In recent times, Crypto-assets are becoming more and more popular, referred to often as a digital currency. The number of available digital assets are on the increase and the king of crypto-assets, Bitcoin, has held its place on top moving strength to strength.
Brief Overview About Bitcoin: Why This Crypto is the King
Bitcoin has been dominating the crypto-markets since 2009, the founder of Bitcoin is Satoshi Nakamoto who established it in 2008. Satoshi is a prominent figure in the crypto space, but funnily enough no one actually knows the founder’s real identity.
In 2010, the first Bitcoin Transaction was made. Staggeringly a total of 10,000 BTC was traded in exchange for two pizzas.
By 2011, the rivalry began, as competitors arrived on the crypto scene including Litecoin and Namecoin. The competition led to a price-drop in 2013, from $1,000 to $300.
By end of 2017, Bitcoin had put in it’s all time high, climbing to just shy of $20,000.
It’s now 2020, and Bitcoin’s value is steadily climbing again, still being the number 1 ranked crypto in the market to this day. All of this success would not have been possible, if it wasn’t for the miners behind this crypto asset.
Let’s talk further about what ‘mining’ is and why a Bitcoin enthusiast mines.
Mining – What is it, and Why do it?
Blockchain technology is a peer-to-peer transaction network, the function of which is to keep the transaction records of payments on a public ledger. This ledger requires all transactions made to undergo a confirmation process, proving that the transaction occurred- this is where the miner steps in!
Crypto enthusiasts who are mining are conducting these network confirmations as a service to the crypto network, ensuring each transaction has been securely completed. As a reward, miner’s will be paid in Bitcoin that is generated periodically as payment in what’s referred to as blocks.
These blocks are new bitcoins, generated from the mining activity, and will be of equal value to the current market price of Bitcoin.
With regard to Bitcoin specifically, only a finite amount can ever be created (21 Million, of which 18.5 million have been already created). Hence why there are often similarities drawn between Bitcoin and Gold as both being precious assets
What does a Confirmation Involve?
A miner’s job in the confirmation process is to solve a ‘Hash’ code, which is created using cryptographic protocol (hence why it’s called cryptocurrency!).
Cryptographic Hash – an algorithm applied to data, to securely mask data, in cryptocurrency this is the transaction details. For bitcoin this hash function used is known as SHA256.
Transaction Hash- a fixed length of random digits, created by the Cryptographic Hash.
SHA256(The quick brown fox jumps over the lazy dog.) =
This transaction hash code not only contains information related to a current transaction, but also the transaction prior to it – this additional information allows a miner to verify definitively that the transaction occurred in a particular sequence on the blockchain. Once this confirmation has been made, the receiving wallet accepts the transaction has occurred.
The Hash power of a mining setup, will determine the capacity for conducting these confirmation tasks. More information about this will be covered below.
Cloud or Local Mining?
There are various ways to mine Bitcoin on your computer:
Surprisingly, It is possible to use a personal computer for mining, and is often done through a graphics card unit (GPU). The selection of compatible computer hardware is broadening, as demand has been on the rise in recent times.
There are also mining specific hardware standalone units available, such as Application-Specific Integrated Circuit. ASIC chips are specifically designed for conducting crypto mining, and have the advantage of producing a greater efficiency in Hashing power for the power used- compared to a regular computer.
The cost for an ASIC miner is variable, and it’s best to evaluate the output vs cost. These mining machines are evolving, and advancements in hardware and design does result in improved efficiency.
Most commonly personal miners will often utilize their output by being a part of a Bitcoin mining pool. When a user mines on their own, there is a higher degree of difficulty obtaining a reward due to the competitive landscape of crypto mining. These mining collectives will let Aussie miners work alongside others, having a better chance to be rewarded more often.
The advice is to keep in mind that it’s crucial to select reputable and established mining pools, and understand the payout and fee structure of membership.
For aspiring miners, Cloud mining can seem attractive due to the barrier for entry being lower but it does have it’s advantages and disadvantages.
Hosted cloud mining is where a customer will enter a contract or purchase a piece of physical mining hardware located in a facility (also referred to as mining farms).
Leased Hash Power is another type of cloud mining (most common), that allows a user to purchase computing power from a mining farm. The customer is then able to take a cut of the overall profits, while assisting in the maintenance and running costs of the mining farm.
The reality of all these options at the end of the day, is the “break-even point” and how sustainable the returns are from mining costs.
The amount of Bitcoin rewarded to a miner will drop as time passes. Miners should keep in mind the difficulty in generating a block at any given time, and the relationship this has with Bitcoin’s current value to determine this break-even point! We’ll touch on the difficulty rate of mining later below.
