Bitcoin mining hit record highs in 2017. Many people mine bitcoin and other Cryptocurrencies from home. Others buy cloud mining contracts. It’s a big business.
But many people still don’t really understand how it all works. So let’s break it down and find out what it takes to mine Bitcoin.
Mining Bitcoin Explained – What Is Bitcoin Mining?
Mining Bitcoin is how it is born and enters into circulation for us all to buy. However, unlike fiat currencies like the dollar, Bitcoin doesn’t have a central bank that prints more of it on demand. It is decentralized. Bitcoin relies on a community of what is known as miners.
Mining Bitcoin Explained – How Does It Work?
There are a few common ways of mining. The first is to use a Graphics Processing Unit or GPU’s to mine which uses multiple computer graphics cards. You can also mine from your desktop computer. This isn’t very effective as it’ll likely not be powerful enough to warrant the cost of running it.
Application Specific Integrated Circuit or ASIC Mining is another quite common way to mine Bitcoin. ASIC miners work very similar to GPU miners. However, instead of using components designed for graphics they are built specifically for mining Bitcoin and other Cryptocurrencies.
Miners compete against each other to confirm the transactions on the Bitcoin network and to produce new blocks in the Blockchain. For this, they are rewarded in Bitcoin from the transactions fees and the reward for creating a new block.
A block is just a lot of transactions all bundled together. The reward for each block is around 12 and a half bitcoin.
In order to claim the rewards, miners need to work out very complex mathematical equations. They add the answers known as the hash to the Blockchain. This is known as proof of work. It’s then checked and verified on the network and the rewards are paid to the miners and transactions on the network are confirmed.
Mining Bitcoin Explained-Pro’s And Cons
Mining Bitcoin can be very profitable with the right investment in equipment. It’s a pretty passive way to earn Bitcoin daily straight to your wallet. Even more so if you are cloud mining. However, the equipment you need to mine bitcoin can be very expensive.
Also, the cost of electricity to power your mining rigs can be very expensive too. With the volatility in the bitcoin market when prices drop low mining Bitcoin can sometimes not be worth the cost of power. Over time the difficulty and complexity increase meaning it becomes harder to mine which will cost more to produce it.
Mining bitcoin is a costly but rewarding process. Especially is the price is right. You can get more information on how to earn money with Cryptocurrency from Low Cap Crypto CEO Ash Davidson here. Also, check out the latest in our series on crypto basics