Community contribution: This contribution was created in collaboration with our community and together with the MeaTec team . Her area of ??expertise is bitcoin mining and mining of other cryptocurrencies. We will go into the basics of mining and also examine the question of whether mining is worthwhile. So everything you need to know about Bitcoin mining can be found here. Have fun!
Anyone dealing with Bitcoin & Co. will inevitably have come into connection with the topic of mining. But what is Bitcoin mining anyway? How does it work? What is a mining pool? What do I need to get started? Is BTC mining worth it? What about the environment?
Mining is an integral part of the Bitcoin ecosystem and the core of blockchain technology.
What is Bitcoin mining?
Mining is an essential component or process of blockchain technology and was first introduced with the launch of the Bitcoin blockchain on January 3, 2009. Bitcoin mining itself operates according to the proof of work (PoW) principle, a very complex computing process in which an attempt is made to “guess” or calculate a hash on transactions and data from the previous block. Once this is found, a finished block is created, which is attached to the other blocks, refers to them and thus expands the database. The result is a chain of blocks: the blockchain.
The little mining lexicon
Before we throw around other technical terms, we have put together a small overview of the most important terms around Bitcoin mining for you.
Terms Definition Crypto Mining Solving math puzzles to validate transactions and secure a blockchain; usually automatically rewarded with coins Blockchain A decentralized database; mostly used by cryptocurrencies, but other areas of application are possible and are also used Block Entry in the blockchain; consisting of transactions, sender, recipient, number of coins sent, transaction fees, etc. Hash “Random” string calculated from the data within a block; not retroactive Coins Unit of a cryptocurrency Mining Difficulty Yardstick of how difficult it is to mine a block by mining; is related to the hash power in the network; high hash power / many miners = greater difficulty ASIC A nwendungs s pecific I ntegrated circuit ( C ircuit); special mining hardware algorithm Calculation process according to a certain repeating scheme
Who are the miners?
Miners participating in the system provide their computing power to find the hash of the current block. The hash is unpredictable and can only be found by guessing. When a miner has found the current hash, it sends this value to all nodes and miners. The other miners in the network check the hash found. If the value is correct, the block that has now been validated is appended to the next one and thus added to the chain. The best known example is Bitcoin mining and the origin behind this approach.
The miner receives a reward for finding a hash ( block reward ). This is paid out in Bitcoin on the Bitcoin Blockchain and currently corresponds to 12.5 BTC, which is approximately every 10 minutes. go to the finder of a new block. This incentive enables the system to manage itself. This ensures that only valid transactions are included in a block.
Monitoring the other miners and nodes ensures that the hash, and thus the block, is correct and that the transactions contained in the block are executed correctly.
The difficulty describes how difficult it is to calculate the mathematical problem. The more miners participate in the network, the more difficult it will be to mine a block. If the number of miners in the network decreases, the difficulty also decreases.
The network or the Bitcoin mining algorithm adjusts the difficulty so that an average of one block is found every 10 minutes. This automatic adjustment creates a balance between the creation of new blocks and the block time. Where a laptop used to be enough to calculate bitcoins, today you can only work with specialized calculators that are a thousand times faster than any PC. BTC mining can still be worthwhile today.
By the way: The block reward for Bitcoin mining is halved every 210,000 blocks, i.e. every 4 years. The next BTC halving will take place around May 2020 and has had an enormous impact on Bitcoin's price development in the past. You can find more information here: Bitcoin Halving .
What is a mining pool?
In the early years of Bitcoin mining, the difficulty was still relatively low and, as already described above, a simple computer was sufficient to find blocks. The block reward was even higher during this time, so before 2014 there was a whopping 25 BTC per block found.
Unfortunately, these times are over. With the current difficulty and about 70 TH it would currently take an average of 10220 days to find a block. With a little luck you can find a block faster, but this is unlikely. In order to avoid this long waiting time without having to buy new equipment, the miners came up with the idea of ??joining together in pools . In a mining pool you bundle the computing power of all devices and act as a single, powerful computer to the outside.
If, for example, 10,000 miners participate with a computing power of 53 TH / s (TerraHash / second), finding a block takes about 0.74 days. These 12.5 bitcoins are then divided among the 10,000 miners. Each participant thus receives 0.00125 Bitcoin per block found collectively.
Can you mine on your own?
