tasks, record works, and distribute revenue.

Step 5: Download the mining software

A mining software connects your mining rigs with a mining pool, enabling a smoother mining process.

Step 6: Monitor & maintain your mining rigs

To reduce the mining cost, miners centralize their mining rigs for easier maintenance and management in places with cheap electricity, such as Africa and Kazakhstan. The practice of pooling multiple mining rigs forms a mining site. The BTC mining sites as we know are facilities that bring together dozens, hundreds, or even thousands of mining rigs for mathematical computation (mining).

If you find the above process too complicated, you can always go with a suitable cloud mining service, which helps you experience BTC mining with greater convenience and efficiency.

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