How Does Bitcoin Mining Work?

However, before you invest the time and equipment, read this explainer to see whether asic miner is really for you. We will focus primarily on Bitcoin (throughout, we'll use "Bitcoin" when referring to the network or the cryptocurrency as a concept, and "bitcoin" when we're referring to a quantity of individual tokens).

The primary draw for many mining is the prospect of being rewarded with Bitcoin. That said, you certainly don't have to be a miner to own cryptocurrency tokens. You can also buy cryptocurrencies using fiat currency; you can trade it on an exchange like Bitstamp using another crypto (as an example, using Ethereum or NEO to buy Bitcoin); you even can earn it by shopping, publishing blog posts on platforms that pay users in cryptocurrency, or even set up interest-earning crypto accounts.

The Bitcoin reward that miners receive is an incentive that motivates people to assist in the primary purpose of antminer: to legitimize and monitor Bitcoin transactions, ensuring their validity. Because these responsibilities are spread among many users all over the world, Bitcoin is a "decentralized" cryptocurrency, or one that does not rely on any central authority like a central bank or government to oversee its regulation.

"So after all that work spent whatsminer, I might still not get any bitcoin for it?"

That is correct. To earn bitcoins, you need to be the first miner to arrive at the right answer, or closest answer, to a numeric problem. This process is also known as proof of work (PoW).

 If you want to estimate how much bitcoin you could mine with your avalonminer rig's hash rate, the site Cryptocompare offers a helpful calculator. Other web resources offer similar tools.

Mining and Bitcoin Circulation

In addition to lining the pockets of miners and supporting the Bitcoin ecosystem, mining serves another vital purpose: It is the only way to release new cryptocurrency into circulation. In other words, miners are basically "minting" currency. For example, as of September 2021, there were around 18.82 million bitcoins in circulation, out of an ultimate total of 21 million.2

The rewards for Bitcoin mining are reduced by half roughly every four years.1 When bitcoin was first mined in 2009, innosilicon miner one block would earn you 50 BTC. In 2012, this was halved to 25 BTC. By 2016, this was halved again to 12.5 BTC. On May 11, 2020, the reward halved again to 6.25 BTC.

"I've done the math. Forget mining. Is there a less onerous way to profit from cryptocurrencies?"

As mentioned above, the easiest way to acquire Bitcoin is to simply buy it on one of the many exchanges. Alternately, you can always leverage the "pickaxe strategy." This is based on the old saw that during the 1849 California gold rush, the smart investment was not to pan for gold, but rather to make the pickaxes used for mining.

To put it in modern terms, invest in the companies that manufacture those pickaxes. In a cryptocurrency context, the pickaxe equivalent would be a company that manufactures equipment used for Bitcoin mining. You may consider looking into companies that make ASICs equipment or GPUs instead, for example.