Important Things to Consider in Bitcoin Mining
Factors That Influence Bitcoin Mining
As the activity of mining is intricate, it is prudent that you choose the right hardware. One has to keep in mind specific factors that affect the overall performance of a Bitcoin mining process. Let us discuss each factor.
Hash rate can be defined as the number of calculations performed by the hardware in one second. This rate is of high significance, as the higher the hash rate number, the faster the calculations, which will close the block and reward you much quicker.
Miners keep a look-out for a particular output from the hash function. For the hash functions, the same output is generated for the same input, yet they have been fabricated to show erratic behavior. Thus, miners try several random inputs to find a particular output for the hash function. You should understand that the competition in mining is robust, so to obtain a reward, a miner needs to search through all the random inputs as fast as possible. Thus, a higher hash rate facilitates faster search output – thus increasing the probability of being rewarded.
To measure hash rates, we use the unit MH/s (megahashes per second), GH/s (gigahashes per second), and TH/s (terahashes per second). You may have already seen these units displayed above, but now you understand their importance. Furthermore, a hardware’s hash rate is particularly fabricated for Bitcoin mining, which can range from 336 MH/s to 14 million MH/s.
Consumption Of Energy:
The next factor of importance in Bitcoin mining is the investment in power input. Powerful hardware that you are planning to use for computations is going to need a convenient supply of electricity (energy). Before proceeding, you will need to understand the energy consumption of the hardware in watts. Plus, you will have to calculate your electricity bill as per the predicted number of watts. This calculation will help you to anticipate whether your investment in mining Bitcoins is less than the rewards you are going to earn or not.
Utilizing the consumption of energy and hash rate in numbers will help you figure out the number of hashes that you receive for each watt expended by your hardware. For achieving the numbers, you can divide the hash rate by the watts.
Here is an example:
Assume that the hash rate of your hardware is 4,000 MH/s with a requirement of 30 watts, so the consumption of energy will be 133,333 MH/s per watt. You can even use an electricity rate calculator online, or simply check your electricity bill to know the actual cost of your investment in the power supply for your hardware.
At one time, the concept of Bitcoin was too good to be true. People from a multitude of regions and cultures were attracted to this financial technology that offered freedom. There was no role of a centralized network, which relaxed users. Now, they had the power to check their transactions through an autonomous system that did not function through corporations, tax authorities, banks, and other third-party organizations. There is no one to keep an eye on how one spent his/her own money.
Moreover, in the past few years, the value of Bitcoin was not motivated by mere profit, but was admired due to the unique concept and philosophy it followed. Back then, computers were all that were needed to transact and calculate the exchange of Bitcoins.
As technology advanced, miners found that better GPU processors were able to calculate and mine Bitcoins at a faster rate. In fact, the results were almost 100 times more efficient than previously. Thus, mining hardware manufacturers came into existence, and they started designing hardware specifically for this purpose. This conclusively gave birth to the concept of cryptocurrency mining.
Nowadays, mining Bitcoins has become quite profitable. Many are even paying their regular bills through the rewards generated using mining of Bitcoins. The mining farms consist of graphic card processors and cooling units to keep the computation running continuously.
Apparently, a mining farm will require a vast supply of power, which is not usually available to individual miners. Thus, the big corporations invest in the energy utilization and virtually gather limitless resources to create mining farms. However, there is still a way for individual miners to make a profit. And that is by joining with other miners and combining their power. This is known as a mining pool.
Proof Of Work
You should also be familiar with the phenomenon ‘proof of work’ in the mining industry. A Proof of Work is a part of data that is quite time-consuming, costly and difficult to produce. It is needed for acknowledging particular needs. However, it has to be more streamlined to check whether it satisfies the specific requirements or not.
Production of a POW can be formulated randomly with reduced probability. Lowering the probability results in more chances of trial and error, which is essential to validate before generating a proof of work. Bitcoin uses a hash cash proof of work system, in particular.
The hash cash method used in Bitcoin mining helps reduce spam emails, as the sender will have to provide a valid proof of work in the contents of the email, including the To address.
Any legit email can show the proof without any difficulties. On the contrary, spam emails will not be able to do so, as there is a need for computations for generating the proof.
In Bitcoin system, the hash cash proof of work generates blocks. This proof of work is attached to an individual block’s data so that it can be validated. Its difficulty is also regulated so that there is a limit on the generation of new blocks. Thus, each block generation takes roughly 10 minutes.
Moreover, as the probability is set at a low value, the success of a generation of proof of work becomes unpredictable, as there is little information about the particular computer that will be generating the successive block.
Also, there is a requirement for validating a block, which is based on a lower hash value than the present target. In other words, every block that generates consists of the hash value from the previous block. This results in the chain of blocks that together incorporate a lot of computational work to produce Proof of Work.
Furthermore, altering a block will require reworking on all the following blocks. This way the blockchain remains safe from being tampered with.