The profits from Bitcoin mining are attractive and provide significant income for miners. Currently, Bitcoin mining has become more difficult due to tightening policies in many countries. However, Bitcoin mining is still a form of investment that is of interest
What is Bitcoin Mining?
Bitcoin mining is the process of mining Bitcoins by solving algorithms and verifying transactions on the Bitcoin blockchain. When a transaction is made, miners use their computers’ processing power to verify and record the transaction, while also creating a new block for the network.
When a miner solves a problem and adds a new block to the blockchain, they receive a reward in the form of BTC. This also simultaneously creates new Bitcoin and maintains the Bitcoin network system.
However, Bitcoin mining requires powerful hardware and high electricity consumption, so Bitcoin mining is mainly done by data centers or mining pools
How Much Money Can You Make Mining Bitcoin?
The amount of money earned from Bitcoin mining depends on factors such as:
- Workload: The computing power and performance of the Bitcoin mining equipment that the user utilizes will affect the workload they can complete. The more powerful the equipment, the faster the calculation speed, and the more Bitcoin the user will earn.
- Mining Difficulty: The Bitcoin network is designed to automatically adjust the mining difficulty over time and based on the number of participants. As the difficulty increases, miners will need more computational work to complete a block. As a result, earning Bitcoin will become less frequent.
- Price of Bitcoin: The value of Bitcoin in the market directly affects the value of the Bitcoin rewards that miners receive. If the value of Bitcoin increases, the amount of money earned from the rewards will also increase.
However, the Bitcoin mining process is becoming increasingly complex and requires more electricity consumption. Currently, mining Bitcoin for significant profit requires a substantial infrastructure investment and a thorough understanding of the market.
For individuals, Bitcoin mining is often considered an investment activity or a means to participate in the blockchain community, rather than a way to make a quick profit.
Read more: How much can you earn mining crypto per month?
What Do You Need to Prepare to Mine Bitcoin?
To prepare for Bitcoin mining, users need:
- Bitcoin Mining Hardware: Users need a computer device with high computing power, also known as a Bitcoin mining machine. In the past, miners often used graphics cards (GPUs) or specialized integrated circuits (ASICs) to mine Bitcoin. In addition, users need a stable power supply and an efficient cooling system to ensure the stability of the mining equipment.
- Bitcoin Mining Software: To participate in the network and mine Bitcoin, users need to use mining software. There are many different Bitcoin mining software available for different operating systems such as CGMiner, MultiMiner, etc.
- Bitcoin Wallet: Users need a Bitcoin wallet to store and manage the Bitcoin they earn from mining. There are many different types of Bitcoin wallets available, including online wallets (Coin98 Wallet), hardware wallets (Trezor), and paper wallets.
- Internet Connection: To participate in the Bitcoin network and perform mining transactions, users need a stable and fast Internet connection.
- Knowledge and Understanding: Bitcoin mining requires knowledge of blockchain technology, the Bitcoin mining process, how to manage a Bitcoin wallet, and security risk management. Make sure you have learned about the basic concepts related to Bitcoin mining and know how to maintain the security of your assets.
Note that Bitcoin mining is becoming increasingly complex and requires large investments. Before starting to mine Bitcoin, carefully consider and learn about the technical, financial, and environmental impact of energy consumption.
How to Mine Bitcoin?
After completing the preparation steps, miners will have two options: join a mining pool or become a solo miner. Next, the miners will join the Bitcoin network and verify transactions.
Specifically, their process will take place as follows:
- When transactions are created on the BTC network, a software will generate a hash function for each transaction. Then, all these transactions are gathered and formed into a block, using the SHA-256 hash function – a hash function capable of converting any text into a 256-bit string.
- The process of gathering transactions is also known as a Merkle tree. When a Merkle tree is created, the transaction data on the tree will be verified and arranged into blocks using the Proof of Work (PoW) algorithm.
- When transactions are verified, a new block will be added to the Bitcoin network and ready to be mined. At this point, miners will use this information to solve the algorithm and verify the transaction. They need to find a 64-digit hexadecimal number, called a hash.
- Finally, the miners will check if the block is correct. If it is, the block will be added to the Bitcoin network, and the last person to find the 64-digit hash will receive the block reward (6.25 BTC).
Types of Bitcoin (BTC) Mining
There are different types of Bitcoin mining, including:
- CPU Mining: In the early stages of Bitcoin, users could use personal computers to mine Bitcoin using software. However, currently, the difficulty of the Bitcoin algorithm has increased significantly, making Bitcoin mining on personal computers obsolete.
- GPU Mining: When Bitcoin mining on personal computers became ineffective, some miners switched to using GPUs (graphics cards) to mine Bitcoin. GPUs have better graphics processing capabilities than CPUs, which helps increase Bitcoin mining efficiency.
- ASIC Mining: Professional Bitcoin miners use specialized devices called Application-Specific Integrated Circuits (ASICs) to mine Bitcoin. ASICs are designed to perform Bitcoin mining calculations at much higher speeds than CPUs and GPUs.
Cloud Mining: This is a form of Bitcoin mining provided by cloud mining companies. Instead of users buying and using mining equipment, they can rent cloud companies to mine Bitcoin for them. However, this form is often less common due to the relatively high cost and the trust in these companies is also subject to much debate.
Read more: What is Cloud Mining? Things to Note When Using Cloud Mining
Pool Mining: This is a form of Bitcoin mining that allows miners to combine their computing power to solve difficult problems and share the rewards received. When a new block is found, the reward will be divided equally among all miners participating in the mining pool.
