Bitcoin mining may sound tiresome to the uninitiated, but it’s the driving force behind this new form of virtual currency. It’s also far more popular than many would imagine. A recent study found that most placed the number of daily Bitcoin miners at around 5,000, while the actual number is closer to 100,000. That’s a whole lot of virtual mining, and nobody even has to put on one of those funny-looking safety helmets with the light.
This article is meant to provide an overview of Bitcoin mining. While you’ll never need to perform this process yourself in order to play online poker or buy a cup of coffee, a basic understanding of how the system works is always helpful.
How Does Bitcoin Mining Work?
In order for Bitcoin transactions to take place, a series of complex mathematical equations must be solved (a process known as “hashing”). This service is performed by individuals or groups with specialized hardware and software, as the technical demands are too great for the standard personal computer.
When a mathematical problem is solved by a miner, a block of encrypted transactions is created. This is the point when miners receive their reward in the form of new bitcoins, although the system is designed to produce increasingly smaller numbers of bitcoins as more of the virtual currency enters into circulation. This is intended to keep the market from flooding, and there’s a built-in ceiling of 21 million bitcoins.
Examples of Bitcoin Mining Equipment
Just like a traditional miner once needed a pickaxe and shovel to perform their job, Bitcoin miners also use specialized tools to save time and decrease power requirements. The following items can be found on Amazon or more specialized sites, and their prices and technical specs have been provided to serve as an example of the elaborate nature of the hobby/profession. Keep in mind that technology is always marching forward, so these devices are likely to be obsolete within a couple of years.
- AntMiner S5 – Weighs six pounds with a power efficiency of 0.51 W/Gh. The advertised capacity is 1,155 Gh/s. At the time of this writing, it was available through an online retailer for $494.99. Earns 0.35787681 BTC per month.
- BPMC Red Fury USB – Weighs 1.6 ounces with a power efficiency of 1.00 W/Gh. The advertised capacity is 2.5 Gh/s. At the time of this writing, it was available through an online retailer for $33.87. Earns 0.00077463 BTC per month.
- Spondoolies Tech SP20 Jackson – Weighs 20 pounds with a power efficiency of 0.80 W/Gh. The advertised capacity is 1,500 Gh/s. At the time of this writing, it was available through an online retailer for $499.97. Earns 0.4647508 BTC per month.
- AntMiner USB U2 – Weighs 0.8 ounces. The advertised capacity is 2.0 Gh/s. At the time of this writing, it was available through an online retailer for $34.99.
- Avalon USB Nano3 – Weighs 0.8 ounces. The advertised capacity is 3.6 Gh/s. At the time of this writing, it was available through an online retailer for $32.37.
It’s not always easy to make a profit as a bitcoin miner. For example, in 2013 the cost of electricity in the U.S. was 10 cents for every kilowatt hour. Therefore, someone using a piece of hardware with a capacity of 1.6 TH/sec would take an entire year to break even. Of course, these figures can greatly fluctuate, and large-scale institutional mining operations have the advantage of cheaper electricity, more sophisticated equipment, and faster delivery dates for the latest hardware.
Bitcoin mining can often seem like a thankless job that requires additional computer software and sizable expenditures of electricity. In reality, however, it’s the backbone of the Bitcoin system and an important example of the service-goods continuum.
Even if the meaning of words like “hashing” fade from your mind moments after reading this article, never forget the important role played by these virtual miners. As least there’s some form of justice at work, as these devoted men and women receive shiny new bitcoins instead of black lung disease.