Mining, if you’ve heard of Bitcoin, you’ve surely heard about it. But what exactly is mining?

Miners make the blockchain work

In order to properly explain the concept of mining, it is important to first have an idea of what the blockchain (block chain) exactly is. In short, this is a distributed database on which a continuously growing list of blocks is maintained. Every day millions of people send cryptocoins to each other, but if nobody keeps track of this on the blockchain, nobody can keep track of who has paid whom and who has which cryptocoins. The blockchain keeps track of this by collecting all transactions within a certain time in a ‘block’. It is then the miners’ job to record this on the blockchain and we call that mining. This mining only costs the miners electricity.

Satoshi Nakamoto has come up with a solution for this that the miners can be rewarded. Miners who use their computer to record transactions can win a reward worth 25 Bitcoins in the case of Bitcoin. The computer that first solves a (very) difficult math problem receives this reward. This method of mining is also called Proof of Work. Nowadays there are also other ways of mining, such as Proof of Stake (PoS) or Proof of Importance (PoI).

Do you want to know more about Proof of Work? In the video below from AllesOverCrypto, Matt explains what PoW is and how it works.

Mining limits

Finding a block of 25 Bitcoins is regulated. This means that a maximum number of Bitcoins are always created per day throughout the Bitcoin network. And because more computers are mining for Bitcoin every day and the hardware for this is being improved every day, it is becoming increasingly difficult to find Bitcoins.

Different rules may apply to mining for other cryptocoins. With Litecoin, for example, a new ‘block’ is found every 2.5 minutes. Litecoin also uses a completely different scrypt, which means that the difficulty level is a lot lower than with Bitcoin.

Things you need if you want to start mining yourself:

And of course the question remains: how can I start mining myself? Unfortunately, that is more difficult than you think and there are major differences per crypto coin. Below is a list of ten things that you need in any case if you want to start mining.

1. A wallet of the specific coin you want to mine
2. A software mining package
3. A good and, above all, reliable internet connection
4. A good location. The miners can get very hot and also make a lot of noise. It is therefore not convenient to do this in your living room. The best is a cellar or shed.
5. For this reason you also need a cooling system. Think of fans or an air conditioner. It is important that you keep your equipment cold
6. A computer built specifically for mining. Gone are the days when your own home garden and kitchen computer was good enough
7. An (AMD) graphics processing card (GPU) or an ASIC chip.
8. It is wise to be a member of an online mining pool. This is a pool that mines the same cryptocurrency as you. By joining this you ensure that your income is more stable.
9. If you want to sell the crypto coins, you must be a member of an online exchange where you can sell your mined coins
10. And the most important thing: you have to like it and be curious how it all works. It is clear that the difficulty of mining continues to rise and the only way to keep up is to constantly educate yourself on how to improve your miners. You can see it as a sport and the one who puts in the most effort will eventually get the best result.

Do not mine Bitcoin

Another important thing to mention is that it is no longer profitable to mine Bitcoin these days. This was certainly lucrative in the early days, but due to the enormous price increase of Bitcoin, the coin has become so popular that a lot of miners have dived into it. Meanwhile, the difficulty of mining a Bitcoin has become so difficult that only those with specialized and very powerful machines can make a profit from it. This has resulted in entire parks full of miners in China, Iceland and Venezuela. This has caused discussion as to whether Bitcoin is still so decentralized.
 

Would you rather buy cryptocurrency instead of mining? Here are the steps for you:

How do I buy crypto?

Buying crypto on Bitvavo is a piece of cake. Within minutes and for less than a euro you can be the proud owner of your favorite cryptocurrency.

1. Register here for free at Bitvavo
2. Verify yourself by clicking on your name in the top right corner and then go to ” Verification “.
3. Transfer money via iDeal. You do this by clicking on ” Transfer Euros to Bitvavo “.
4. Then enter the amount and choose iDeal as payment option so that the money is in your Bitvavo account within a minute. Then click on “Pay”.
5. If you click on ” Overview ” afterwards, you will see the money.
6. Find your favorite cryptocurrency, click on it and then press “Buy”.
7. Invest the amount you have in mind in your favorite cryptocurrency.
8. Congratulations! You bought favorite cryptocurrency!

Source Main image: By Marco Krohn (Own work) [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons