How to mine Bitcoin: Step-by-step Guide for beginners

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Bitcoin mining remains one of the most popular topics among investors worldwide. Interest in this method of income generation remains very high, and many people are interested in how to mine Bitcoin (₿). However, the newcomers have a lot of questions. Many people do not know where to start. TU analysts have prepared detailed instructions for customers. We’ll tell you how to start mining and what you need to know about it.

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What is mining?

Mining is a cryptocurrency process that involves providing the computing power that supports the blockchain.

Miners provide their computing power to solve the main tasks in the network:

  • Generation and search for blocks.

  • Adding blocks to the blockchain.

  • Transaction signature.

These operations keep the network stable. The more miners connected to the network at the same time the better and the higher the reliability of the blockchain.

However, computational operations require significant resources. Users incur expenses on the purchase and maintenance of equipment, electricity, rent for premises, etc. Therefore, at the software level, miners are compensated for expenses in the form of cryptocurrency.

Can Bitcoin be mined in 2022?

The answer is yes. Bitcoin runs on the Proof-of-Work (PoW) consensus algorithm. The algorithm plays an important role for the miners, and Bitcoin continues to use it.

The essence of the PoW algorithm is to solve the main problems of a decentralized network, such as:

  • Setting the correct version of the network.

  • Control of network timing.

It uses the so-called hash function, which is a unique code, a digital fingerprint of a certain piece of information. These hashes are created by miners during the mining operation and help to build the signature blocks. Bitcoin operates on this principle, and unlike Ethereum (Ξ), there are no plans to transfer to another algorithm. This means that at least in the next few years BTC mining will be possible.

In addition to Bitcoin, mining is available for other cryptocurrencies, which appeared as a result of hard fork (a permanent divergence from a blockchain’s most recent version ).

For example:

All of these cryptocurrencies work according to the SHA-256 hash algorithm. And they can be mined using special equipment designed for this algorithm.

It is also important to know another important term for Bitcoin mining: complexity. Mining complexity is a parameter that indicates the amount of capacity needed to extract cryptocurrency. In other words, what kind of power does it take to generate one Bitcoin. This parameter changes every 2,016 blocks, which at modern mining rates is about 14 days. At the time of this writing on April 27, 2022, the difficulty parameter is 29794407589312, which is 5.56% more than the previous one.

Dynamics of mining complexity change for 10 months

Dynamics of mining complexity change for 10 months

Equipment needed to mine Bitcoin

To start a Bitcoin minefield, you must first purchase the necessary equipment. It exists in two variants.

Bitcoin farming

Farming is a popular option for the early stages of mining. This method was used widely until 2018, after which its popularity began to decline. A farm is a computer or multiple computers with high processing power. Such computers can provide mining through the following capabilities:

Processors (CPU).

Video card (GPU).

These chips provide the necessary hash rate and make the computer powerful enough to work efficiently to extract cryptocurrency. At the same time, you need the most modern and most powerful chips. For example, the best video cards for mining in 2022 are:

Radeon RX580

GeForce GTX1050

Radeon RX5700XT

Radeon VII 1400MHz

GeForce GTX1060 etc.

The advantage of such a device is that it can be easily installed by the average computer user. However, considerable refinement is required after installment. For example, it may be necessary to install a more powerful power supply, an optimal cooling system, etc. In addition, it is not easy to buy the necessary chips (and they are not always enough). Their price is high and sometimes their efficiency is low. Therefore, individual mining farms often gradually fade into the past.

Mining hardware

With the growing popularity of mining, many companies began to develop specialized solutions needed only for cryptocurrency mining. They have been named ASIC miners. These are special devices that are designed only for mining. ASIC stands for Application-Specific Integrated Circuit (or integrated circuit for a special purpose).

Such devices are similar to PCs but have several differences. They consist of several boards (typically 2 or 3), which include several tens or hundreds of chips. Chips provide the required hash rate, that is, performance and capacity for mining. Also, ASIC miners are equipped with appropriate power supply units and cooling systems. For example, popular models of ASIC miners are:

Antminer T17E 53TH/s

StrongU STU-U1++

AvalonMiner 741

Ebit E9 Plus

Innosilicon A11 Pro 8GB 2000MH

The peculiarity of ASIC miners is that they are designed only for mining; therefore, it is impossible to use them for any other purposes. However, the efficiency and performance are much higher. As a result, the ratio of price and capacity that owners get is much more profitable compared to mining farms.

