Bitcoin block rewards
The goal of every miner in the network is to be the first to solve this puzzle. As a reward for their efforts, the fastest miner receives a certain amount of newly minted Bitcoins, known as block rewards. In addition to block rewards, miners also receive transaction fees in the form of BTC credited to their wallet.
The difficulty of the cryptographic puzzles in the Bitcoin network varies depending on the number of active miners, not on the number of already mined BTC. This means that miners must increase their computing power to keep up with the rising total mining power and continue earning Bitcoin by solving puzzles. The adjustment of difficulty ensures that the amount or speed of Bitcoin mining remains constant.
Block rewards are halved every 210,000 blocks, a recurring event known as Bitcoin halving. The most recent Bitcoin halving took place in April 2024. Bitpanda broadcasted the event live – you can find the highlights here.
Rewards such as block rewards are important because they serve as an incentive for everyone in the network to participate in the process and keep it running properly. Without a form of verification and incentivisation, blockchain technology as we know it wouldn’t function. Incentivisation means that participants are motivated by rewards to check and verify transactions in the network.
Did you know: Through halving, miners can estimate when the last Bitcoin will be generated. Satoshi Nakamoto programmed the code in such a way that the final BTC will likely enter the orbit of the crypto space in the year 2140. After that, the question will no longer be “how do I mine Bitcoins?”, but rather “how do I get hold of Bitcoin?” That will probably only be possible via crypto trading.
Mining and security
The puzzle-solving mechanism is necessary to protect the Bitcoin network from attackers. For example, if someone wanted to reverse transactions on the Bitcoin blockchain, it would require at least 51% of the total network’s computing power, also known as a 51% attack.
However, such a heist would be a very costly and likely unsuccessful undertaking. Why? It would be extremely difficult to alter transactions validated before the attack – the older a transaction is, the harder it would be.
Mining difficulty
The Bitcoin algorithm sets a difficulty level (“mining difficulty”) as a parameter to reach consensus on the validity of a block in the blockchain. Mining difficulty refers to the level of complexity of the mathematical puzzle used to create new blocks. Depending on the number of miners in the network, the difficulty of mining new blocks can increase or decrease. The mining difficulty adjusts every 2,016 blocks to match the network’s total hashrate. This ensures that the time between found blocks remains about ten minutes.
A random number is added to the block, known as a nonce (short for “number only used once”) for cryptographic purposes. Miners change the nonce until they find a value that matches the block’s hash. Once the nonce requirement is met, participants can no longer modify the block. To alter it, they would need to repeat the exact process. During periods of high computing power, this can lead to difficulties, as it requires more energy or even better hardware. The nonce varies millions of times until the correct hash is found.
What do I need to mine Bitcoins?
To mine Bitcoins, you need the following:
special hardware, also known as ASIC miners
a stable internet connection
access to low-cost electricity
appropriate mining software
To better calculate costs, many miners consider the price per hash to plan power and hardware needs more realistically.
You’re asking: how can I mine Bitcoin myself? The first step is to acquire the appropriate hardware and install the necessary software. Mining pools offer an alternative where miners join forces to pool computing power. Bitcoin cloud mining is another option, where you rent computing power instead of investing in hardware. For a comprehensive service, you can contact specialised mining providers who take over the mining completely for you. It’s an ideal solution if you want to know how to produce or mine Bitcoins without owning your own hardware.
Mining Bitcoin yourself
When mining BTC independently, purchasing an ASIC miner is the first item on your to-do list. This specialised hardware is optimised to mine Bitcoin efficiently by performing the cryptographic calculations required by the Bitcoin network. You’ll also need a stable and fast internet connection, as well as suitable mining software. The software controls the hardware and connects you to the Bitcoin network. If you’re thinking about getting started, you should consider the high power consumption and related costs. These play a key role in the profitability of Bitcoin mining.
Modern Bitcoin miners also often use a powerful GPU (graphics processing unit). It’s better suited for processing the hash functions required for mining in parallel. The hashrate a GPU can achieve is crucial for its efficiency in Bitcoin mining. It determines how many hash calculations can be performed per second. A hash is the result of a hash function and serves in the Bitcoin network as a unique digital fingerprint for transaction data.
Mining pools
Mining pools are groups of miners who pool their computing power to increase the likelihood of mining blocks and receiving rewards in the form of Bitcoins. This can be particularly attractive for individual miners, as solo mining rarely delivers immediate results due to the high network load. By joining a pool, the expected block reward can be stabilised, although rewards and transaction fees must be shared. When joining a pool, you should carefully review the pool fees, payout structures and the pool’s reputation. If you're wondering how to mine Bitcoins, these pools can be a good place to start.
