What are mining generators? Any device which does the act of bitcoin mining, is a bitcoin generator. But what is mining?
For starters, Bitcoin mining is an energy-intensive process of introducing new Bitcoins into the ecosystem. You can think of it for a moment as new currencies creation by different governments around the world. But unlike the governments, Bitcoin’s supply is fixed and regulated by the laws of mathematics that are practically impossible to break. Also, it is not as simple as banks printing new currency notes. Instead, a lot of work, energy-intensive, and cost acquiring is carried out before producing a single Bitcoin, which is called proof of work. And this requires an enormous amount of computational power and hardware resources which proves that a large amount of work is carried out before mining any individual block. That’s why this is called “proof-of-work“. And in this way, whichever miner obtains the correct Bitcoin Hash first, gets the lottery and gets the block reward of 12.5 BTC.
Now the important question is “How much does a generator make”?
How much a miner makes depends on many factors:
The price it pays for electricity
How old its mining hardware is
The scale of its operation
The price of Bitcoin when the miner sells it
The level of difficulty when the Bitcoin is mined
By far, the biggest factor affecting how much money a miner makes is how much it pays for electricity. Nearly all miners are using the same hardware. Since the reward for finding a block is fixed, and the difficulty is adjusted based on total processing power working on finding blocks at any given time, then electricity is the only cost that is variable. If you can find cheaper power than other miners, you can afford to either increase the size of your mining operation, or spend less on your mining for the same output.
How much electricity does a mining farm use?
Reasonably, mining farms use a lot of electricity. How much they consume depends on how big their operation is. However the latest Bitmain ASIC miner consumes about 1350 watts.
In total, it is estimated that all mining farms will use about 75 terrwat hours of electricity in the year 2020. That is roughly the equivalent to 15 times the yearly energy consumption of denmark.
Bitcoin generators work more efficiently when they are linked to mining pools.
But what is a mining pool?
A collection of individual miners who ‘pool’ their efforts or hashing power together and share the blockreward. Miners create pools because it increases their chances of earning a block reward.
Nowadays, the hardware with which the bitcoin generators work, are of two types :
ASIC stands for “Application Specific Integrated Circuit”. In ordinary talk, that just means it is a cheap designed to do a very specific kind of calculation. In the case of of an ASIC miner, the chip in the miner is designed to solve problems using the SHA256 hashing algorithm. This is opposed to GPU mining, explained below.
GPU mining is when you mine for Bitcoins (or any cryptocurrency) using a graphics card. This was one of the earliest forms of mining, but is no longer profitable due to the introduction of ASIC miners.
Every bitcoin generator has a hashing power or hash rate with which it works.
Hashing power determines How many calculations (hashes) a miner can perform per second. Or it can refer to the total amount of hashing done on a chain by all miners put together – also known as “Net Hash”.
Besides, there is a mining difficulty with which generators work. Measured in Trillions, mining difficulty refers to how hard it is to find a block. The current level of difficulty on the Bitcoin blockchain is the primary reason why it is not profitable to mine for most people.
When speaking of the bitcoin generators, a question arises ; What Coin Miners Actually Do?
Miners are getting paid for their work as auditors. They are doing the work of verifying previous bitcoin transactions. This convention is meant to keep Bitcoin users honest and was conceived by bitcoin’s founder, Satoshi Nakamoto. By verifying transactions, miners are helping to prevent the “double-spending problem.” Double spending is a scenario in which a bitcoin owner illicitly spends the same bitcoin twice. With physical currency, this isn’t an issue: once you hand someone a $20 bill to buy a bottle of vodka, you no longer have it, so there’s no danger you could use that same $20 bill to buy lotto tickets next door. With digital currency, however, as the Investopedia dictionary explains, “there is a risk that the holder could make a copy of the digital token and send it to a merchant or another party while retaining the original.”
Once a miner has verified 1 MB (megabyte) worth of bitcoin transactions, known as a “block,” that miner is eligible to be rewarded with a quantity of bitcoin. The 1 MB limit was set by Satoshi Nakamoto, and is a matter of controversy, as some miners believe the block size should be increased to accommodate more data, which would effectively mean that the bitcoin network could process and verify transactions more quickly.
Note that verifying 1 MB worth of transactions makes a coin miner eligible to earn bitcoin—not everyone who verifies transactions will get paid out.
1MB of transactions can theoretically be as small as one transaction or several thousand. It depends on how much data the transactions take up.
“So after all that work of verifying transactions, we might still not get any bitcoin for it?
That is correct. To earn bitcoins, you need to meet two conditions. One is a matter of effort; one is a matter of luck.
1) You have to verify ~1MB worth of transactions. This is the easy part.
2) You have to be the first miner to arrive at the right answer to a numeric problem. This process is also known as proof of work.