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What is Bitcoin?

Bitcoin is an open network for transferring value via an internet-native money.

  • Created by Satoshi Nakamoto
  • White paper published in 2008
  • Network and asset have share the same name

The Bitcoin network itself is a record of payments for the internet built to be permissionless—anyone can use it—and decentralized—no one controls it. These features were chosen so Bitcoin could support a new financial system without intermediaries or gatekeepers.

A global network of thousands of computers called nodes participate in using and securing the network by running the Bitcoin software. Each node keeps a copy of the network’s transaction history, which updates in real time, to prevent fraud and verify which bitcoins belong to what user.

Satoshi Nakamoto, a pseudonymous cryptography developer, created Bitcoin.

  • A white paper with their ideas was first published in October 2008.
  • The first Bitcoin block was mined on January 3, 2009.

Although many attempts to build similar projects came before it, Bitcoin is the first successful cryptocurrency.

The name Bitcoin refers to two separate parts of the system: the protocol and the asset. To differentiate the two, standard practice now uses a lowercase b and the ticker BTC for the asset. The protocol itself carries an uppercase B.

All bitcoins can be split into tiny fractions. The smallest sub-unit of a bitcoin is called a “satoshi.” 1 BTC is the same as 100 million satoshis. Put differently, 1 satoshi equals 0.00000001 BTC.

What Type of ASIC Shall I Choose?

Legendary Miners sells ASIC miners with and without hosting. Available hardware can be found on the Shop page.

Choosing your ASIC is one of the most important decisions any miner needs to make. We will guide you through some of the key factors to consider:

  • Brand and model - Bitmain (Antminer), MicroBT (WhatsMiner), and Canaan (AvalonMiner) are the most well-known bitcoin ASIC manufacturers with years of history. There are other companies that produced bitcoin ASICs, however, you should always do your due diligence.

  • Hashrate and power consumption - The hashrate is measured in TH/s and is the computing speed of the machine, and determines how much bitcoin you can mine per day. The power consumption is measured in kW and determines how much you will need to pay for your hosting bill. A higher hashrate and lower power consumption are best.

  • Price - The price shown includes the hardware price, and any applicable shipping costs and duties to get the hardware landed in the chosen country unless stated otherwise.

  • Shipping date, location, and lead time - There is a price premium on machines that can get up and mining faster. ASIC manufacturers have monthly production schedules, and the further out your purchase, the cheaper the machines can be. If a machine says "May 2021", it means that it will ship as per the manufacturer's production schedule and will ship by May 30, 2021. From pickup, it then takes around 4-5 for weeks in China or Hong Kong to arrive at facilities in the USA, Canada, United Kingdom, and Kazakhstan.  

  • Condition and warranty - New and used ASICs can both be purchased with Compass. New units come with a manufacturer warranty (Bitmain, MicroBT, and Canaan all offer 12-month warranties), and used units can come in varying conditions. Compass only sells used units that have been thoroughly tested and are in good or excellent condition.

  • Minimum order quantity (MOQ) - The MOQ is the minimum order size. Where possible we try to set a MOQ of 1 unit, however in some cases, a larger number of units will need to be purchased to complete the order.
What is bitcoin mining?

Bitcoin mining is the process of recording transactions on the Bitcoin network. To do this, miners compete against each other to solve a difficult puzzle that resets every 10 minutes. Winning miners are awarded a predetermined amount of bitcoin for their success after each interval.

Miners provide a service.

Miners add batches of transactions to the blockchain, which is akin to making entries in an accounting ledger anyone can look at. These transactions have been verified by other network participants and sit in a holding depot of sorts called a memory pool (or “mempool”). From the mempool, miners take transactions and package them in blocks.

Mining is the process of adding those blocks to the chain. For this service, miners are paid a fee for each transaction and a set reward for creating the next block in the chain.

Read: How do miners make money?

Mining is a hashing race.

The technical details of bitcoin mining are extensive, but at its most basic elements, mining is a race to reveal encrypted data. The data hidden in the puzzle miners need to learn is a randomly generated string of numbers called a nonce.

Each block’s nonce is encrypted as a hash, or an algorithmically generated string of letters and numbers that is impossible to decode. Mining is a game built around guessing what the unknown nonce is, and the rules are simple: be the first miner to guess correctly.

Learn more about nonces.

Because miners cannot simply “unlock” the hash to learn the nonce, they must generate random nonces of their own, hash them, and compare their hashes to the unknown nonce’s hash.

Finding a matching hash to a block’s public one means the miner has also generated an identical hash. When matching hashes are generated, the new block is added to the blockchain and the winning miner claims their reward. So, to earn bitcoins, miners make new guesses at the encrypted nonce over and over as fast as possible.

Bitcoin’s hashrate serves as an estimate of how much computational activity is spent on this game.

How do miners make money?
What is hashrate?

