What Is Bitcoin Mining?

Contributor, Benzinga

Bitcoin mining is the process of securing the blockchain and earning the bitcoin block reward. Start with your home PC on kryptex.com.

Bitcoin isn’t owned or managed by any central company or government, its reins are held by thousands of individuals across the globe. This idea of decentralization is a core principle of blockchain technologies, the stuff that powers bitcoin. Bitcoin’s blockchain is a transaction database maintained by the community, as opposed to a centralized entity. 

  • Blockchain. A variety of technologies that distribute control across a large network of individual actors for security purposes.
  • Decentralized. A system that is not controlled by a single, central entity or government. 

Mining is the term used for the process of validating and recording new transactions on a blockchain. Miners are individuals who compete to validate the transactions first, and the winner earns the block reward, a healthy 12.5 coins, or just under half a million dollars. A new bitcoin block is added to the chain approximately every 10 minutes and a lucky miner (or mining pool) is issued newly minted coins.

Miners share the responsibility for authenticating and safely recording all the new transactions that come across the Bitcoin’s blockchain network. Keeping the blockchain safe is no easy task – so miners are carefully incentivized to cooperate and work effectively together. 

The rules of any successful decentralized system must be structured so that it is in the best interest of random individuals around the world to help maintain it.

What Do You Need To Mine Bitcoin?

Those with the fastest computers make the most money mining. Most computers can bitcoin with their CPUs or integrated GPUs, but aren’t efficient enough to turn a profit (earn a reward more than the cost of the electricity required to attain it.) Special ASIC computers are created for mining and areas with the cheapest electricity costs have the highest concentration of mining power. 

GPU Mining

Nearly any computer can run crypto mining algorithms, but some are much better than others. A modern computer has a CPU (central processing unit) and a GPU (graphics processing unit). If the CPU is the brain of the computer the GPU is the muscle, and is what is primarily used for mining.

Modern GPUs like the GTX 3080 are powerful and efficient enough to make mining profitable – even in the United States, where electricity costs are typically really high. 

ASIC Computers

As Bitcoin mining grew in popularity, companies like Bitmain and Antminer emerged to build and sell specialized computers that could only perform one operation: mining. 

These ASIC (application specific integrated circuit) computers began to dominate the network power, and people began to collect hundreds of them to start mining “farms”. 

ASIC computers are so specialized that they can often only mine one specific cryptocurrency. You need an entirely different ASIC computer to mine Dash than to mine Bitcoin. This also means that a software update could make your ASIC computer obsolete overnight. 

What States Offer The Cheapest Electricity, On Average?

It’s no secret that the 24 hour a day, 7 day a week computing power necessary to mine bitcoin can get incredibly costly. A simple but useful measuring stick in determining whether mining bitcoin in your home region makes sense is the average cost of electricity per kilowatt hour (kWh). 

So if you were to undergo the daunting process of mining bitcoin, which state on average offers the lowest cost of electricity, a vital and necessary component?

Our team analyzed average cost of electricity data to residential end-use consumers for 2020. Data courtesy of the U.S Energy Information Administration (EIA) collected in October 2020.

Nevada (4.07 cents per KWh), Washington (10.02 cents) and Utah (10.25 cents) are the 3 states that possess the lowest average energy residential electricity rates.

The following are the 10 states that have the lowest average industrial electricity rates in the country.

  1. Nevada: 4.07 cents per kWh
  2. Washington: 10.02 cents
  3. Utah: 10.25 cents
  4. Idaho: 10.30 cents
  5. Louisiana: 10.57 cents
  6. North Dakota: 10.62 cents
  7. Arkansas: 10.76 cents
  8. Oklahoma: 10.79 cents 
  9. Missouri: 11.05 cents
  10. Tennessee: 11.18 cents 

Is Bitcoin Mining For You?

Cryptocurrency mining is not for everyone.

Unless you have the latest and greatest in computer hardware – your potential mining profits are likely quite low, and buying an ASIC comes with many annoyances.

If you don’t want to throw money at ASIC computers that will pollute your home with extreme noise, heat and run your electricity bill through the roof – I can’t blame you. You might be better off waiting for a more mainstream entrance to the mining industry.

Perhaps instead of buying expensive computer equipment, there will come a day when the companies making these products will IPO, and present you with a cooler, quieter and more practical way of investing your money. 

The Crypto Rocketship: Weekly Newsletter
  • Exclusive Crypto Airdrops
  • Altcoin of the Week
  • Insider Interviews
  • News & Show Highlights
  • Completely FREE