Bitcoin mining is one of the most popular and important ways to obtain this cryptocurrency. Someone might ask: what exactly is Bitcoin mining? Mining is nothing more than creating new Bitcoin blocks and adding them to the blockchain network. Miners extracting Bitcoin use especially dedicated computers with high computing power, which by performing very complicated mathematical algorithms form a single block. In addition, miners based on increasingly computing power, compete with each other in the speed of block mining – that’s why mining Bitcoin is so difficult.
Mining a Single Bitcoin Block
According to the above paragraph, Bitcoin mining involves creating and adding a single block to the blockchain. Let’s focus on how a block is created and added to the network. Since the creation of a Bitcoin block relies mainly on the computational power of the computer and the mining difficulty increased, specially created devices for this purpose arose – the most popular of them is AntMiner S9 (from latest data in the world there are about 2 million of such devices).
Thanks to ever newer devices and growing demand for Bitcoin mining, its difficulty is systematically growing. This is due to the specially created function in the Bitcoin source code. This feature increases the mining difficulty systematically every 14 days and the average time for mining single Bitcoin is steady 10 minutes. Yes, you heard it right – 10 minutes. So what makes Bitcoin mining so difficult?
Due to its increasing algorithmic complexity and current mining difficulty of 9.99 T, mining 1 BTC by a single device is close to impossible. That’s why miners from around the world combine their computing power into pools, which reduces the mining time of single block to 10 minutes by making millions of calculations per second.
World’s Bitcoin Mining Pools
The mining pool is a “resource” in which miners share their computing power and divide the reward with each other in proportion to the work they put into creating a single block. Below we will present the most popular mining pools in the world.
AntPool, as the most popular mining pool in the world, was created by Bitmain Technologies Ltd. founded in 2013. AntPool is open to users from around the world, as well as rewards for mine a Bitcoin, are paid automatically every 24 hours.
F2Pool is a Chinese mining pool created on 5th May 2013. It’s also referred by users as “Discus Fish”, whose history is related to times when F2Pool did not have an English interface.
Slush Pool (older name Bitcoin.cz Mining) as the oldest mining pool was founded on 27th November 2010 with HQ in the Czech Republic. Slush Pool allows their users to mine Bitcoin (BTC) and ZCash (ZEC) with 2% pool fee and payouts minimum limits set on 0.001 BTC and 0.001 ZEC. If the user reaches the minimum withdrawal limit, Slush Pool processes his withdrawal after the next 100 generated blocks in the network which takes up to 17 hours.
Speed of Mining – Bitcoin Hash Rate
Hash Rate plays a very important role in the Bitcoin mining process. It is the speed of Bitcoin network computing power. When a new Bitcoin block is created, before adding it to the network, the transactions contained in it must be encrypted. The encryption speed of these transactions is known as the hash rate. The higher the hash rate, the safer the network is because it means that proportionally higher computer power is needed to carry out the attack. The speed of transaction encryption in a single block is measured by multiples such as klios, megas, gigas, teras, exas, petas, zettas and is determined in the number of transactions per second (H/s).
Bitcoin’s hash rate has responded very well to the recent price sell off:— Yassine Elmandjra (@yassineARK) March 17, 2020
- Down only 10% in the last 7 days
- Next difficulty adjustment estimated to go down only 2.5%
Also worth zooming out. On a logarithmic scale, the drop is completely undetectable. pic.twitter.com/t4GQH3jl4G
Why, then, do the signs everywhere point to EH/s? And what is this mysterious EH/s? Because Bitcoin hash rate is close to 136 quintillion transactions per second, the multiples known to us would be useless. Let’s try, for example, to present the number of 136 quintillions as kilo or even as zetta. That’s difficult, right?
That is why it was agreed that transactions in the blockchain network due to the unbelievable amount processed in each second will be represented by the symbol EH/s, which corresponds to the quintillion of transactions per second. Well, we already know what hash rate is and how to mine Bitcoins. So what about charging and energy costs? Let’s now try to take to the workshop the costs of the energy needed to mine a Bitcoin.
The profitability of Mining – Electricity Costs
Energy costs are one of the most important things a beginner miner faces. How much does it really cost to mine one BTC? For example, let’s assume that we use AntMiner, which works 24/7 for all year and will mine around 0.85 BTC. The associated energy costs will be close to 15,000 kWh. That’s a lot, right? If we assume a price of electricity from 3 to 6 cents for 1 kWh, then the total energy cost will be from $ 600 to $ 1,800 for mine one BTC.
Every time the total energy draw of the #bitcoin mining network surpasses another country we should be celebrating.— Christopher Bendiksen (@C_Bendiksen) March 3, 2020
That's another nation state whose -combined energy resources- would not even be enough to mess with the chain!
Ztrong. Like bull.
The above example only illustrates how important it is to consider the cost of electricity when mining Bitcoins. It’s also worth knowing how much it really costs. Using real data from various countries and also taking into account the year-round mining, we present a shortlist of countries where mining due to energy costs is the cheapest and we will also show the flip side, where the mining 1 BTC is the most expensive.
Let’s take a look at the list below showing the countries with the lowest energy costs:
- Trinidad and Tobago ($1,190)
- Ukraine ($1,852)
- Kuwait ($1,983)
- Myanmar ($1,983)
- Belarus ($2,177)
And let’s come on the other side and see the list of countries with the highest average electricity costs:
- Cambodia ($8,327)
- Tahiti ($11,103)
- Curaçao ($11.896)
- Turks and Caicos Islands ($14,033)
- South Korea ($26,170)
How Much Do Miners Earn?
Since we already know how much energy it costs to mine a single Bitcoin, let’s think how much the miners really earn. Let’s ask the following question: is mining Bitcoin profitable at all? Miners digging Bitcoin, receive block reward in the form of parts mined BTC. In 2009, when Satoshi Nakamoto created the Genesis Block (the first Bitcoin block), the block reward was as much as 50 BTC for a single block. So why is it now only 12.5 BTC per block? One more important concept will help us explain – halving.
Halving is the profit splitting. Because all Bitcoins in the pool are limited to just 21 million BTC, there is an event once every four years where the prize for mining a single block is split in half, which automatically adds half of all unexplored bitcoins to the correct pool. The first halving took place on the 29th November 2012, splitting the mining award from 50 BTC to 25 BTC per block. Second halving on 2016 splitting block reward from 25 BTC to 12.5 BTC and the third May 2020 from 12.5 BTC to 6.25 BTC per block. For the inquisitive, it’s worth knowing that halving will take place down to zero so that the 21 million BTC pool is never reached.
To sum up, the above decent dose of knowledge about Bitcoin mining, let’s consider some issues. We know how to go about it, but is it profitable? Will the investment be better? And how will the price change before and after halving? Rate it yourself. More information about Bitcoin and investments soon in the next articles.