One of the most popular ways of earning Bitcoin used to be mining it using a pickaxe. This approach has fallen out of favour because Bitcoin mining nowadays is extremely competitive, and the profit margins even for large operations are typically less than 1%.

Bitcoin mining has a long and interesting history. In the beginning, the block reward (the amount of Bitcoin you received for successfully mining a block) was 50 Bitcoin. However, Bitcoin is a deflationary currency, and continuing to give this reward for all future blocks would make the currency inflationary, so every 210,000 blocks (approximately 4 years) the block reward halves. This has happened twice so far, so the block reward is currently 12.5 Bitcoin. Still a very respectable amount, but remember that most people mine with mining pools, so this reward is split among the members of the pool.

The critical factor that determines mining profitability is computing efficiency. The primary cost of Bitcoin mining is electricity, so if it costs you more in electricity to run the miner than you receive from the mining reward, it is not profitable.

Originally Bitcoin was mined using CPUs. This is because the Proof of Work function that Bitcoin uses is SHA-256, and this algorithm was only really implemented in software running on CPUs at the time. However, this PoW function is highly parallelizable, which essentially means that it runs faster with more computing cores. Most desktops and laptops today only have 4 to 8 cores, which isn’t very many.

GPUs, on the other hand, have thousands of computing cores, but they are far less flexible than CPU cores, so they can’t be used to do all of the same types of work. Thankfully, they are flexible enough to perform SHA-256, so within a few years of Bitcoin being invented, people had written software to calculate the PoW on GPUs instead of CPUs, vastly improving efficiency and making CPU mining more or less untenable.

However, there is a step beyond GPU efficiency. This is where we need to talk about ASICs. An ASIC is an Application-Specific Integrated Circuit. It is a circuit that is designed and fabricated only to do a very particular type of work, so it is not a general purpose processor like a CPU. By designing hardware that calculates SHA-256, and only SHA-256, you can improve efficiency even more. ASICs blow even GPUs out of the water when it comes to performance efficiency. There are several companies that make Bitcoin mining ASICs, with one of the most notable being Bitmain.

Buying a good ASIC miner will cost you hundreds or thousands of dollars, and even then it still may not be profitable for you to mine depending on the price of your local electricity. Furthermore, ASICs become obsolete relatively quickly, so even if it is profitable now it will not be for long.

In conclusion, this is really an article telling you why Bitcoin mining is probably not a good way to earn Bitcoin, contrary to what you may have heard in the media.