Table of contents

• What is Bitcoin mining?
• How does Bitcoin mining work? Introduction to related proper terms
• Hash
• Target hash
• Proof-of-Work
• Confirmation
• Rewards
• Difficulty
• Mining Farm
• Mining Pool
• The cost of Bitcoin mining
• Electricity bill
• Mining equipment
• Network Services
• The historical evolution of Bitcoin mining
• GPU mining
• ASIC Mining
• Conclusion: Is Bitcoin still worth digging?

Bitcoin mining is not about mining the entity's Bitcoin, but rather obtaining accounting rights and Bitcoin rewards through calculation competitions. With the intensification of competition for Bitcoin’s halving mechanism and computing power, mining costs have increased significantly and are no longer an industry that everyone can easily participate in. In the face of energy consumption, hardware investment and policy risks, whether it is worth continuing to mine has become a question that investors must think deeply about.

This article will introduce you in detail the proprietary terms, mining costs and historical evolution related to Bitcoin mining. Finally, I would like to tell you whether Bitcoin is worth mining?

What is Bitcoin mining?

Bitcoin mining is used to confirm whether the information in the "public account" of the Bitcoin blockchain is true .

By solving some complex mathematical problems that can only be tried and errors, the first accountant to find the correct answer will lead the update of the account book. This action is also called packaging blocks and get some Bitcoin block rewards as rewards.

• The accounting officer needs to constantly pay his own power and computing resources, but whether he can get a block reward depends on the aircraft transportation. This concept is very similar to mining, and the miner is a miner.
• A new block will be generated every 10 minutes (the account book is updated every 10 minutes), and the miner who receives the block reward will also randomly replace people.
• Miners who do not receive block rewards are not doing idle work, because we usually use Bitcoin blockchain to transfer funds, and the transaction fees generated will be paid to these miners who act as "bookkeepers".

As time goes by, the block rewards for Bitcoin mining will gradually decrease, and will be halving every four years. Finally, by 2140, the total issuance of Bitcoin mined in the market will reach the upper limit of 21 million pieces. At this time, the miners will no longer receive block rewards, but these miners can still earn "transaction fee" rewards.

How does Bitcoin mining work? Introduction to related proper terms

Let's use a simplified example to illustrate.

Imagine that you ask your friends to guess a number between 1 and 100. They don’t need to guess exactly the number, as long as the first person guesses "less than or equal" the number 19 you think in your mind.

The number you choose is 19, just like the "target hash" set by the Bitcoin network for a block, and the numbers you guess casually are just like miners guessing "hash".

The following further explains the introduction of relevant proper terms during the Bitcoin mining process.

Hash

Hash is a mathematical operation that converts data of any length into a fixed-length string of numbers; hash is like the fingerprint of each Bitcoin transaction, a string of numbers and letters that belong only to that transaction.

Target hash

The purpose of mining is to constantly try and error to find a specific hash value that is less than or equal to the "target hash". The target hash sets the difficulty of mining and will be adjusted regularly to keep the block generation speed stable.

Proof-of-Work

When a miner finds a hash that meets the requirements, this is considered a proof of work, proving that the miner has invested a lot of computational work to solve the hash problem. The miner successfully mined a new block (packaged block) and received a reward of Bitcoin (block reward).

Confirmation

Before a new block is added to the blockchain (public ledger), it needs to undergo certain confirmation. Other miners will verify whether the hash value of this block meets the requirements and ensure that all transactions are valid; generally speaking, the Bitcoin system requires 6 confirmations to determine that a block is valid to ensure the security and reliability of the blockchain.

Rewards

The miner who mines a block (packaged block) will receive a certain amount of Bitcoin as a reward (block reward). Currently, the reward for each block is 6.25 bitcoins, and it is expected to usher in the fourth halving in history in April 2024. At that time, the reward will be reduced to 3.125 bitcoins.

Difficulty

To maintain the speed of block generation approximately one every 10 minutes, the Bitcoin system adjusts the difficulty of the target hash based on the current network computing power (depending on the computing power contributed by all miners). If the computing power increases, the mining difficulty will also increase accordingly, and vice versa.