Mining Bitcoin Mining yourself and alone (solo) may have become more difficult, but it is still possible to generate Bitcoins without a mining pool. In addition to the fact that you do not have to share the block reward, Solo BTC Mining also has the advantage that you do not have to trust the operators of a pool to actually get your share.
To operate Bitcoin mining alone, all you need is a mining device ( ASIC or GPU miner ) and a place with electricity and internet connection. This can be in your own basement or you can have your device hosted externally. Hosting providers operate their data centers in countries with easy access to renewable energy (hydropower, geothermal energy). Electricity is very cheap there, which is why mining is particularly worthwhile in these countries.
You can find out which cryptocurrency is most worthwhile at www.whattomine.com .
Is Bitcoin mining still worth it?
Whether alone or in a pool, the mining has a sticking point, as mentioned above, which can make it very expensive in addition to the hardware investment: the electricity. The energy required for the enormous computing power is one of the decisive factors in answering the question of whether Bitcoin mining is still worthwhile. The best way to illustrate this is with an example calculation:
Mining income - running costs (electricity, location rent, etc) = profit / loss
If the mining yield exceeds the running costs, then you make a profit and the BTC mining is worthwhile. So far so good. In Germany we have an average electricity price of around 0.27 euros per kilowatt hour. A modern, energy-saving miner has a hashrate of 73 TH / s and consumes 2.8 kilowatts an hour. If we now compare the use of this miner with the electricity prices in different countries, we can quickly see why mining in Germany is not worthwhile:
Land Cost per kWh in euros Profit per month in dollars Germany 0,27 EUR -250.75$ Netherlands 0,17 EUR 18.61$ Russia / USA 0,052 EUR 250.85$
* BTC price at around $ 8100
In addition to the electricity costs, the acquisition costs for an ASIC miner should of course not be neglected. Assuming a purchase price of $ 3000, the break-even point at an electricity price of 5.2 cents is around 12 months. This means that after 12 months all costs have been recovered and you can mine profitably.
These values ??can change at any time. Whether Bitcoin mining is worthwhile and profitable does not only depend on the Bitcoin price, as described in the formula. Above all, the electricity price and the acquisition costs for the BTC miner are of great importance. Rent and other additional costs are not to be scoffed at either. Finally, the performance and runtime of the BTC miner are of course very important.
So whether Bitcoin Mining is still worthwhile depends on many different factors and can be reassessed every day. However, it can be said that without good hardware, a pool and without cheap electricity prices, it is very difficult to do a really good business here.
What is ASIC and GPU mining?
In addition to Bitcoin, there are many other cryptocurrencies that use different mining approaches. We primarily talk about the Proof of Work (PoW) system by providing proof of work through arithmetic, as with Bitcoin Mining. In addition to ASIC mining, there is also GPU mining, which pursues a data-intensive mining approach. Let's just start with A like ASIC.
ASIC Mining
The word ASIC stands for " a pplication- s pecific i ntegrated c (German: application specific integrated circuit) ircuit".
These are chips that have been designed for a specific application and can no longer be reprogrammed. As a result, the chips are very small, simply constructed, use little electricity and are very fast. The advantage is that you can put dozens to a hundred pieces on boards and this scaling makes them very efficient. Appropriate algorithms such as SHA256 (Bitcoin Algorithm) are very suitable here, since it is only a matter of pure computing power. From what we've learned, they're perfect for Bitcoin mining.
GPU Mining
Other cryptocurrencies such as B. Ethereum not only rely on computing power, but are very data-intensive and require very fast storage. ASIC chips don't have much memory available and are not the first choice for Ethereum, for example.
Graphics cards are much better here. Graphics card processors are fast and have enough memory (up to 16GB) installed. Since graphics cards are multiprocessors, they can be freely programmed and in principle do any kind of calculation without having to be newly developed. A simple update of the software is sufficient for this.
The threat of GPU & BTC mining centralization
Centralization is always a sensitive issue in mining and the GPU miners also see dangers. Because ASIC manufacturers are trying to develop corresponding ASIC processors that come with external memory chips and have a higher speed. This is viewed with concern by the mining community, since developing an ASICS that is as fast as 100 graphics cards would quickly make the existing GPU miner superfluous. The communities see decentralization at risk because only a few ASIC miners are sufficient to achieve the computing speeds of hundreds or thousands of miners.
