WHAT iS BITCOIN
Abitcoin is created when a computer program solves a mathematical puzzle. The program that runs the calculations is called a "miner." It connects to a network where every other miner on that network is trying to solve the same puzzle.
Find out how people are taking advantage of technology to generate Bitcoin, and what is involved in the process.
Key Takeaways
- A bitcoin is created every time a puzzle is solved by a program designed to solve the puzzle, called a "miner."
- Bitcoin becomes increasingly difficult to mine as more people join, which lowers the chances of a puzzle being solved by one program, person, or group.
- Mining pools were created to share the computing power across many miners to increase the chances of solving a puzzle.
- Pools split the profits when a Bitcoin puzzle is solved, but this reduces the payout for everyone in the pool.
Conversely, if you are part of a small pool, you will successfully mine blocks less frequently. When you do, though, your reward will be higher. So, you might go some time without earning anything and then get a large reward.
Single vs. Multi-Crypto Pools
Some cryptocurrency pools focus on one virtual currency, like Bitcoin. Others pop around, mining different coins based on which one they think is most profitable at the time. They use various factors to decide this, including the pool's hash rate at the time and the rate of exchange between different coins.
Local vs. Cloud Mining
Some mining pools combine cloud-based mining with pooled activity. This means that you don’t have to buy the mining equipment but can pay for an online mining contract that is automatically woven into the pool. This minimizes your capital outlay but means that you have to pay for your mining capability from your pool profits.
Pool Payout Options
Pools pay out in various ways. Some pay participants immediately based on every "share" that they successfully submit. A share is a valid piece of the mathematical puzzle that has been solved. That puts more risk on the mining pool operator because shares may be earned even if the whole puzzle is not solved. The operator may end up paying out rewards for shares, even if they don’t earn a reward from the blockchain.
Most commonly, pools pay using a proportional model, in which the reward is distributed only when the whole puzzle is successfully solved by the pool (which means that a block in the blockchain has been successfully mined).
Understand What You're Getting Into
A Bitcoin mining pool's main appeal is as a means of normalizing your reward so that you don’t have to wait years for the off chance of cracking a block. However, it won’t necessarily increase your rewards over time, especially as the block operator may take a percentage of the payout themselves in commission.
Bitcoin mining can pay off in the long run, but there is no guarantee that it ever will. Like other types of investing, gaming, or gambling, much of it depends upon a few good decisions, patience, and luck.
Frequently Asked Questions (FAQs)
How long does it take to mine one bitcoin?
You cannot mine only one bitcoin. It takes 10 minutes to mine each Bitcoin block, and the current reward for mining a block is actually 6.25 BTC. However, only one person or mining pool can mine each block every 10 minutes, so it could take you years to actually mine one on your own. That's why most miners join mining pools.
How much does it cost to mine Bitcoin?
Bitcoin mining costs vary greatly depending on your equipment, whether you're in a pool or on your own, and electricity rates in your areas. In a 2018 report, Elite Fixtures estimated the cost of mining one Bitcoin in major countries around the world. In the U.S., the report estimated it cost $4,758 to mine one bitcoin.1
NOTE:A mining pool is an excellent way to get started in Bitcoin because of the lower costs and possibility of constant smaller payouts.
Join a Bitcoin Mining Pool
Many hands make light work, as the saying goes. That is just as true in the world of Bitcoin mining. Miners (the people, not the programs) created mining pools to get around Bitcoin mining costs.
The mining software was adjusted to link together and share computational power among miners, which made a pool much more competitive and increased its ability to solve the Bitcoin puzzle.
Their combined computing power stands a much better chance of winning the contest. When the puzzle is solved, the miners (the people) share in the profit by receiving a payout according to their effort. That approach means that you can still generate a tiny proportion of the Bitcoin with your basic mining equipment, even if you don’t win the whole 25-bitcoin reward. In this sense, it’s like entering a drag race with a fully decked-out dragster, rented by an entire community of people. It’s the only way to take on the big boys and win.
Join a Bitcoin Mining Pool
Many hands make light work, as the saying goes. That is just as true in the world of Bitcoin mining. Miners (the people, not the programs) created mining pools to get around Bitcoin mining costs.
The mining software was adjusted to link together and share computational power among miners, which made a pool much more competitive and increased its ability to solve the Bitcoin puzzle.
Their combined computing power stands a much better chance of winning the contest. When the puzzle is solved, the miners (the people) share in the profit by receiving a payout according to their effort. That approach means that you can still generate a tiny proportion of the Bitcoin with your basic mining equipment, even if you don’t win the whole 25-bitcoin reward. In this sense, it’s like entering a drag race with a fully decked-out dragster, rented by an entire community of people. It’s the only way to take on the big boys and win.
Choose a Type of Mining Pool
There are many different mining pools available. Which one you choose depends on a variety of factors. Should you join the largest pool possible to maximize your chance of a reward? It doesn’t work that way. If you join a large pool, your probability of successfully mining a block as part of the pool increases, but the size of the pool means that your payout will be lower. Day-to-day payouts will be more predictable.
Choose a Type of Mining Pool
There are many different mining pools available. Which one you choose depends on a variety of factors. Should you join the largest pool possible to maximize your chance of a reward? It doesn’t work that way. If you join a large pool, your probability of successfully mining a block as part of the pool increases, but the size of the pool means that your payout will be lower. Day-to-day payouts will be more predictable.
Conversely, if you are part of a small pool, you will successfully mine blocks less frequently. When you do, though, your reward will be higher. So, you might go some time without earning anything and then get a large reward
Pool Payout Options
Pools pay out in various ways. Some pay participants immediately based on every "share" that they successfully submit. A share is a valid piece of the mathematical puzzle that has been solved. That puts more risk on the mining pool operator because shares may be earned even if the whole puzzle is not solved. The operator may end up paying out rewards for shares, even if they don’t earn a reward from the blockchain.
Most commonly, pools pay using a proportional model, in which the reward is distributed only when the whole puzzle is successfully solved by the pool (which means that a block in the blockchain has been successfully mined).
Understand What You're Getting Into
A Bitcoin mining pool's main appeal is as a means of normalizing your reward so that you don’t have to wait years for the off chance of cracking a block. However, it won’t necessarily increase your rewards over time, especially as the block operator may take a percentage of the payout themselves in commission.
Bitcoin mining can pay off in the long run, but there is no guarantee that it ever will. Like other types of investing, gaming, or gambling, much of it depends upon a few good decisions, patience, and luck.
Frequently Asked Questions (FAQs)
How long does it take to mine one bitcoin?
You cannot mine only one bitcoin. It takes 10 minutes to mine each Bitcoin block, and the current reward for mining a block is actually 6.25 BTC. However, only one person or mining pool can mine each block every 10 minutes, so it could take you years to actually mine one on your own. That's why most miners join mining pools.
CONCLUSION
YOU CAN BECOME A SUCCESSFUL BITCOIN MINNER IF YOU FOLLOW ALL THE STEPS CAREFULL
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