What is Bitcoin Mining (A Brief Guide)
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This question might look like a straight yes or no question, but it is a lot more complicated. I believe the answer that we can all settle for is “it depends on where you are”. For example, El Salvador has just adopted cryptocurrency including Bitcoin as legal tender, so mining is legal there, on the other hand, countries such as China, the Central African Republic, and other countries in Africa, Asia, and South America have banned cryptocurrency as a whole so mining is illegal in those countries, however, there are countries like the US and some parts of the EU where cryptocurrency has not been adopted as legal tender but mining is still allowed.
Part of the reason why Bitcoin mining is still facing legal issues is in the above-mentioned Proof of work. Because the machines used to mine bitcoin are high-performance, they consume a lot of energy (For example 120- 240 billion kw/h is used to mine bitcoin in a year greater than the annual usage of well-populated countries like Australia and Argentina), mining has come under major opposition by climate change activists and ecological support groups.
Cryptocurrency mining
When bitcoin mining was new, it was very lucrative, but as many more people joined the bitcoin blockchain, the process has become way more expensive, and you have to get more expensive equipment and a bigger source of power supply, which also means more expenses.
Furthermore, since the creator of the bitcoin blockchain cannot afford to flood the market with bitcoin, (or else the supply will become greater than the demand and its value will drop) each successive block reduces in value, which means the reward of the bitcoin earned bare covers the expenses of the equipment required to mine it.
However what miners are essentially doing is that they are acting as auditors to forestall the problem of double spending,
At the moment if a miner can solve a hash successfully they will make 6.25 bitcoin (about $125,000). However, the increased competitiveness of solving a hash ensures that bitcoin miners form mining guilds (much like the mining guilds of the gold rush) to increase their chances of solving the hash. If a miner within a mining network solves a hash, every member of that network who participated gets something as a reward for their work.
As noted mining bitcoin is not an easy job. There are an estimated 1.7 billion attempts to guess the correct hash of a new block and miners mine a new bitcoin block every 10 minutes. Thus in real terms, it takes extremely fast machines 10 minutes to mine 1 bitcoin. It is because of these reasons that miners often form mining networks.
In the first years of Bitcoin, people could mine bitcoin on regular laptops, but as more people became miners and the competition became stiffer, ordinary laptops simply became too slow. Then they moved to GPUs, specialized processors that were created to render graphics and were 100 times as fast as normal laptops but then even those became too slow as even more people become bitcoin miners
At the moment most bitcoin miners use Application Specific Integrated Circuits (ASIC) systems that a configured to mine bitcoin and only bitcoin. These ASICs apart from being specially programmed for mining bitcoin also have the added benefit of not using up too much electricity, which lessens the power consumption of bitcoin miners significantly.
Thus a bitcoin miner, once you have obtained the ASIC processor, you will also need mining software. The older models of ASICs require specialized software but current models usually come pre-configured.
More about Bitcoin mining in the Bitcoin whitepaper.
