Sep 21, 2022
An Overview of Cryptocurrency Mining: What is Cryptocurrency Mining?
Crypto Mining is the process by which new cryptocurrency tokens or coins are generated when digital currency miners use computers to solve cryptographic problems and receive a reward in the form of crypto.
Bitcoin (BTC), Monero (XMR) and Litecoin (LTC) are examples of some of the coins that can be mined. Before September 15 2022, Ethereum (ETH) was one of the cryptocurrencies that could be mined. But, after migrating to the Proof-of-Stake (PoS) consensus mechanism, Ether can only be staked and not mined.
Cryptocurrency mining is painstaking, costly, and only sporadically rewarding. Nonetheless, mining has a magnetic appeal for many investors who are interested in cryptocurrency because miners receive rewards for their work with crypto tokens.
Not every cryptocurrency can be mined because not all use a competitive reward system. Moreover, the most profitable cryptocurrencies have become much more difficult to mine than in the past.
While mining may have been relatively easy in the early days of crypto, it has become a highly competitive business. Competitiveness has increased so much that it is profitable only for those that can afford large-scale mining operations.
Becoming familiar with the mining process is a key factor when you’re starting. You’ll need a cryptocurrency wallet, mining software, and mining hardware to begin mining cryptocurrency. The equipment you need can be very expensive; however, the more you pay for equipment, the more profitable it can be.
Bitcoin Energy Consumption and Carbon Footprint
Mining consumes much electricity, you need at least 1200W and be capable of supplying power to six graphics cards, six motherboards, CPUs, memory, and many other systems to mine.
The Digiconomist’s Bitcoin Energy Consumption Index estimated that one bitcoin transaction takes 1,449 kWh to complete, or the equivalent of approximately 50 days of power for the average US household.
However, a recent update by the Bitcoin Mining Council (BMC) shows a progressive attempt to reduce BTC’s energy consumption and carbon footprint.
During the ‘Global Bitcoin Mining Data Review 2022,’ Microstrategy’s CEO and BMC member stated that the hashrate and related security of the Bitcoin network improved by 23% year-on-year, while energy usage decreased by 25% in the first quarter of 2022.
Bitcoin Average Mining Time & Costs
The average time for generating one Bitcoin is about 10 minutes, but this applies only to powerful machines. But that single Bitcoin is most likely shared between many miners worldwide.
Most Bitcoin miners work together as part of a mining pool. As part of the pool, they combine their hash rate with improving their odds of solving a block on Bitcoin’s blockchain.
Venezuela ranks as the number one most expensive country to mine bitcoin. It costs a whopping $246,530.74 to mine a single bitcoin in the South American country, meaning the process is far from profitable.
How much Bitcoin can you Mine a day? Based on the mining hardware inputs provided, 0.00056823 Bitcoin can be mined per day with a Bitcoin mining hashrate of 140.00 TH/s, a block reward of 6.25 BTC, and a Bitcoin difficulty of 30,977,051,760,460.10.
Final Thoughts
As of August 2022, there are about 19.1 million bitcoins (BTC) left to be mined. It means there are still more BTCs to be mined. However, it cost so much to set up a mining rig.
For example, one Bitcoin mining rig may cost USD $2,000 to build and operate and generates $4.56 in profit per day at current prices. Thus, it would need to run for 387 days to become profitable. To commence your mining journey, you have to put these steps into consideration:
(i) Choose and Set Up Your Bitcoin Mining Hardware. Start by choosing the hardware you’ll use to mine Bitcoin. (ii) Create a dedicated Bitcoin Wallet. If or when you successfully validate a Bitcoin block, you need a valid Bitcoin wallet to get paid (iii) Configure your mining equipment. (iv) Start Mining.
Disclaimer: The opinions expressed in this blog are solely those of the writer and not of this platform.
