What is Bitcoin mining (best explanation)

Bitcoin Mining is a process performed by computers to verify, protect and secure Bitcoins transactions between users. Those tasks are rewarded with the creation of new cryptocurrency for the miners.

Transactions related to buy/sell and payments with Bitcoins are recorded in a public (digital) book known as ledger that contains all transactions previously made by people all over the world.

These transactions are separated by blocks that are verified by computers connected to a publicly shared network.

A lot of blocks that contain the Bitcoin (or other cryptocurrency) transactions, they are interconnected forming a set called blockchain.

The word blockchain is formed from two other words: block + chain. So, blockchain is a group of blocks connected in a chain.

In the example with the two people, the transaction between Peter and Mary is recorded and everyone knows what each had before and after the transaction of bitcoins.

As mentioned earlier, this registration and verification process is called bitcoin mining and in order for it to occur it is necessary to have computers working all the time in this task.

Bitcoin miners are the computers scattered around the world connected in a network to process blockchain transactions.

You can track transactions of bitcoins around the world at any time, because the records are public and anyone can have access to them at any time.

Below the image with an example of bitcoin transactions  that can be consulted directly on the website of blockchain.info

The computers involved in this bitcoin mining task are rewarded and paid according to how much they worked on processing the information and creating new blocks.

Obviously the payment of the miners is done in bitcoins or fractions of it that are known as satoshis. If you want to learn more about Bitcoins, just read the article: What is Bitcoin.

Anyone can participate in the bitcoin mining, It's necessary to have a device connected to the network and participate in the process of verifying the Bitcoin transactions that occur daily.

There are different ways to do this, see the following options:

Your computer may use specific software to participate in the bitcoin mining process automatically, but this requires a lot of processing power these days.

See in the picture an example of a software called NiceHash Miner, you can download and install it on your computer for free.

Note that the software has identified that the computer has 1 processor (CPU) but it doesn't have a compatible video card (GPU) that could be used for the bitcoin mining process.

It is possible to notice at the bottom that the software is running, see the message: "Current Mining Status: Active - Running"

The gains with Bitcoins are small, see on the bottom right side of the image (in green) the 0.00000856 BTC balance information.

This is a test I'm doing on my laptop with an i7 processor, 2.4GHz with 16GB RAM and Nvidia GTX770M video card.

It is common to use the video card processor for Bitcoin mining, however in my case this Nvidia model is not compatible.

You can buy specific hardware manufacturered for bitcoin mining. They have a processor optimized only for this task and can not be used for anything other than bitcoin mining.

This type of hardware is usually expensive and consumes a lot of electrical power. So it is necessary to evaluate the cost/benefit of having such device connected 24 hours for bitcoin mining.

In February 2018 an Antminer S9 like the one shown in the photo is being sold in the United States for $2,300.00.

The electrical consumption of such equipment can be compared to that of a small hair dryer. Just imagine someone in your home using a hair dryer 24 hours a day for the entire month, OMG!

It is possible to contract bitcoin mining services through the use of company servers that have hardware dedicated to this task and rent the processing power to interested people.

In that case, you must pay a monthly fee to the company according to the package you hire.

An example of a company that provides bitcoin mining services is Genesis which has different packages available for hiring.

Certainly the first option should be discarded because the Bitcoin mining at this level is not profitable at all. Years ago it was possible to earn something mining Bitcoin from a laptop, but this is not profit anymore.

In tests performed with laptop the gain is so insignificant and slow that it would take a couple of years to produce an single Bitcoin.

Of course there is still the option to set up a server for bitcoin mining using a good motherboard, basic processor and several video cards (GPUs). But still the investment is high and there is risk of failures.

The second option is still profitable in 2018 but depends on the price of electricity and the investment in hardware that is not cheap at all.

Before investing in ASIC bitcoin mining hardware you need to analyze the total cost of the project and check if your pocket is prepared for the investment with medium or long term return.

Adding the investment in hardware with the expense of electricity can be tricky. The project takes time to generate profit and there is still the risk of something going wrong, such as a hardware failure problem.

Although you buy a high-tech equipment with the proper processor for the Bitcoins mining task, there is still room for various problems such as hardware failure, Internet issues, etc. Nothing is 100% guaranteed.

Every day the difficulty of mining Bitcoins increases, so the return on investment (ROI) gets more and more complicated.

In the United States the average time of return of the investment is from 3 months to 4 months if everything works fine.

The price of equipment and electricity, however, is much lower in the United States, so consider that the return on investment in other countries can take double or triple the time, let's say 6 to 12 months.

The third option is also profitable in 2018 and easier to put into practice as it does not require such high investment at first and you can go investing as your financial conditions allows you to.

People in different parts of the world have reported that the investments they have made are paying off with an average return of 14% a month without reinvestment the profit or 40% a month when all profits are reinvested in the mining services.

Other than Genesis, there are a lot of companies offering contracts for Bitcoin and other altcois mining, but until now people did not report the experiences they had with these companies.

Every day the Bitcoin mining gets harder and more processing power is needed to generate new Bitcoins.

The technical name for this process is Bitcoin difficulty and you can hear people talking about it when they're mining their bitcoins.

This gradually increasing difficulty was created from the beginning to have a control of scarcity, in the Bitcoin mining process, being more difficult to mine increases the value of the cryptocurrency.

Compare this with gold and other precious metals, the less there are available and the more difficult to find, the more valuable they become.

In the beginning it was easy to work with Bitcoin mining, but now there are a lot of people mining, so the prices are much higher. 

In the the rise and rise of Bitcoin it is possible to see stories of pioneers who started the Bitcoin mining process in their own homes by investing money in several powerful computers to do so.

At that time each Bitcoin was worth some tens of dollars and when it happened to cost more than a hundred dollars, everybody was excited.

Just imagine now that each Bitcoin costs more than 6 thousand dollars, it was worth all the effort and investment to work with the Bitcoin mining because this movement created some Bitcoin millionaires.

I hear people whining and not wanting to invest in Bitcoin anymore because they think it's too late for that, but maybe when you're reading this article the price may be way beyond the 6 thousand per coin.

So you should decide whether it is worth it or not depending on when you are reading this and how much cost a Bitcoin.

Bitcoins mining may or may not be a good business depending on how and when you invest and continue the process.

Before deciding to mine Bitcoins or trade this cryptocoin, it is worthwhile to study a little bit more through courses and training.