Difficulty is a metric of the average time between the creation of blocks from mining activity. This figure can fluctuate – as it is assessed by the network, in the example of bitcoin, every 10 minutes. This will inherently govern how likely you are to be rewarded for all your efforts, and in more recent times has become a lot more competitive.
There are seldom instances in Australia where cloud mining contracts can be profitable. And in most instances, more profit can be generated by buying cryptocurrencies compared to cloud mining.
Which mining Platform should I use?
This platform will give access to cloud based mining of: BTC, DASH, ETH, LTC, ZEC, and XMR.
This platform has mineable coins, like ZEC, ETH, LTC, DASH, XMR, and BTC.
How Profitable Is Mining for Bitcoin Enthusiasts
It is profitable, although arguably it was more profitable in the past. In the present time performance yield of current technology is far better than it was, yet the competition and difficulty of earning a reward for mining efforts has increased. The reason it remains profitable is purely based on the costs of mining vs output relative to difficulty at any given time.
The ultimate decision will come down to each user,and how much they are wanting to invest, as more expensive equipment is more efficient, resulting in earnings more favourably.
There is still room for improvements with current technology, especially with ASIC equipment and software, as new developments and improvements will result in further efficiencies in the power consumption costs and hash power output.
Here are other reasons why mining is still profitable in 2020:
- More efficient hardware is available in the market as time passes, giving you an advantage over older hardware users.
- Lower barrier of entry into renewable electricity options (solar).
- Miners can take advantage of the fees when trading Crypto assets. Some fees may be high, and some are low. It varies on the exchange-fee structure.
- More trustworthy pools are becoming available, and becoming a member will help the miner earn income in a more stable fashion.
Tips on Mining Bitcoin and How to Start
Aussies have two primary ways to enter this space and mine mine Bitcoin/Crypto in Australia:
Method 1: Mining Bitcoin Through a Cloud Mining Platform
- Select a mining service provider. Compare various platforms for cloud mining, consider the contracts and costs/fees associated & do your homework to find out if they are a reputable cloud mining provider.
- Choose a mining package/contract. After reviewing, check how long the contract will last. Aside from that, consider the mining hardware that the provider will use and compare that to what’s on offer by competitors.
- Next is to select one of Australia’s best mining pools. After purchasing the plan, many cloud mining services will need it’s users to pick one. Comparing different pools is necessary as well, considering the track record and real user reviews.
- Begin mining! It’s recommended to transfer all earnings to a safe BTC wallet in your control.
Method 2: Mining Bitcoin at Home Through a Personal Software and Hardware
- Before starting to mine Bitcoin utilize a mining calculator, this can be found online easily via google and is necessary for Bitcoin mining. The user will be able to check whether mining is worth the time or not.
- Select the best mining hardware, for your budget. Comparing various hardware features, power consumption vs hash output is crucial before deciding what to use and the cost of mining devices for ASIC vs a GPU/CPU setup.
- Next is to select a mining pool. After purchasing the plan, many cloud mining services will need it’s users to pick one. Comparing different pools is necessary as well, considering the track record and real user reviews.
- Download mining software. There are many programs for crypto/Bitcoin mining. Some software can be more technical to use, while some may provide a more user friendly graphical user interface. Mining pools may also provide or suggest a particular software to use.
- Begin mining! It’s recommended to transfer all earnings to a safe BTC wallet in your control. It’s important to note, regular maintenance is also completed on your mining system, as per the recommendations.
Factors to Consider in Choosing the Best Hardware for DIY Mining
This is a representation of the number of calculations, which the hardware can do per second. It’s a crucial parameter, a higher hash rate will boost the chances of solving a calculation to result in sealing-off the block and earning you a reward.
In measuring hash rate, it should be in MH/sec or megahashes per second, GH/sec or gigahashes per second, and TH/sec or terahashes per second. For Bitcoin, the range is from 336 MH/s to 14,000,000 MH/s.
Another factor is the energy consumption, there is a critical relationship between Hash Rate and power consumption, when calculating profitability.
The formula is dividing the hash count by the total power-watts.
For example, if your rate is at 4.500 MH/sec, and it needs 32 power-watts, you’ll have 140.625 MH/sec on every watt.
There’s also an online calculator available to check on an estimation of your power bill using hardware.It’s important to refer to your own power costs, as these do vary all around the world.
Choosing the Best Software for Mining
In selecting the best software, it is important to also check if your hardware equipment has any software requirements needing to be installed before use.
The software client will control the hardware in conducting the work, which is solving transaction blocks.
