The purpose of bitcoin mining is to approve transactions by adding them to the blockchain.

At its core, Bitcoin mining is a guessing game. Here is a simplified version.

You tell a friend: Guess a number between 1 and 10.

• They guess 7

• They were right

• They get a prize

When you mine Bitcoin..

• You have to guess a very LARGE number

• The prize is 6.25 Bitcoin (~$250k)

This large number can vary. But it is on the order of many many zeroes.

Note: Bitcoin has an auto difficulty adjuster. If numbers are guessed too quickly, the puzzle automatically increases in difficulty (ie. more numbers to guess). The converse is also true.

Fundamentally, it’s a compute-power game. The more compute power you have, the faster you guess the right number, and the more likely you are to win the prize.

Compute power increases linearly with input size. Here is a piece of code that shows this relationship. All it does is iterate through numbers.

• 10 Numbers - 42 nanoseconds

• 100 Numbers - 708 nanoseconds

• 1000 Numbers - 6375 nanoseconds

• 1,000,000 Numbers - 0.006 seconds

• 1,000,000,000 Numbers - 3.6 seconds

• 10,000,000,000 Numbers - 36.5 seconds

As numbers get very large, it quickly overwhelms your computer.

How to Mine Bitcoin?

You want to use specialized equipment to mine Bitcoin, ie. Application-Specific Integrated Circuits (ASICs) that are designed to mine Bitcoin. ASICs are far more efficient than general-purpose CPUs (ie. your laptop).

To illustrate the difference, compare the two hash rates:

• General-purpose CPU (Mac): 1200H/s [*]

• ASIC: 110TH/s

A terahash (TH) is 1 trillion hashes. A laptop computes on the order of 10^3 hashes per second, while an ASIC computes at 10^14 hashes per second. That’s an 11 order of magnitude difference, meaning you’d need 100 billion laptops to match 1 ASIC. Laptops simply cannot compete.

Note: The hash rate is simply the speed at which you mine Bitcoin.

Cost Breakdown

You can buy a Bitcoin miner on Amazon. These can range anywhere from $1k to $20k.

When buying a miner, you should consider these factors:

• Hashrate (TH/s)

• Electricity Consumption (kWh)

• Cost of Electricity in your Area (Price / kWH)

Hash rate is how fast you can guess numbers. Electricity Consumption is how much electricity the machine uses. Electricity prices are location-dependent. Rural areas generally have cheaper electricity than urban areas. North Dakota is ranked #1 in the US.

You also have to consider these factors:

• Bitcoin Price

• Network Hash Rate

These fluctuate over time. So you’ll have to make assumptions. For this reasons your calculations will vary.

Here is a calculation I did back in January 2022. The assumptions I made:

• $46k Price of Bitcoin

• 138M TH/s Network Hash Rate

• Ithaca, NY

Note: As of May 2022, the price of Bitcoin is $39k and network hash rate is 223M TH/s.

Mining Pools

Bitcoin mining is a winner-takes-all game. People have realized this, so they created mining pools, to distribute the rewards more evenly.

A mining pool is when people pool together CPU power. When one person wins, they distribute the reward to everyone in the pool.

The top 4 China-based mining pools (F2Pool, AntPool, ViaBTC, and Poolin) account for over 50% of new blocks [*].

Joining a mining pool is free, but they come with fees. Here are some example rates:

• 4% - F2Pool

• 2% - SlushPool

Other Factors To Consider

Besides cost, there are other factors to consider.

• Heat

• Noise

You probably don’t want to mine Bitcoin inside your home. They are LOUD. Here is what they sound like:

https://www.youtube.com/shorts/23l3gxuYLyA

Video: Link

You want to make sure your landlord is okay with you using a LOT of electricity. Failure to disclose may result in upset landlords.

I hope this helps. Let me know what you think. Will you be mining Bitcoin? Send me an email.

Step 1: Image Generation

The first step is to assemble your images. You can either create them yourself or work with an artist. First create parts, then use an image generation script to form 1000s of combinations of them.

Here is an example of such a script. You can also write your own.

Step 2: Storage

The next step is to store your images. You can either use cloud storage (eg. Amazon S3) or a fully-distributed database (eg. IPFS). If you use IPFS, I recommend using Pinata as your management tool.

Step 3: Smart Contract

You need to set up a smart contract. A smart contract defines the rules of buying, selling, and transferring NFTs. Fortunately, you don’t have to do this from scratch. ERC-721 is a standard template that you can use.

You can find smart contracts on sites like Etherscan. Here’s Doodles: Link.

Step 4: Website

Set up a website for your project. The website is where people can go and see your project.

Sections you can include:

• Story

• Description

• Perks

• Roadmap

• About

Step 5: Mint Page

Minting an NFT makes it official. Unfortunately, minting comes with a transaction fee. If you want don’t to pay it, you can have your fans mint your NFTs for you.

Preparing for Launch

Social Media

Building up a following on social media. Twitter is the most popular platform for NFT discussions.

Community

Start a community. Discord is the go-to app. A strong community makes for a successful launch.

Launch 🚀

Now it’s time to tell the world! Set a date for the mint to begin, and you’re off to the races!

If you found this article helpful, please share it with others. As always, you can find me on Twitter.

But, these things have everything to do with human psychology, and nothing to do with NFTs.

All an NFT is, is a unique item. They don’t have to be financial assets, though they can be.

People don’t understand why NFTs are so valuable because they don’t understand what they’re used for. So, in this article I will tell you the 3 most popular use cases of NFTs.

1. Art

If you visit an NFT marketplace (eg. OpenSea), you will quickly find thousands of art pieces that are available for sale.

Art is valuable because otherwise why would people buy it? Not all art is valuable, of course. Most artworks get sold for $0. This is true for physical art. This is true for NFT art. The price of art can range from worthless to astronomically valuable. Last year, the Salvador Mundi was sold for $450M to the crown prince of Saudi Arabia. In the NFT space Beeple sold his Everydays for $69M at the Christie’s auction house.

Saying “NFTs aren’t valuable” is like saying “Art isn’t valuable”. It’s just not true.

2. Tickets

When we buy tickets for a movie, we get access to the movie. When we buy tickets for a flight, we get access to the flight. Tickets are a way to trade cash for access.

You can make tickets as an NFT. All you have to do is mint it on a blockchain.

In fact, most NFT projects are already de-facto tickets.

I’ll give you an example. Last month, I went down to SXSW in Austin. Doodles, an NFT project, had a physical booth there. Here is a look at the inside.

I was allowed in. But, if you had a Doodles NFT, then you were eligible to receive an additional special perk. Now, I didn’t have a Doodles NFT, so I didn’t know what that perk was.

But, the Doodles booth shows two things: (1) it’s possible to use an NFT as a ticket (2) it’s already being done.

3. Credentials

Let’s say you take a course or training. You probably want some proof that you completed it. Otherwise anyone can say they took it.

Certificates of completion can be minted as NFTs, as can resumes and badges. The difference between NFTs and a regular old PDF is that an NFT is on the blockchain - a transparent, distributed database - for everyone to see. It’s public. All transactions are timestamped. So you can’t fake it or remove a credential. This builds trust. The person who’s reading your credential knows that it’s valid.

Synthesis School plans to distribute micro-credentials as NFTs. These credentials can be anything from "Building a Compiler” to getting an endorsement from a well-known person at a particular point in time. Students use these NFTs can show off their skills at a more granular level than is currently available.

Conclusion

NFTs are not just silly avatars that you can buy and sell on the internet. They are pieces of art, tickets of access, and proofs of transactions. These things are part and parcel of a functioning society. So expect to see them everywhere.

Thanks for reading.