The magical cryptocurrency ‘Bitcoin’ has taken the internet by storm since its introduction in 2009. The ones who got their hands at this currency are now raking in the benefits as the price of the cryptocurrency has risen multiple times since its inception.
Bitcoin is a form of digitalized currency which exists on a decentralized ledger system known as blockchain. A blockchain is a decentralized ledger system where every node of the system contains a record of the previous transaction on the system. This system supposedly gives the power to the people as it requires no central authority to regulate and control the currency.
How do we get Bitcoins?
Similar to elemental mining, bitcoins are hidden inside the blockchain and people can discover them by creating blocks of the previously validated transactions and including them in the bitcoin blockchain according to the pre-defined bitcoin protocols.
The people who do this are known as miners and they compete amongst each other to get a certain amount of rewards in the form of bitcoin for every time they discover and add a new block. There are an estimated 21 million bitcoin blocks that are to be discovered, a number estimated to be achieved by 2140.
However, bitcoin mining is a very difficult procedure and requires heavy upfront investment in both the setup and the mining process.
Factors to consider while mining bitcoin
There are two main things, one should consider before setting up a system for bitcoin mining-
- Hash Rate – For discovering a new node in the system, one has to solve a complex mathematical equation, the answer of which can be any integer value between 0 and 4,294,967,296. To do this, you need a system which can make calculations at very high speeds. Hash rate is the number of calculations the hardware can do per second to crack the mathematical equation. The higher your hash rate, the better your chances are to mine a new block and earn bitcoins.
- Energy Consumption – Complex algorithms require complex hardware to solve them. All this hardware takes up a lot of electrical power to run consistently. This cost can affect your bitcoin mining procedure adversely, as the electricity cost might be more than the actual bitcoin value you are gaining from the mining.
If you have a system that can efficiently work considering both the above factors, then it is time for you to put your hardware in place and start mining bitcoins.
Hardware requirements for mining bitcoin
Essentially you require systems that can stay connected to a few other nodes and have a higher processing power to make faster calculations. There are three ways you can do it –
- CPU/GPU Bitcoin Mining – The simplest but the slowest of the mining systems, a user can use his own system’s CPU to start mining for bitcoins. To increase the speed of calculations one can place additional GPU (Graphical Processing Unit) with their systems. Although the initial cost of installing Graphic cards is high, they can give you multiple fold hash speed gain over traditional CPUs. Although this system is largely redundant nowadays, you can always use it for other cryptocurrencies as well.
- FPGA Bitcoin Mining – A Field Programmable Gate Array is an integrated electronic circuit that can be configured specifically for bitcoin mining before installation. Miners usually purchase the chips in volume and configure them afterward. Because of their configuration, they can offer speeds up to 750 Megahashes/sec. Also, it is possible to use multiple chips in one system.
- ASIC Bitcoin Mining – The leaders in bitcoin mining hardware, Application Specific Integrated Circuits are designed to achieve high speeds mining at a fraction of the power consumption. Although they are the most expensive in their category, they can produce mind-crushing speeds up to 500 Gigahashes/sec.
One can choose from either of the above mining hardware systems in order to start mining bitcoins, depending upon his budget and requirement.
After setting up the hardware, one needs to install a mining software and standard bitcoin client software in order to keep you connected with the other nodes of the blockchain.
While blockchain and bitcoin may sound very lucrative to the ears and seem like a sure-shot way to earn some money, one needs to keep all the key parameters in mind before making such an investment.
The Blockchain is still a relatively new technology and is defined on a set of protocols written by its designers. While they boast of it as a secure system, one should always be sure to do their homework before taking the final step.