Here are some of the best current software for a miner:
- Bitcoin Miner – This software has a user-friendly interface, and it runs on both MacOS or Windows. It also features pool support, power saving mode, profit reports, and fast share submission.
- EasyMiner – This software supports different protocols for both pool and solo, along with performance graphs. It’s compatible with Linux and MacOS only.
- RPC Miner – This software is integrated with MacOs systems and APIs.
- CGMiner – This software features a new block-self-detection, which comes with a mini database. It also includes CPU and multi-GPU support and fan speed control. The systems where it’s compatible include Linux, MacOs, and Windows.
- BFGMiner – It’s alike to CGMiner, yet the design is for ASICs. It’s suitable for Linux, MacOs, and Windows.
What Bitcoin Mining Enthusiasts Should Know About a Mining Pool
In the modern landscape of mining it’s important to acknowledge the higher has powered competition created by mining farms. It’s a good reason why a user should contemplate if they are going to do it alone or be a part of a mining pool.
This approach is where many enthusiasts share their computing power with a collective, to seal-off blocks and lock in rewards, as there are more chances of solving a calculation. However, members of the pool will get a divided reward, depending on their input. Which might be appealing as a stable income with a modest reward.
Knowing how to interpret Difficulty and finding value when Mining a Bitcoin Block
A Bitcoin block will take approximately 10 minutes to mine. This metric is also referred to as the average confirmation time, and is the proxy for mining ‘difficulty’.
The mining difficulty is a dynamic parameter that informs miners of the necessary computing power required for block-mining. With specific regard to Bitcoin, there are changes in the difficulty score after every 2016 blocks on the Bitcoin network.
Some of the factors to consider when understanding mining difficulty include:
- The hash rate of the hardware amongst competitors
- The present and future anticipated reward payout for sealing a block
- The historic and present mining difficulty, in projecting future difficulty
- Current market price for a bitcoin, and transactions across the network
Considering Bitcoin Wallets: Guide That Every Beginner Should Know
A Bitcoin wallet is a necessity for a miner. It gives you access to your own wallet private keys that will allow for complete digital ownership of your assets.
Some Risks of Using Digital Wallets for Storing Cryptocurrencies
- Digital exchanges may run the risk of undergoing attacks or have underlying security issues that aren’t in a user’s control.
- Installing digital wallets can be risky, as someone may be able to login to your email or mobile phone and take control of that wallet.
- Digital wallets are prone to viruses. When a user encounters malicious software, they can scan a hard drive to locate the private keys, or hold your assets at ransom.
Some Handy Advice in Using a Digital Wallet: What to Keep in Mind
As a user, it’s important to be very cautious and leave nothing to chance. Make sure to use unique passwords, and store any sensitive data in such a manner that can’t be easily obtained. Be careful when opening emails, as some can look like it came from a legitimate source but are not.
A recommendation is to use a wallet that doesn’t need an internet connection, such as a Ledger. It’s best to utilise cold storage options for digital assets.
FAQs (Frequently Asked Questions)
Here are some of the questions that most Aussies ask about Bitcoin mining.
Can a user mine another crypto aside from Bitcoin?
Yes, it’s possible. There are several “Proof of Work” digital assets that a user can consider. Some are more accessible and profitable when compared to Bitcoin.
What’s the amount of power necessary for mining BTC?
The electricity consumption is dependent on the hardware the user chooses. This will also govern the amount of power that is needed to perform the tasks necessary to yield a reward. According to Canstar, the average electricity cost per kWh across Australia is more than 20 cents per kWh. It should be noted this can change depending on your location.
Can mining secure BTC?
The process of mining is foundational in creating a secure network, by stopping individuals from earning payments by attempting to make changes in the blockchain ledger. It also stops individuals from undoing already sealed transactions, if there were someone trying to reverse their transaction. The proof of work concept of blockchain demonstrates an effective way to stop individuals defrauding others.
How to begin mining BTC?
A user needs specialised hardware for a cost-effective way of mining. Nowadays, it’s better by performance and effectiveness, unlike before, where people still use CPUs. You can also look to lease computer hashing power via cloud mining services.
Is Bitcoin mining legal to do in Australia?
Yes, it’s legal in this country. What’s important is that the user is using his or her electricity.
Should a user expect taxes from digital assets?
There are various jurisdictions for digital assets regarding income, sales, payrolls, and capital gain. Nonetheless, investors are liable for reporting taxes locally.
Becoming a Bitcoin miner is not as easy as may look on paper, especially when users are decrypting a puzzle for a reward. There are many ways to turn it into a profitable venture, while helping facilitate Bitcoin’s secure network. The one good thing is, anyone can be a miner!