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Bitcoin's decentralized nature means that transactions are broadcast to the network from peer-to-peer (individuals operating computers). Once broadcast, they must be verified, confirm the authenticity of the transaction, and then register the transaction in the public transaction database, which is known as the Bitcoin blockchain.

A simplified guide on bitcoin mining and how it works

What does the mining process include?

Miners are basically people involved in the processing and verifying transactions before registering transactions on the Bitcoin blockchain. Miners then receive transaction fees in the form of newly created bitcoins.

Computers are used to embed new transactions into the Bitcoin blockchain. While computers find it relatively easy to complete the verification process, the process becomes more difficult, as the computer's ability becomes vulnerable to more complex algorithms with faster processing speeds.

Trying to convince bitcoin users from all over the world to agree to a single copy of the transaction is a challenge, and it is about what is referred to as proof of work. Where miners compete with everyone on the peer-to-peer network to earn bitcoins. The higher the processing power, the more attempts the devices make to try to complete the verification, thereby earning the metal the much-needed bitcoins in addition to transaction fees.

It is worth noting that the Bitcoin network is self-evolving, to ensure that the time it takes for the metal to win the block is fixed at about 10 minutes. The speed of the processing power in bitcoin mining is referred to as the hash rate and the processing power is referred to as the hardware hash power.

To get a little more technical and introduce some of the most common terms used in the crypto world, the mining process is where bitcoin mining hardware manages the hash and encryption function of the Constituent blocks of the blockchain. For each new hash attempt, the mining program will use different numbers as a random element, which is the number indicated by the nonce number.

As soon as proof of work is produced, through the random calculation of the codes until the correct number is detected, a fundamentally new block is discovered, which is verified and agreed upon by the peer-to-peer network. At this stage, the metal is rewarded with a certain number of bitcoins, currently limited to 6.25 bitcoins. Although this bonus will be divided and halved every 210,000 blocks.

In addition to the bitcoins received, those who failed to receive the mining bonus will be given fees related to transactions paid by users within the successfully mined block, which is a much greater incentive for miners as the number of bitcoins per block continues to decrease.

Mining from start to finish:

Perhaps the process of mining from beginning to end can be described in the best and simplest possible way by the following points and elements:

• Check if the transactions are valid.
• Grouping transactions into a block.
• Select the header of the latest block and insert it into the new block as a hash.
• Completion of proof of work.
• Add a new block to the blockchain and add it to the peer-to-peer network.
• The miner receives the reward in bitcoin and transaction fees.

Normally, the average ideal block mining time is 10 minutes, and the cycle continues to repeat at the rate of a two-week cycle.

 

What is Bitcoin cloud mining?

Bitcoin cloud mining provides a way to receive newly mined bitcoins, without the need to own bitcoin mining hardware or even have any technical knowledge of mining, which allows the mining world to attract not only technically minded people but also a much wider audience.

But the question that comes to the mind of many is:

 

What is the difference between bitcoin mining and cloud mining

It boils down to the location of bitcoin mining devices.

For bitcoin metal, the user will buy, create and maintain Bitcoin mining devices, which is not suitable for many individuals except for a few technology enthusiasts, in addition, these devices require cooling and operational electricity, which raises the necessary cost. Mining devices require a lot of ventilation and cooling, not to mention processing.

Cloud mining is supported by mining companies that create mining rigs at their own facilities, where a cloud miner only needs to register and purchase shares or a mining contract. And the user does not have to do anything else, the mining company does all the work and gives the cloud miner revenue regularly. And the user basically buys a percentage of the hash power of bitcoin mining.

One of the main concerns that should be noted about cloud mining is fraud, as there are a lot of reports of fraudulent activities, not to mention low profits and even mining companies that can stop operations if the price of bitcoin falls below certain levels, so due diligence should be taken and a good search for reliable names in the field, there are some basic indicators and steps to reduce the risk of fraud, including these signals that suggest that the company is fraudulent:

• There is no mining address and/or no user-defined pool.
• There are no images of the devices or the data center of the mining company.
• There are no restrictions on sales or not display of the amount of hash rate sold to miners.
• Referral and social networking programs.
• Avoid a mining company willing to pay high referral fees as this could be a Ponzi scheme.
• Inability to sell your position or get money when selling.

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Bitcoin mining hardware:

Mining hardware has changed from what it was in the early days, as bitcoin mining was based on central processing units.

