Mining makes sense if you plan to do it for fun, to learn or to support the security of Bitcoin and do not care if you make a profit. If you have access to large amounts of cheap electricity and the ability to manage a large installation and business, you can mine for a profit.
What is Bitcoin mining? Bitcoin mining is a lot like a giant lottery where you compete with your mining hardware with everyone on the network to earn bitcoins. Faster Bitcoin mining hardware is able to attempt more tries per second to win this lottery while the Bitcoin network itself adjusts roughly every two weeks to keep the rate of finding a winning block hash to every ten minutes.
By conducting a random lottery where electricity and specialized equipment are the price of admission, the cost to disrupt the Bitcoin network scales with the amount of hashing power that is being spent by all mining participants.
Defending Bitcoin’s Power Usage
Depending on the nonce and what else is in the block the hashing function will yield a hash which looks something like this: To create a valid block your miner has to find a hash that is below the difficulty target. So if for example the difficulty target is any number that starts with a zero would be below the target, e. The mining difficulty expresses how much harder the current block is to generate compared to the first block. To be fair, back then mining hardware and algorithms were a lot slower and less optimized.
To keep blocks coming roughly every 10 minutes, the difficulty is adjusted using a shared formula every blocks. The network tries to change it such that blocks at the current global network processing power take about 14 days. In the quest to further secure the network and earn more bitcoins, miners innovated on many fronts and for years now, CPU mining has been relatively futile.
You might mine for decades using your laptop without earning a single coin. GPU About a year and a half after the network started, it was discovered that high end graphics cards were much more efficient at bitcoin mining and the landscape changed. The massively parallel nature of some GPUs allowed for a 50x to x increase in bitcoin mining power while using far less power per unit of work.
That 5x improvement allowed the first large bitcoin mining farms to be constructed at an operational profit.
The bitcoin mining industry was born. An ASIC is a chip designed specifically to do one thing and one thing only.