Should You Start Mining Bitcoin?
One of the many things that make Bitcoin different to traditional currency forms is that central banks can’t just print more of it when they want to. This virtual, digital currency doesn’t exist in a physical form, so the notion of printing is a bit redundant anyway. If you’re a bit of a Bitcoin geek, you might describe the creation of the Bitcoin currency as a way of discovering treasure, but the more conventional term for this process is mining.
What is Bitcoin Mining?
While the notion of mining conjures up the gold-rush days of adventurous prospectors arming themselves with a pick and shovel and staking out their claim with a dream of striking it rich, the reality of this new virtual and the digital age is quite different.
When you go mining Bitcoin you don’t need a pick or a shovel – you need a computer. A pretty big computer. Or even a lot of pretty big computers.
Effectively the Bitcoin prospectors are competing with each other to process Bitcoin transactions, creating lists and blocks that are entered into the general ledger. The general ledger is a record of all the Bitcoin transactions that have ever been made. When a block of transactions is created, Bitcoin miners process it, applying a formula to it that shortens it and stores the information within the block-chain of the general ledger. Each block of data added to the general ledger helps to verify the authenticity of the transactions either side of it – a key fraud or counterfeit prevention tool.
Each time a block of data is successfully processed and added to the general ledger they are rewarded with twenty-five Bitcoin. It’s a relatively complex and time-consuming process to process a block of data to the general ledger successfully, and miners are competing with each other to be the one to get it down and claim the reward.
How to get started
In the early days of Bitcoin, it used to be possible to mine for Bitcoin using your computer CPU or a high-speed video processor card. However, with the growing interest in Bitcoin, you now need a lot more computing power to get in the game. You will need a device based on custom ASIC chips – delivering performance up to one hundred times the capabilities of traditional computing systems.
You are also going to need some purpose-built Bitcoin mining software – there are several different types of software options that are readily available.
It’s no longer possible to mine for Bitcoin by yourself. You are going to need to join a mining pool – a group of fellow miners who are all working together to complete the processing of a block of data for the general ledger and thereby share in the rewards generated.
Mining for Bitcoin isn’t for everyone – you need to know what you’re doing, you need to have the tools to do it, and you need to be able to work with fellow miners for a common purpose. You may find that there are easier ways to make your fortune.
At the moment it is not so profitable to mine Bitcoins like it was in the past, but still, there is room for profit.