12. Mining virtual currencies

Cryptocurrencies mining the process by which an individual is incorporated into a Blockchain based network and he offers a computational effort. Through a process of solving complex mathematical problems (called PoW Proof of Work), it validates the transactions that are made in this network and obtains, in return, a reward in the form of cryptocurrency.

Today, to mine bitcoin, integrated circuits are used for specific applications, called ASICs.

It must have a computer system with sufficient capacity to carry out a large number of operations per second. The first computer that finds the correct solution to the problem will take the prize.

The bitcoin network pays us a percentage when we discover a coin. It is something that does not have a definite time. Finding a deposit is not easy, if it were… everyone would be mining bitcoins. To put it bluntly, it is as if you wanted to find the hiding place of a person doing calculations. That’s what mining computers do, calculations, until one of those calculations hits a key that gives access to the hiding place.

Do not think that the miner has to be on top of the computer to mine bitcoin. The rig, by itself, is looking for bitcoins 24 hours a day.

Given the exponential increase in difficulty in mining, which is also derived from the growing interest in this particular virtual ‘gold chimera’, the miners have become organized into pools, or groups, where they join forces. In this case, the requirements differ from the solo miner.

If you decide to start in this activity in a group of miners, you no longer need the software that connects our equipment to the Blockchain, but the necessary computer program will link the miner to the joint center. Finally, according to the experts consulted, there is a third way to mine and is to do it in the cloud, which is process that depending on the configuration, may not require the previous installation of any program on the computer.

WHAT IS ASIC

ASIC (application-specific integrated circuit) is an integrated circuit tailored for a particular use, rather than intended for general purpose purposes.

If the speed of block mining increases due to the increase in processing capacity, the difficulty of maintaining the distribution ratio of a new block every 10 minutes will also increase proportionally.

That means that the ability to get Bitcoins with mining does not depend on the absolute processing capacity but on the relative processing capacity that is had in relation to all other Bitcoin miners. This system has led to the evolution of Bitcoin mining from CPUs, GPUs, FPGAs to ASICs.

Necessary power

The global power of energy needed to create cryptocurrencies this year could surpass the total electricity consumption in Argentina and also boost renewable energy producers, especially the US and China.

It is estimated that currently the electricity cost in bitcoin mining exceeds that of countries such as Denmark, Belarus and Bulgaria, and accounts for more than 25% of the energy consumption of the Netherlands, 15% of Australia or 10% of the United Kingdom.

In this scenario, some estimates assure that miners could focus on regions with low energy costs, such as China, the Midwestern US and the Pacific Northwest.

But how is it possible that the cost of so much electricity continues to be profitable? Everything depends on the conditions in which this mining takes place, and that the value of the currency continues to grow at an exponential rate. The energy efficiency of the technology used is fundamental, but also the price of light itself.

Another important factor to take into account is that the cryptocurrencies are virtual but the pollution is very real. The carbon footprint of bitcoin mining annually exceeds 17,000 kilotons of carbon dioxide. The growth of the popularity of cryptocurrency and the spectacular rise in its value endanger the environment in equal measure.

The Block Reward

When a block is discovered, the discoverer will be able to assign to himself a certain number of bitcoins, which is agreed by all the members of the network.

Additionally, the miner receives the fees paid by the users who send transactions. The fee is an incentive for the miner to include the transaction in his block. In the future, as the number of new miners was allowed to increase bitcoin the number to create a new block dwindles, the fees will constitute a much more important percentage of mining revenues.

Mining costs and profitability

Mining bitcoins at a domestic level is not profitable or viable for years, but regardless of this, there are other viable options if we really want to mine, such as mining pools. The profitability depends on the following conditions:

• Price of electricity.

• Price of the components that we buy for it.

• Duration of these components before they become obsolete.

• Amount to which we can sell them once they become obsolete.

• Hash rate that we can get with those components. That is, the power necessary for mining.

• And of course, monetary value of the cryptocurrency in question.

How to choose a Bitcoin mining machine

Determining the best equipment to achieve Criptocurrency mining is not easy, it is a mixture of many important factors to examine when you want to determine which bitcoin mining ASIC to buy, then some points to consider.

- Consider the Price — How much does mining cost? The cheap mining hardware will mine less coins, and that’s why efficiency and the use of electricity are important. For obvious reasons, the fastest and most efficient mining hardware will cost more.

- Determine the hash rate — How many hashes per second can the computer make? More hashes means more expensive, and that’s why efficiency is crucial.

- Value Efficiency a lot — No doubt you want to buy the most efficient mining hardware possible. Since mining equipment uses a large amount of electricity, you need to buy one that converts the most electricity into bitcoins. Remember to consider that Bitcoin is the most difficult cryptocurrency to mine, and the equipment to succeed is the most expensive in the market.

In short, mining can be very interesting if it occurs in the right conditions and especially with the correct currency. There is a wide range of options to choose and try.