What is Bitcoin cloud mining?
Put simply, Bitcoin cloud mining means renting mining computing power from companies that operate the physical infrastructure for you. This allows you to participate in BTC mining without having to worry about acquiring and maintaining hardware. However, you should check the provider’s trustworthiness and transparency, as there have been fraud cases in the past. You should examine contracts carefully for terms such as cost, duration and potential return. Cloud mining could be a first step for you. There, you’ll learn how to mine Bitcoins without a large upfront investment.
Mining providers
Professional mining providers offer you complete mining services – from hardware to operations in specially designed data centres. An interesting option if you want to invest in cryptocurrencies but are not very interested in the technical details. However, you should choose a reputable provider that offers transparent pricing models and a traceable mining process. Here too, it’s important to assess profitability in advance, taking into account the ongoing costs.
What does Bitcoin mining mean for the environment?
Estimates suggest that cryptocurrency mining consumed 90 terawatt hours of electricity in 2022, making it one of the most energy-intensive activities in digital technology. Despite growing efforts to use renewable energy sources, the network still relies heavily on fossil fuels.
The high energy demand of the Bitcoin mining network raises questions about its sustainability and environmental impact. The intense use of fossil fuels for mining results in significant carbon emissions, which can further accelerate climate change. In light of the climate emergency, this is a challenge that shouldn’t be overlooked.
Good to know: In 2020, Bitcoin mining used as much energy as 35% of German households! Because of this, research is now in full swing. Scientists are currently exploring alternative methods, such as the Proof of Stake consensus algorithm. This algorithm aims to significantly reduce the energy consumption of Bitcoin mining. These developments are crucial for minimising the ecological footprint and promoting a more sustainable future for blockchain mining.
What influences mining?
The profitability of mining largely depends on the following factors:
The costs for miners and electricity prices are critical to the mining process, as they directly affect profit margins. As the Bitcoin price increases, mining can become more profitable, whereas a price drop puts miners under pressure. The mining difficulty indicates how hard it is to mine or extract new Bitcoin blocks. It increases as the network’s total computing power grows, which in turn raises complexity and costs for miners – during times of network congestion, transaction fees can rise to as much as 60 USD.
In addition, legal regulations and technological advances also play a role, as they can affect access to resources and demand for mining. Miners therefore have to constantly monitor the market and adapt their strategies to remain competitive in the long term. This applies not only to beginners who are just learning how Bitcoin mining works, but also to experienced miners.
What are the risks of Bitcoin mining and how do you protect your devices?
Thanks to our guide, you now know how Bitcoin mining works and how you can mine Bitcoin yourself. But don’t forget: it’s not completely risk-free! Like many other things in life, it carries certain risks when it comes to creating or mining Bitcoin. The first point is the risk of faulty hardware.
In general, Bitcoin transactions require a lot of computing power, for example to find new blocks. The more computing power the hardware needs for BTC, the harder the cooling systems work. However, average smartphones, computers or tablets only have limited cooling capability, which can lead to CPU overheating. Instead of creating new Bitcoins, your mining efforts could end with damaged hardware.
Another point: Bitcoin mining software is designed to consume up to 100 percent of computing power. If you continue to use the hardware for gaming or work, you’re putting yourself in a tricky situation. Even tasks with low processing demands may no longer be manageable. You’ll need hardware exclusively dedicated to Bitcoin collection.
In addition, hackers could use your hardware as an entry point to inject malware. This malware then spreads to all devices connected to the hardware. Through this malware, hackers could specifically access the connected devices and use them to generate Bitcoin themselves. They then verify transactions in the blockchain through these devices, meaning they don’t need their own computing power. As a result, you can mine fewer Bitcoins yourself while still providing full computing power.
How do I properly protect my devices when mining Bitcoin?
To mine Bitcoin confidently and safely, you should protect your device against the risks mentioned above. Here’s how it works:
Use a Virtual Private Network (VPN): A VPN protects your devices from hackers trying to access your network. The network is protected with a username and password. Only those who have both can access the network. This way, you can safely produce Bitcoin without worrying that hackers will tap into your computing power. Additionally, the VPN encrypts data traffic, protecting your network from unauthorised third parties.
Avoid public Wi-Fi networks: It’s tempting to sit in a café with an espresso and check the Bitcoin live chart. A common mistake? Many people log into public Wi-Fi networks to do so. However, these connections are far from secure. Hackers can easily gain access to connected devices and infect them with malware.