Hashrate is one of the most commonly referenced metrics in bitcoin mining. But what is it?

As the term suggests, the Bitcoin network’s hashrate is simply the estimated rate of total hashes generated by all active mining machines. Called hashing, the process of generating hashes is the primary job of miners.

What’s a hash?

Hashes are strings of numbers and letters used to encrypt data.

Any sort of raw information—like passwords, poems, or single letters—can be turned into a hash by using specific hashing algorithms. The Bitcoin protocol uses the SHA-256 hashing algorithm.

Learn more about SHA-256.

All hashes are unique, like fingerprints. No two pieces of data generate the same hash. And there is no way to “unlock” a hash to know what data it contains. Only by re-entering the exact same information into the hashing algorithm and generating an identical replicated hash can the data behind the first hash be verified.

Measuring hashrate

Hashrate (sometimes called hash power) is an estimate of the total amount of computational activity that bitcoin miners spend working to add new blocks to the network. This task requires miners to encrypt data into hashes and match it with a piece of encrypted data in the new block, called a nonce. Finding an encrypted match solves the block.

Hashrate is measured using the base unit of hashes per second (h/s).

The metric itself is extrapolated from the speed at which new blocks are added to the blockchain, which can lead to variance in the hashrate number reported by different data providers.

See Bitcoin’s current hashrate.

What is a mining farm?

Bitcoin mining facilities – or farms – are large data centers constructed to power thousands of mining machines. These facilities emerged as mining hardware became more specialized and power requirements increased with the shift from CPU bitcoin mining to ASIC mining.

Large warehouses typically house mining farms, and it’s not uncommon to repurpose old factories for bitcoin mining farms. But size and scale are irrelevant for an operation’s designation as a mining farm.

Mining farms are equipped with large cooling and ventilation systems, rack or rig structures to hold machines, and adequate power supplies. ASIC miners generate an abundance of noise and heat and large-scale operations require extensive and reliable amounts of electricity.

The advent of portable mining operations allows miniature mining farms to relocate based on the availability of cheap energy. As an alternative to building large mining farms in a single location, mobile mining units can travel to power stations with excess power or natural gas sites to harness would-be flared gas.

How long do ASICs last?

For any miner, the lifetime of an ASIC mining machine is one of the most important considerations. Mining demands a lot of ASIC machines, but high-quality models are built to withstand relentless hashing. Still, many miners opt to push their machines to the limit for maximum output, which can cut short a machine’s lifespan.

Good machines operating in well-managed facilities can last for many years. Three to five years is typically a machine’s average lifespan, although even longer periods aren’t unheard of. Newer models are expected to have at least five-year lifespans.

For example, it’s not uncommon for mining farms to still have Antminer S9 models online, which originally launched in 2016. Other quality machines like the Antminer S19, Whatsminer M20, and Whatsminer M30 are expected to easily last several years if operated in a good facility, although some of these models are only a few years old.

If an ASIC is consistently overclocked, poorly maintained, or housed in unfavorable conditions, however, its lifespan can be as short as a few months. Some examples of facility features that can harm machines:

  • Poor ventilation or cooling
  • Humidity
  • Extreme temperatures
  • Irregular monitoring or maintenance

A machine’s raw hashing power isn’t the only consideration. Some ASIC models are taken offline depending on their profitability, which can vary with Bitcoin’s difficulty and price. Higher price levels will often prompt less-efficient, typically older ASIC models to be brought back online, while lower price levels or significant increases in mining difficulty can have the opposite effect.

What is Proof-of-Work?

Proof of Work (PoW) is a process that requires miners to expend energy solving a sort of puzzle for each block added to the blockchain. After it’s complete, the “work” of solving new blocks can be easily verified by other miners.

PoW also serves as a protection mechanism against bad actors who might try to alter the blockchain’s transaction record or spam the network with meaningless transactions.

What’s the work?

Mining work comes from a process called hashing, wherein miners guess at a random encrypted number included in every block called a nonce. The nonce is needed for miners to win the lottery to make the next block. Miners make guesses as fast as possible to be the first to discover the number and claim the reward for their work.

Read: What is bitcoin mining?

PoW effectively creates a form of artificial cost in a usually costless digital world. Anyone wishing to amend or alter the blockchain’s transaction record must complete expensive work that is cheap to prove and confirm.

Read: How do miners make money?

After a miner wins the guessing race, the answer (nonce) is broadcasted to other miners across the network to share that the work has been completed and the block is added to the network. In this way, the work is proven and easily confirmable by other miners.

With the cost of PoW comes the benefit of security.

Bitcoin users can trust that the network’s transaction record is valid because only values that miners have expended energy on can make it onto the ledger. Re-writing these transactions, moreover, requires overpowering a majority of the network, which is about the energy equivalent of a small country.

What is mining difficulty?
How many bitcoins can I mine?


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