How Bitcoin Mining Works

In simple words, Bitcoin mining is a process with the help of which new coins are created. It can be done by solving some mathematical issues or puzzles. Furthermore, mining confirms and makes trustworthy transactions on the cryptocurrency network. 

Hash is a one-way encryption tool, which can be decrypted only if a combination corresponding to this hash is selected. Miners sort through a huge number of hashes in order to find a suitable one. It must satisfy a condition called difficulty. Hash and difficulty are very large numbers, and the condition is that the hash value should be less than difficulty. Miners generate a hash based on the data found in each block header in order to identify each block.     

In the event that even the slightest component of the block is changed, the nodes will instantly reject the wrong version of the blockchain. This means that the network is reliably protected from unauthorized access.    

Miners do a really difficult job, for which they are rewarded with Bitcoins.  

 It is also worth buying local storage for storing funds on a PC and opening an online wallet in any system. Moreover, it is also worth understanding that mining requires constant computer operation, which means huge energy consumption.   

Check out our comprehensive guide on Best Bitcoin Wallets.   

Is Bitcoin Mining Profitable?

Before starting Bitcoin mining, everyone should make sure that they are ready to invest the necessary amount of money in equipment. It is also worth studying the level of complexity of cryptocurrency mining to understand whether this process will be profitable.    

By reducing the price of Bitcoin, the mining difficulty of this cryptocurrency will also decrease. As a result, it becomes easier to mine Bitcoins.  

Undoubtedly, Bitcoin mining can be really profitable since even for the creation of one block, a miner can receive several hundred thousand dollars.    

Mining Pools

The pool is a group of united miners. All pools have a special algorithm for distributing and collecting tasks from miners.    

The best pools are those whose complex algorithms can be changed. This algorithm allows assigning more complex tasks to miners with high performance and less complex tasks for less experienced miners.    

The following list includes the best Bitcoin mining pools: 

• Slush;  
• F2Pool;  
• AntPool;  
• ViaBTC;  
• BTC.com;  
• Poolin;  
• Genesis Mining;  
• Bitfury;  
• Binance Pool;  
• KanoPool.  

Solo Mining vs. Multipool Mining

Solo mining is an independent attempt by an individual miner to confirm blocks of transactions on the blockchain. This method of mining was the very first. Since the number of miners has increased over time and the reward remains the same, the reward for each miner has decreased over time.   

Solo mining is very dependent on luck, and that is why it is not the most reliable.    

In pools, miners work together to get a stable and reliable stream of earnings. Rewards for multipool mining are distributed between all the miners. The distribution is based on how much power a miner adds to the network. Each miner in a group receives remuneration after finding and confirming a block.    

Therefore, mining in a pool is a more reliable and easier way to mine cryptocurrencies.    

Cloud Mining

Cloud mining is a way of mining Bitcoin by renting computing power. In this case, there is no need to install and start the equipment. There are cloud mining firms that allow people to mine cryptocurrency remotely after creating an account. A basic fee is charged for this.    

The advantage of this method of mining is that thanks to it, mining has become available to a much larger number of people. In addition to this, the problem of high-energy consumption has disappeared.   

Is Bitcoin Mining Legal?

Now, Bitcoin mining has been widely recognized all over the world. However, the fact that a large amount of energy is spent causes some controversy.    

A number of countries, such as China, Russia, Bolivia, Algeria, and Ecuador, restrict or outlaw Bitcoin trading due to its decentralized nature, volatile value, and other factors. However, it is unknown if Bitcoin is legal in other countries.    

However, it is welcomed and widely used in countries such as Finland, Germany, France, the United States, Canada, Australia and the UAE. Bitcoin is legal tender in only one country, El Salvador.    

Bitcoin Mining: Pros & Cons

In the modern world, the use of cryptocurrencies, and in particular Bitcoin, is becoming increasingly popular. However, people’s opinion about this process remains ambiguous.