Install antivirus software: These programmes filter out harmful threats in advance – before they can damage your hardware. Additionally, they can remove threats from already infected devices. You should also protect your device with a firewall. The firewall checks all data leaving your device. If your hardware is infected with malware, the firewall prevents it from spreading to other connected devices.
Conclusion: how will Bitcoin mining develop in future?
Mining pools, solo mining or cloud mining – we hope this article has helped answer the question: “How do I mine Bitcoin?” You’ve also seen the potential risks and the environmental impact of mining, even though experts are already working on more sustainable solutions. It might sound tempting, and Bitcoin mining can seem like a profitable opportunity. But what does the future hold for Bitcoin mining?
In short: Bitcoin mining is at a turning point. As global interest in cryptocurrencies grows, so too does awareness of the importance and complexity of mining. Technological innovations such as more efficient mining hardware and the shift to renewable energy sources could help address environmental concerns. At the same time, regulatory developments could reshape the mining landscape by setting new standards for compliance and sustainability.
In future, mining could also be influenced by the development of new blockchain protocols that consume less energy or offer entirely new approaches to the consensus model. These factors combined could not only change the way Bitcoin mining is carried out, but also redefine its role in the broader cryptocurrency ecosystem.
Essentially, mining must continue to be attractive to you in future. This includes, in addition to the factors mentioned, a rising Bitcoin price – something many forecasts predict. Optimistic projections estimate a Bitcoin price between 100,000 and 1.5 million US dollars by 2030. In the past, BTC has repeatedly shown that it can hold its ground in the market and come back stronger than ever after a downturn.
Please note: Past performance is not an indicator of future results.
Frequently asked questions about Bitcoin mining
We answer the most frequently asked questions about Bitcoin mining.
What are miners?
Miners are users of a PoW-based blockchain who verify blockchain transactions. They have downloaded the entire Bitcoin blockchain and run it on computers with high computing power. The users of the Bitcoin network are called “miners” because they verify the validity of a transaction through Bitcoin mining. You can imagine this process as solving complex mathematical problems.
This system only works if the miners act in a way that benefits the entire Bitcoin community. Miners are incentivised to carry out this process fairly and honestly in order not to abuse trust. Once a new request for recording and approving a transaction in the blockchain is distributed, miners choose the transactions with the highest offered fees to include in the next block of the blockchain.
How many Bitcoins can be mined?
There is a fixed cap of 21 million Bitcoins that miners can generate. The principle of a maximum supply, defined by Satoshi Nakamoto, the “inventor” of the cryptocurrency Bitcoin, is intended to ensure scarcity and prevent inflation. To date, over 18 million Bitcoins are already in circulation, and the last Bitcoin is expected to be mined around the year 2140.
What is a pre-mined cryptocurrency?
A pre-mined cryptocurrency means that a portion of the total supply of a token or coin (e.g. Bitcoin) was already generated before the public launch and often reserved for developers, investors or as incentives for the community. These practices are common in new projects but differ significantly from Bitcoin’s approach, where all coins must be earned through mining.
How much energy does Bitcoin mining consume?
Bitcoin mining is known for its high electricity consumption, which was globally estimated at around 90 terawatt hours in 2022. The industry is increasingly seeking ways to use more sustainable energy sources to reduce environmental impact.
Why is Bitcoin mining necessary?
Bitcoin mining processes and secures all transactions on the network. Without mining, there would be no way to ensure the immutability of the blockchain, which is what gives Bitcoin its trustworthiness and security.
What do Bitcoin miners earn?
Bitcoin miners don’t earn money directly but receive rewards in the form of newly mined Bitcoins as well as transaction fees from the blocks they confirm. These earnings can fluctuate greatly depending on the Bitcoin price and mining difficulty, with successful miners needing to constantly balance costs and returns. You should particularly keep an eye on your individual electricity costs, as they represent a significant expense alongside hardware and software.
What is a Bitcoin mining farm?
In a Bitcoin mining farm, miners organise extensive hardware and often operate it in regions with low electricity costs. In these areas, miners can farm a significant number of Bitcoins. Such Bitcoin farms are a sign of the increasing professionalisation of Bitcoin mining.
Is Bitcoin mining suitable for beginners?
Bitcoin mining can be a challenge for beginners, as it requires technical knowledge, efficient mining hardware and access to affordable electricity. Additionally, the initial investments for powerful mining devices and ongoing electricity costs should not be underestimated.
Beginners should therefore conduct thorough research and evaluate profitability based on current market conditions and their individual situation before deciding to mine. There are platforms and communities that make Bitcoin mining a bit easier for beginners. There, you can gain knowledge and make it easier for yourself to get started with mining.
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