Mining software

The most important element of Bitcoin mining is software. These are special programs that allow you to connect to the blockchain and provide all the necessary tasks. ASIC miners have pre-installed software. Manufacturers specially develop software, which is specially adapted for hardware.

If you plan to use the farm method, you will need a special program for mining. These programs also vary depending on which cryptocurrency you want to mine. For example, you can use the following programs for Bitcoin:

CPU miner.

Easy Miner.

Nicehash Miner.

GUI miner(Phoenix + poclbm).

MultiMiner etc.

The program requires some configuration. The features depend on the specific type of software.

Your own Bitcoin farm or mining through a pool

You must decide whether to mine cryptocurrency alone or through a mining pool by defining the terms. Independent or solo mining implies that the user will be mining alone. In this case, he can use any device and he alone will recoup all the profits to his wallet. However, it is important to understand that the complexity of mining is constantly growing and investment in equipment for solo mining will sometimes be colossal.

An alternative option is to join a mining pool. A mining pool is a combination of miners that provide joint capacity. It can consist of an unlimited number of participants. Pools exist in thousands worldwide, often specializing in different cryptocurrencies, but the most popular are the pools for Bitcoin mining. The largest of these are:

F2Pool.

BTC.com.

Poolin.

AntPool etc.

After joining the pool, the user becomes part of the pool and joins the computing power. When BTC is jointly extracted, the profits are shared among all participants. It is distributed proportionally, depending on the capacity given by each member of the association.

Roadmap to Bitcoin mining

If you have made a firm decision that you should start Bitcoin mining, you will need to complete the following steps.

1. Determine the budget

Mining costs are quite large, and it is necessary to purchase and maintain equipment, pay electricity bills, etc.

You need to determine your budget for at least a few months, as any farm or ASIC miner has a payback period. Some money will start to flow into your wallet after the connection of the equipment, but in the beginning, you have to invest personal funds to get started. It is important to be prepared for this, so calculate everything in advance.

2. Decide on the location for the equipment

The second step is closely related to the first because the location of the capacity affects the budget. For example, if you will be mining at home, you will not have to pay extra for rent, but you will be forced to accept the noise and the huge amount of heat that the mining process emits. If you opt to rent a separate location, it is necessary to allocate money for rent. Mining will increase your electric expenses and you may have to beef up your power supply system, such as adding a backup generator. Also, repairs and upgrades may be needed, and these are also important to consider when planning the budget.

Another important aspect is the difference in electricity prices. In different countries and regions, the price of a kilowatt of electricity is very different. This must be taken into account when planning. If you plan to engage in mining seriously, it makes sense to choose the region where the price of electricity is the lowest.

3. Open a cryptocurrency wallet

Cryptocurrency wallets are very important for miners. It will be paid for by the process of mining.

There are three main types of cryptocurrency wallets:

  • Hot. Wallets in which cryptocurrencies are stored in the cloud.

  • Cold. Cryptocurrency storage is carried out directly on the computer or on the phone.

  • Hardware. These are specialized devices that resemble a flash drive but have special software for storing digital (monetary) assets.

Each cryptocurrency wallet has an address that includes two parts — a public key and a private key. The public key is your account number, and the private key is the equivalent of a password. The public key must be specified when configuring the mining program, and it will be paid for via the mining process.

4. Buy and set up the equipment

Now comes the crucial stage of the set up which includes the preparation for and procurement and adjustment of the mining equipment. You can buy the equipment in most markets. It is possible to find cheaper options, so it makes sense to carefully look for equipment in different markets. Do not forget about the need to take into account the price of shipping.

After receiving the equipment, you must connect it and configure it. In the settings you need to specify the type of cryptocurrency you plan to retrieve, the address of the wallet, and other information, depending on the type of software you use. If you plan to work through a mining pool, in the settings you need to specify information about the mining pool.

5. Start mining

After you have completed all the preparations, it remains only to start mining. All you need to do is click on the start button in the program or on the ASIC miner. After that, the devices will work automatically. The mining process itself does not require human intervention as the devices work automatically and independently.

It is important to remember that any mining equipment requires control and maintenance, however. Carefully read the instructions and frequently check the status of the equipment.

Is it profitable to mine Bitcoin in 2022?

The answer to the question of whether mining Bitcoin can be profitable depends on several factors, which are:

  • The current fee for the block.

