What is a Bitcoin miner?
Miner is a bit of a misnomer. It suggests that there are precious pieces of metal buried within the internet that you can dig for. There are indeed a finite number of coins to be released by Bitcoin – a handful each day for the next 10 years or so. However, these are neither buried nor hidden.
A miner is responsible for processing transactions within the Bitcoin ledger – organising these transactions into a set block size and then adding these to the chain. What makes Bitcoin and blockchain different is that it is not processed by a central organisation. The transactions can be processed by anyone, anywhere in the world. The reward for processing the transactions is ownership of Bitcoin.
It is possible, if you have a powerful enough graphics card, that you could create your own mining device. Realistically, however, a miner of cryptocurrency is likely to be using a highly expensive, highly powerful ASIC device (application-specific integrated circuit).
Why would you want to become a miner?
The obvious reason for wanting to become a miner is that you will make a profit. You can earn money by processing the transactions. The amount you will earn will depend on a number of factors. The first of these factors is your hash rate. This is crypto-speak for the amount of processing power your device contains. The more powerful the rig – or computer designed for mining – the more electricity you will use and the less profit there is to be made. Yet, mining becomes more complex as time passes – so the more processing power the more successfully your device will solve the maths problems that will encrypt the transactions.
How to go about mining?
Becoming a crypto-miner is no easy task. It is unlikely that you will be able to buy an everyday computer and start successfully solving complex problems. However, here are some tips for those who have the ambition to get started.
Join a pool
One of the most likely ways that you could mine is as part of a mining pool. This is a huge number of machines grouped to collaboratively engage in mining. If transactions are successfully processed and a reward received, the profit is then shared amongst the group. The proportion of the share of the reward correlates to the amount of processing power you provide. However, this varies from pool to pool and it is well worth doing your research.
Buy an ASIC device
More unlikely, maybe, is that you try to go it alone and make the major investment in an ASIC device designed specifically for cryptocurrency mining. One such rig is called the Antminer S9 – and you are looking at some serious investment to get hold of one of these. You are likely going to have to invest about $2500 to buy your S9 and the power supply unit will likely be close to $400 – not to mention the electricity. These computers tend not to transfer well between different cryptocurrencies either – so if you are buying a rig in the belief you could move to a different coin if that coin grew in presence and credibility – you might be disappointed.
Create your own
The other option is to create your own rig using a lot of graphics cards – like you would find in a top of the range games console. You would also need to think about how to get rid of the heat this machine would create – so you are likely going to need to buy a case for your computer.
Rent some hash power
If investing a lot of money in a device specific to mining, or a do it yourself model, is too much, then you can hire processing power from cloud mining companies. These cloud mining companies have whole data centers dedicated to mining coins. The bulk use of machinery and electricity makes this a more efficient way of mining – and the most accessible to everyday folk.
You will be offered the chance to purchase a fixed amount of GH/s or Gigahash Seconds. This means you get some pretty powerful processing time without having to invest in expensive hardware.
The pros and cons of mining
With the rising popularity of Bitcoin and other cryptocurrency, there are a lot of transactions to process. Therefore, there is a lot of opportunity to earn money mining. However, it is always best to be safety conscious and consider the potential for cloud mining or mining pools to be hoax. There are a lot of reputable businesses out there, offering great opportunities in mining. It is important, however, to do your research.
The major positive of mining is the chance for a sustained passive income. Once the hash rate is in place, you are going to be earning from the investment you have made. It may take some setting up, with some important decisions to be made along the way, but once done then the Bitcoins should accrue with little effort on your part.
An alternative to mining Bitcoin is to buy and sell coins in exchanges. Here, you are speculating that the price of the coin will rise before you sell. The advantage when mining is the only investment made is in the equipment, which continues to offer return over a long period. By speculating on the market value of a Bitcoin the variables for the price are often out of your control.
It is worth doing some research into other coins – with their mining and validation processes. Bitcoin is the daddy of cryptocurrency and demands a high price per coin. However, some of the smaller coins are an easier access point and their price per coin is likely to rise.
In short
Being a cryptocurrency miner is similar to the work of a bank teller, who gets paid depending on how many transactions they can process. Mining tends to be undertaken by large organisations looking to capitalise on the huge data processing and efficient power use they can wield.