Mining Farm

The mining plant is a large host computer room that stores Bitcoin mining hardware equipment, which is filled with a large number of computer hosts (mining machines).

Mining Pool

Mining pools are a platform for media miners to concentrate (connect) their computing power to improve their chances of solving hashing problems; when the mining pool successfully mines Bitcoin, rewards are allocated according to the proportion of the contribution of the computing power.

Unlike mines, participants in mining pools can be scattered around the world.

The cost of Bitcoin mining

Bitcoin mining is a process that can ensure the security and reliability of blockchain. The reason why miners are willing to serve as "bookkeepers" is because they can get the benefits of Bitcoin, but there are three costs that need to be taken into consideration.

Electricity bill

First, Bitcoin mining requires the mining system to run 24/7 all day, and the start-up strips also dissipate heat to the mining machine, which requires a lot of electricity. According to some statistics, the University of Cambridge in the UK estimates that Bitcoin’s annual electricity consumption is more than that of countries such as Argentina, the Netherlands or the United Arab Emirates, and the energy consumed by Bitcoin mining has exceeded that of some countries.

Mining equipment

Second, Bitcoin mining requires a huge mining system, including dedicated hardware (ASIC miners) and software, used to calculate the hash value of each block; this is not a small investment, and it also requires upgrading the hardware to remain competitive over time.

Can I use my personal desk machine to mine?

Yes, but the returns are limited. Although personal desktop computers can be mined by joining a mining pool, because the mining pools allocate rewards based on the workload contributed by each miner, personal desktop computers are difficult to match dedicated ASIC miners.

Join it if you can't win! If you want to buy several ASIC mining machines and add a mining pool, the unit price of each mining machine falls between NT$20,000 and NT$600,000. The stronger the computing power of a mining machine, the more expensive the purchase price.

Network Services

Network speed has little impact on the Bitcoin mining process, but "latency" will do . Because during the mining process, communication with other miners is needed to confirm the effectiveness of the new block.

If you use your personal desktop/ASIC miner to join the pool, you don't need extra bandwidth, but make sure you communicate quickly in the pool.

The historical evolution of Bitcoin mining

The essence of Bitcoin mining is a "guess" game that constantly tries and errors. Whether you can find the correct answer before other miners depends entirely on the speed at which your hardware device generates hash values.

GPU mining

Compared to CPUs, miners realize that GPUs are more efficient and faster in mining, but in addition to consuming a lot of power, GPUs are not designed for heavy mining after all. Even, as miners' demand for GPUs has surged, squeezing market demand for other uses, manufacturers have begun to limit their mining capabilities.

CPU and GPU

To quote Feng Media, CPU and GPU are both hardware units that operate computers, similar to the "brain" of computers, with similar cores, memory and control units.

The CPU has a relatively complex architecture and its functions are relatively generalized, so it is a "generalist".

The GPU has a simple architecture and a large number of cores, which is more suitable for specialized work. It is a "specialist".

ASIC Mining

ASIC mining machine is a mining hardware device equipped with special chips, which is faster and more efficient than GPU mining. The prices range from tens of thousands of yuan to hundreds of thousands of thousands of Taiwan dollars.

At present, the competition for Bitcoin mining is quite fierce, and it is necessary to use the latest ASIC mining machines to be competitive. But even if you have the latest model and rely on your own efforts to fight against the collective strength of the "mine farm and mining pool", a machine is often not enough.

Conclusion: Is Bitcoin still worth digging?

Since 2014, Bitcoin mining has no living space for individual miners and is the world of large mines/mining pools. Individual miners and small and medium-sized mining farms/mining pools can hardly bear the cost and competitive pressure of mining.

Because with the development of the Bitcoin network, we can observe that the difficulty of Bitcoin mining has repeatedly hit new highs, which means that the computing power requirements for mining are becoming more and more stringent , and more computing power is required to obtain Bitcoin block rewards. Moreover, improving computing power requires more investment and hardware upgrades, and it is difficult for individual miners and small and medium-sized mining farms/mining pools to gain cost advantages.

Based on the above, from the perspective of personal interests, there is no need to mine Bitcoin anymore. However, if you are interested in Bitcoin, there are still many other channels to access Bitcoin.

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