Mining Bitcoin on Other Platforms: In addition to the above forms, there are other forms of Bitcoin mining such as mining on smartphones, mining on gaming platforms, mining on IoT (Internet of Things) devices, etc. However, these forms usually only mine a very small amount of Bitcoin and are not as efficient as the common forms.
Some Popular Bitcoin Miners
Currently, there are many different types of Bitcoin miners on the market. Here are some popular Bitcoin miners:
- Bitmain: Popular Bitmain models include Antminer S19 Pro, Antminer S17, Antminer T19, Antminer S9…
- MicroBT: Popular MicroBT Bitcoin miners include Whatsminer M30S++, Whatsminer M20S, and Whatsminer M31S.
- Canaan: Popular Canaan Bitcoin miners include AvalonMiner 1246, AvalonMiner 1146, and AvalonMiner 1166.
- Innosilicon: Popular Innosilicon miners include T3+ 67T, T3+ 52T, T3+ 39T.
The Bitcoin miners from the above brands all have different computing power and performance, and the price and power consumption also vary. Therefore, users should research carefully before deciding to buy a miner to suit their needs and budget.
Profitability and Risks of Mining BTC
The formula for calculating profit is not fixed. If users utilize a Mining Pool service, they will calculate the profit for them. The formula below is for those who want to operate their own mining farm.
In which the revenue portion will be affected by these indicators:
- Hashrate of the machine: This is the unit representing the computing power of the mining machine. It depends on the mining machine or the mining pool the user joins.
- Block Reward: This is the reward given to miners. Typically, the Block Reward is halved after each halving event – an event of the Bitcoin network that takes place every 4 years.
- Transaction Fee: This is the transaction fee of the Bitcoin network. Transaction fees increase when there are more transactions taking place on the Bitcoin network.
- BTC Price: This is the price of Bitcoin. Bitcoin once peaked at $67,000 in November 2021.
Read more: What is Bitcoin Halving? Why is Bitcoin Halving important?
In addition to the formula above, Bitcoin mining costs will also be affected by factors, including:
- Personnel costs: Personnel in Bitcoin mining refers to employees who assist users in monitoring, repairing, and maintaining mining machines.
- Mining difficulty: Bitcoin mining difficulty automatically adjusts over time to maintain a stable mining speed. When more people participate in mining, the difficulty will increase, the rate of discovering new blocks will decrease, and it will affect profits.
- Electricity costs: Bitcoin mining consumes a large amount of electricity. Electricity costs play an important role in determining profits. If electricity costs are high, profits from mining will decrease.
- Policies and regulations: Government policies and regulations can affect profits from Bitcoin mining. For example, some countries have banned or restricted Bitcoin mining activities, which can affect miners’ profits.
- Competitive market: The number of people participating in Bitcoin mining also affects profits. The more people participate, the fewer opportunities to find new blocks and receive rewards.
Therefore, to achieve the highest profits from Bitcoin mining, miners need to monitor these factors and adjust their investment strategy flexibly.
In addition, in the coin mining market, there is a term called “Bitcoin Shutdown Price,” which refers to old mining machines with weak computing power, forcing miners to “rest” the machines because the cost of electricity is higher than the amount of BTC that can be mined.
Read more: What is BTC Shutdown Price? What will happen to Bitcoin when miners shut down?
Some Frequently Asked Questions Related to BTC Mining
How long does it take to mine 1 Bitcoin?
The time it takes to mine 1 Bitcoin depends on many factors, including the computing power of the mining equipment, the difficulty of the Bitcoin network, and the price of Bitcoin.
Currently, to mine 1 Bitcoin, it can take from a few months to several years depending on the above factors.
How many Bitcoins can be mined in 1 day?
The amount of Bitcoin mined in a day depends on the computing power of the mining equipment and the difficulty of the Bitcoin network. Currently, to mine 1 Bitcoin in a day, it requires computing power equivalent to hundreds of mining devices.
Where can Bitcoin be mined?
Bitcoin can be mined anywhere in the world, as long as you have mining equipment and an internet connection. However, to have a sufficiently large profit, many people choose to place mining equipment in places with low electricity costs and choose suitable mining machines.
How many Bitcoins have been mined?
Currently, about 19,331,000+ Bitcoins have been mined out of a total of 21 million BTC.
Where does the money earned from Bitcoin mining come from?
Money earned from Bitcoin mining comes from processing transactions on the Bitcoin network and receiving rewards in Bitcoin for their computational effort.
Is Bitcoin mining subject to taxes?
Bitcoin mining may be subject to taxes depending on the tax regulations of each country. Therefore, you should check the taxes of each country to minimize mining costs as much as possible.
Is Bitcoin mining profitable?
Bitcoin mining can be profitable if you have enough computing power and low electricity costs.
However, Bitcoin mining also has risks such as the high cost of mining equipment, the price of electricity in different regions, the difficulty of the Bitcoin network (increased difficulty makes mining less efficient), and the price volatility of Bitcoin.
Is Bitcoin mining prohibited?
Bitcoin mining is not prohibited in most countries, but some countries have regulations related to taxes or financial activities for activities related to Bitcoin. Before mining Bitcoin, you can ask the competent authority in advance to facilitate legal issues.
Vietnamese law does not prohibit mining and storing Bitcoin. However, the price of electricity and the climate in Vietnam may not be suitable for large-scale Bitcoin mining