Since miners continue to develop their mining capabilities which means they continue to develop devices capable of earning a much larger number of bitcoins, leaving CPU and laptop users behind, it is now unlikely that using a laptop will result in a single bitcoin even if it has been mining for years.

Then, instead of central processing units (CPU) came graphic processing units (GPU), as miners found that using high-end graphics cards was more effective in mining than bitcoins. The use of GPU has increased mining power by up to 100 times, with significantly less energy use, which saves on large electricity bills.

Then came the improvement of "FPGA", short for "Field Programmable Gate Array", which aims to reduce energy use instead of the actual mining speed, with slower mining speeds than GPU, while energy consumption decreased by up to 5 times.

Energy saving has led to the development of mining farms and the bitcoin mining industry as it is known today, where bitcoin mining energy is controlled by a small number of miners known as bitcoin mining pools.

Since "FPGAs", the mining community has turned to Application-Specific Integrated Circuits or ASICs, where the ASIC is a chip designed for the sole purpose of mining, with no other functional capabilities.

While the ASIC chip performs only one function, it provides 100 times more hash power, while also using much less power than was the case with CPUs, GPUs, and FPGAs.

Software development has slowed down, with nothing currently on the market or under development expected to replace ASIC hardware, and ASIC chips are likely to see minor tweaks at best to try to create hardware with greater features and efficiencies, although it will only be a matter of time before the crypto world comes up with something newer and faster as miners catch up with hash capability.

 

What is the difficulty of bitcoin mining?

The difficulty of bitcoin mining is the degree of difficulty in finding the solution of the algorithm provided by the Bitcoin blockchain. Where the degree of difficulty of bitcoin mining is recalculated every 2016 Block. That is, the difficulty of mining is inversely proportional to the target value. As the difficulty of mining increases, the target value decreases, and vice versa.

In basic terms, as more miners join the Bitcoin network, the block creation rate increases, resulting in faster mining times. As mining times speed up, the difficulty of mining increases, reducing the block creation rate to the required ten minutes as mentioned earlier.

As soon as the difficulty of mining increases, the average mining Time returns to normal and the cycle repeats itself approximately every two weeks.

 

How to start a bitcoin mining business?

To start mining it can become a node within a peer-to-peer network, and to start creating Bitcoins, all that is needed is a high-performance computer with internet access.

Wallets can be downloaded for free, mining programs can also be downloaded, and once downloaded, they are ready to work.

The fact is that a private desktop computer or laptop will not work in the world of bitcoin mining, so the options are either to make a large investment and create a mining platform, join a mining pool or even subscribe to a cloud mining service, with the latter requiring a certain degree of due diligence as with any type of investment.

In mining pools, the company managing the mining pool charges a fee, while mining pools are capable of solving several blocks every day, which gives miners who are part of the mining pool instant profits.

At a minimum, you will need GPUs (GPU) and a good place for mining devices with fans set up to keep the device cool, while also having a stable internet connection.

Two of the global GPU graphics card manufacturers are "Ati Radeon" and "Nvidia" while "Radeon" cards are much better for mining than "Nvidia" cards.

While you can try mining using GPUs and gaming consoles, the income will be significantly low and the miners may actually lose money instead of achieving their desired goal, leaving the most expensive alternative which is dedicated ASICs.

The best "ASIC" devices on the market that may be necessary for bitcoin mining, depending on price, segmentation and electrical efficiency are:

Antrouter R1, Antminer S9, and BPMC Red Fury USB, Antminer.

 

How to make money on bitcoin mining?

Miners get bitcoins by creating and authenticating blocks, the current number of bitcoins that miners receive when creating a block is 6.25 digital currencies, and then transaction fees per block, which is equivalent to approximately 1.5 bitcoins in value per block.

It is estimated that ASIC mining devices will pay for their costs in about 15 days, assuming that the price of the device is just under 2500 dollars, after which it ultimately boils down to the rate of increase of the two miners, which then requires more computing power for the device to be able to maintain its power at the same level of creating coins and receiving transaction fees.

In short, if you are going to try to use the CPU or laptop, mining pools will be a better option, and even in this case, you will not achieve much.

 

Is it possible to get rich from the mining process

More likely from the rise in the value of bitcoin than from the mining itself, with only a few mining pools accounting for the lion's share of bitcoin mining power making it difficult for new miners to enter this battle.