  • Bitcoin rate.

  • Mining power in hashes.

  • Reward for the block.

  • Power consumption.

  • Electricity price.

  • Depreciation.

Speaking about the remuneration for the block, it is also necessary to mention the concept of halving. Halving is the reduction of the remuneration for the obtained block by half. This is necessary to ensure that cryptocurrency is not extracted too quickly. The last halving was held in 2020, and after that, the block award was ₿6.25. The next halving will be in 2024. Therefore, it is important to calculate the threshold of payback at the planning stage and to assess how profitable mining will be within your mining environment.

Is it worth mining in 2022?

Mining remains a very popular occupation, and millions of people are ready to invest in the mining of cryptocurrencies. This is a good way to get a passive income because the miner does not need to actively do anything (other than get set up to mine). Once the devices are started up, it is only necessary to periodically maintain them and pay for all mandatory payments.

However, before you begin to engage in mining, assess your abilities in a calm and objective manner. The equipment requires a large initial investment, and there are also a large number of additional costs. If you intend to mine cryptocurrency, you will need the same business plan as for opening any other kind of business. It is important to make all calculations objectively, without bias, including worst-case scenarios.

If you are not sure that mining is right for you, you can invest in cryptocurrency using other methods. For example, it can be bought on a crypto exchange. After a price increase, you can get rid of digital assets, and the difference between the purchase price and the sale price is your profit. Crypto trading also carries significant risks due to high volatility, but the threshold for entry is much lower.

Best cryptocurrency exchange in 2022

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Your capital is at risk.

The best cryptocurrency exchange in 2022 is Binance. It is the largest trading platform in the world, it occupies a leading position in liquidity. This means that you can buy or sell Bitcoin on it very quickly. Binance offers advantageous commissions that vary depending on the volume of sales per month. The maximum commission is 0.1%, which decreases as volumes increase.

There are also passive investment tools. Traders can invest in stakes that involve storing cryptocurrencies on an exchange and making a profit in the form of interest payments.

An important advantage of Binance for miners is its own mining pool. The crypto exchange has managed to form one of the world’s largest pools for Bitcoin mining. The hashrate is updated in real-time and can be controlled.

How to start Bitcoin mining: Summary

Bitcoin mining is of enormous interest to people from all over the world. Anyone can mine cryptocurrency. However, before you start, it is important to properly assess your capabilities. Mining is a costly activity, and payback comes only over time. Therefore, it is important to do everything step by step, and correctly assess your capabilities. If mining is not for you, then you can invest in cryptocurrencies by buying them on the exchanges or staking.

FAQs

What do miners do if the cryptocurrency depreciates in value?

As a rule, with a strong decline in the price of cryptocurrencies miners disconnect their equipment from the network, so as not to work at a negative.

As a beginner, should I choose the ASIC or farming method?

Today, ASIC is more effective than a farm. It is relevant for both beginners and professionals.

What are the prospects of mining Bitcoin?

Blockchain Bitcoin does not plan to change the consensus algorithm, so mining will be available for at least the next few years. However, the payment for the extracted block, mining complexity, and other indicators will change.

When will the last Bitcoin be mined?

Experts believe that by 2036, 99% of the total Bitcoin offer will be mined. However, it is difficult to calculate the mining term of the last Bitcoin. Other analysts believe that Bitcoin mining will not be completely exhausted until 2140.

Team that worked on the article

Ivan Andriyenko
Author at Traders Union

Ivan Andriyenko is a financial expert and analyst. He specializes in trading in the Forex, stock and cryptocurrency markets. His preferred trading style is conservative strategies with low or medium risk, medium and long-term investments. He has 7 years of experience in the financial markets. Ivan is involved in preparation of articles for novice traders, and also of the reviews and evaluation of brokers, analyzing their reliability, trading conditions and peculiarities.

Ivan continuously tests new strategies for various assets, choosing the most effective options. In addition, he believes that helping novice traders is an important aspect of work. He shares information that beginners require – educational materials, strategies.

Ivan’s motto: continuous studying and experimentation lead to success.

Dr. BJ Johnson
Dr. BJ Johnson
Developmental English Editor

Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.

The topics he covers include trading signals, cryptocurrencies, Forex brokers, stock brokers, expert advisors, binary options. He has also worked on the ratings of brokers and many other materials.

Dr. BJ Johnson’s motto: It always seems impossible until it’s done. You can do it.