What Is the Mining Process?
When a new transaction is created, a user waits for the other nodes to verify and validate the transaction. A miner is in charge of collecting transactions that have not been validated and then compiling them into new blocks.
Technically, the mining process requires calculating an effective block hash for the block to be added to the blockchain. Hashing is the cryptographic process of transforming data by means of various algorithms. In the Bitcoin network, hashing is done using the SHA-256 algorithm. A hash block is a certain combination of symbols. A new hash block is created in the following way:
- a miner fixes the hash of the previous block and the data of the new one;
- a nonce (a special code) must be obtained;
- finally, a hash function is used to confirm the data mentioned above.
It’s worth noting that a miner needs to calculate the nonce that will generate the block’s hash in combination with the rest of the collected data. Finding a valid block’s hash indicates that all necessary steps have been taken to verify a candidate block. Actually, that is why this consensus algorithm is called Proof of Work.
Read more about various consensus algorithms: https://coinspaidmedia.com/academy/consensus-algorithms-pow-pos-ect/
When a miner has collected transactions without proof of work and created a candidate block, only the nonce can be changed from there. To perform this task, different mining equipment is used, with which the collected data is also hashed. The final task is to find a suitable hash for a candidate block. After finding a hash that meets the system’s requirements, a miner can confirm the addition of a new block to the existing chain and receive a reward generated in Bitcoin. In this way, unconfirmed transactions waiting inside the block will be confirmed.
Bitcoin Mining Equipment
Essentially, anyone can take up Bitcoin mining since the process is decentralized. Until about 2011, new blocks were being mined on regular PCs, but cryptocurrency mining became more complex over time, which automatically led to a change in the power requirements of the equipment used. To add a new block as fast as possible, miners use video processors and ASIC miners and join mining pools, making the mining process extremely efficient.
Video Processors
Miners still actively use graphics cards to mine cryptocurrency, including Bitcoin mining. At the same time, a miner has the opportunity to connect a number of graphics cards, turning them into a mining farm. In this case, the productivity of mining will multiply. When choosing the best graphics cards for mining it is worth considering the following points:
- storage space — it’s better to use video processors with a memory capacity of 5 GB or more for mining
- cooling — due to constant use, the equipment must be actively cooled, at least two to three coolers per video processor
- bus — a bus bit rate largely determines the performance of graphics cards, so it is worth choosing a GPU for mining with a bit rate of 256 bits or higher
- power consumption — the process of mining is quite power-consuming, so you should choose the most energy-efficient GPU
- overclocking — improving the characteristics of a video processor will be a great advantage in the long term
NVIDIA and AMD are still the most popular video processors for mining. At the end of March 2022, the following video processors can be used to set up a mining farm:
- NVIDIA GeForce RTX 2070 SUPER — a popular video processor among miners with the ability to overclock key features and an average price of $1.200
- AMD Radeon RX 5700 — a video processor with a powerful cooling system, overclocking capabilities and an average price of $1,400
- AMD Radeon RX 580 — quite popular among both miners and gamers, and the average price of this video processor is around $500
- NVIDIA GeForce GTX 1080 Ti — one of the most powerful and expensive video processors in line with an average price of $1,200
- NVIDIA GeForce GTX 1050 Ti — the most affordable graphics card in the manufacturer’s product line with an average price of $400
Moreover, miners will need a high-performance CPU, a stable and fast Internet connection, and an uninterruptible power supply. If a miner plans to assemble a whole farm of graphics cards, it is better to allocate a separate room for this purpose, carefully consider the cooling and power supply systems. In the end, mining Bitcoin and other cryptocurrencies with graphics cards is a great opportunity to earn a regular income. However, a miner needs to carefully calculate the project’s payback because the financial costs of organizing mining are quite high.
ASIC Miners
ASIC miners are integrated circuits used specifically for mining cryptocurrencies. One ASIC has a fairly high hash rate, which significantly increases the speed and volume of the mined cryptocurrency. As a rule, ASIC miners cost thousands of dollars, and not everyone can afford them. Despite the high cost of this equipment, ASICs, like graphics cards, are used to build entire farms, making the mining process much more efficient. In 2022, the following ASIC miners can be used to mine Bitcoin:
- MicroBT Whatsminer M30S++
- NuMiner440
- Bitmain Antminer S19 Pro
- Canaan Avalon Miner 1246
- Bitmain Antminer S19 XP
Miners should keep in mind that the average prices of the aforementioned ASICs range from $4.000 to $10,000 per unit. However, ASIC miner farms remain the best way to mine the most popular cryptocurrency. The main benefits of this equipment are the high hash rate and moderate power consumption. But it is better to allocate a separate room for ASIC farms because the process of mining will be quite noisy.
Industrial Bitcoin mining is also organized with ASIC miners: https://coinspaidmedia.com/bitcoin/industrial-bitcoin-mining/
Mining Pools
When a miner joins a mining pool, it greatly increases his chances of mining a block. Within a pool, the computing power of one miner’s equipment is combined with the power of the other mining pool members. If a single block is mined, each member of a mining pool receives a reward based on the processing power contributed by each miner. Although the distribution of the reward depends on the algorithms of a pool itself, there are other schemes. To learn more about mining pools and how they work, click here: https://coinspaidmedia.com/academy/mining-pools-what-are-they-and-how-do-they-work/
To become a member of a mining pool, you need to connect to a certain server by creating an account. For example, Binance Pool offers to mine Bitcoin and other cryptocurrencies using the SHA-256 algorithm. A miner will be able to get the maximum income by mining BTC, BSV and BCH. Among other popular Bitcoin mining pools are Hashing 24, OKEX Pool and Crypto Universe.
Bitcoin mining is a fairly time-consuming and financially expensive process. However, with the right combination of necessary equipment and knowledge, a miner can recoup the costs and receive a stable monthly profit. Before organizing mining, the first thing to pay attention to is the cost of electricity. The price of electricity in many countries is such that Bitcoin mining can only be unprofitable.