This has also happened in the past with the cryptocurrency Monero , since the ASIC manufacturers have developed corresponding chips that were able to calculate these currencies. Since it takes an average of half a year for a manufacturer to develop an ASIC, the community has decided to adapt the algorithm every 6 months.
Since the chips cannot be reprogrammed, they become worthless and must be redesigned. This cat and mouse game keeps the community from the manufacturers of ASICs. However, ASIC miners have become indispensable in Bitcoin Mining.
The Bitcoin mining network also has to deal with allegations of centralization. In this article, we will clear up the errors and show you that there is even a lot going on to further mitigate the dangers of centralization in BTC mining.
What do I need to start bitcoin mining or GPU mining?
You don't really need much to start mining. Strictly speaking, depending on the cryptocurrency, you can mine with a commercially available PC. A gamer PC with a correspondingly good graphics card is required for Ethereum. More graphics cards are required to scale.
Unfortunately, if you want to get into Bitcoin mining, it is not that easy, because who wants to burn their money? Time, money and a reasonable setup are extremely important here. What is needed:
- ASIC Miner, current generation (from approx. 3000 €)
- cooled parking space, where noise from the miner does not disturb
- Electricity, cheap if possible
- Internet connection
The more current the ASIC miner generation in this context, the lower the power consumption and the more efficient the use. In addition to good cooling, all you need is the internet and you're ready to go. Who now thinks that it is really easy should not forget that a miner quickly reaches a volume of 85dB and requires really reasonable cooling. In addition to configuring a miner, the location is a particular challenge, which is why ambitious miners quickly end up in data centers, where optimal conditions can be found.
After all, maintenance of an ASIC is the least evil with BTC mining. If you feel ready now you should take a deep breath and don't forget the costs (especially electricity) and remember the section "Is Bitcoin Mining Still Worthwhile?". Especially here in Germany it is almost impossible to mine profitably.
Bitcoin mining polluting? - A misconception
Everyone is talking about climate change and the question of the environment is always the subject of hot discussions in Bitcoin mining. As already mentioned, the miner consumes electricity during the computing process and can potentially damage the environment. But not to the extent that one often reads in the media. BTC Mining's electricity consumption is actually very high, but the share of renewable energies is not 40%, as in Germany, for example, but between 80% and 85%. This makes the Bitcoin mining network one of the largest percentages of renewable energy users worldwide.
It's easy to explain why. Renewable energies, especially water and wind power, have characteristic peaks in production. For example, if it is very windy or there is a lot of water available to the hydropower plant. The excess energy can usually not be used or stored in the network. This surplus is then often used by large Bitcoin mining farms to operate the ASICs. This results in a win-win situation, because the electricity is not only cheap, but also "sustainable".
Iceland, hydropower and the Mecca for mining
Part of the Bitcoin mining farms are located in Iceland. A lot of electricity is generated here by geothermal energy. Electricity that is not harmful to the environment, but cannot be transported away from the island without problems to supply other countries.
Many GPU or BTC mining farms are located directly on the site of hydropower plants. These hydroelectric power plants have been subsidized by the state for decades. After the subsidies cease to exist, the power plants often cannot keep themselves afloat and have to close because they cannot compete with electricity prices on the world market (~ 2 cents). This is where the data centers come in, because they like to pay double the world market price and at the same time take the excess electricity from the hydropower plants.
For Bitcoin mining farms, it is not worthwhile to rely on a normal electricity provider, since they are then connected to the public power grid. This will result in additional network charges, line costs and environmental charges.
Even if electricity consumption is very high, the environment is less damaged than, for example, the mining of gold, and at the same time a market for environmentally friendly electricity generation is maintained or even expanded.
Operate Bitcoin mining successfully and profitably
Now we have rummaged through the basics of bitcoin mining and found that many mistakes shared in the simple media are wrong. Nor is it true that BTC mining is not worth it, you just have to know how. If you are interested in the topic and want to know how MeaTec manages to mine bitcoins successfully and profitably from Germany, then you should take a look at the following videos and our further articles on the topic: Is mining with your own Hardware still lucrative? - MeaTec
We will gradually update this article and add interesting topics related to Bitcoin mining and mining in general. If you like the article, please share it among interested miners and help us to make the BTC mining network profitably accessible from Germany.
