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Overview of Bitcoin Mining

Crypto Currencies are ruling the world right now, with everyone looking to be a part of it, in some way or the other.

Some are just doing it for quick gains, others have their own ideas.

Since bitcoin is hovering around all-time high prices right now, it’s not possible for everyone to purchase them, so people start looking for different options, on how they can earn bitcoins?

And, the most popular way, is to start mining bitcoins.

Let’s discuss bitcoin mining in detail in this topic and let’s see if it makes sense to do it at this stage when the majority of the coins are already mined and in circulation and if it’s going to be profitable or not?

What is Bitcoin Mining?

All the miners in the network compete with each other to solve a computationally difficult puzzle to earn the right to place the next block on the blockchain and also earn rewards in return.

So, once a miner wins, he is able to add all the recent transactions into a block and then into the blockchain and also able to release new bitcoins.

The rewards are nothing but transaction fees paid to the miner in the form of Bitcoins and thereby leading to new bitcoins getting released into the network.

How much reward do the miners get?

The reward i.e. bitcoins which the miners get is halved every 210,000 blocks or roughly every four years. The reward started with 50 Bitcoins in 2009 and is now 25 bitcoin and so on it will continue till we reach the total supply of bitcoins possible i.e. 21 million.

Is it difficult to mine Bitcoins?

The Bitcoin network automatically adjusts the difficulty of the mining every 2016 blocks, or roughly every two weeks.

So, if more computational power is used in mining, it will proportionately increase the difficulty level to mine bitcoins and vice versa i.e. if the power is reduced in the network, it will make it easier to mine.

So, the more people are mining, in hindsight, making it more difficult and thus less profitable for everyone.

What is required to mine Bitcoins?

You need both mining hardware and software to start mining bitcoins. In the early days, it was possible to mine bitcoins using just a standard computer as the difficulty level was very low.

Then as the difficulty level rose with more people starting to mine, more power was needed and hence the power shifted towards graphical cards.

Nowadays, even that is not enough and we need ASIC chips packed into custom Miners to mine bitcoins.

Also Read: Overview of Bitcoin & how to earn it

Is it still profitable to mine Bitcoins?

There are many calculators available which show what the ROI (Return on Investment) you can get on any given hash rate when you take into account the cost of electricity.

So, based on how much you spend on your computer hardware and what your electricity cost is, the payback for profitability might be 9-12 months out.

But, there’s a trick here, all these calculators don’t take into account the future value of Bitcoins.

Currently, each Bitcoin is worth $7,000. But if Bitcoin’s value rises to $10,000 by next year, then the ROI on your mining gets significantly dropped to maybe a few months.  And if Bitcoin’s value rises to $100,000 in 3 years, then your ROI would drop to minutes.  And whatever Bitcoins you’ve mined would be worth 25x more.

Remember, Bitcoin has a finite number and as we approach the 21st million Bitcoin mark, the value will significantly rise.

Should we go for Bitcoin Cloud mining?

Rather than having to set up the entire mining hardware, now we have an option to just go the cloud route and simply lease the mining hash power.

Mining Bitcoin with a cloud provider is a very good option for those thinking about starting to mine. This is especially for people who do not want to clutter up their house or those who lack the technical ability to set up Bitcoin Miners.  You simply enter your wallet address and watch mined Bitcoins flow into your wallet.

Here are some popular Bitcoin Cloud Mining providers:

Genesis Mining: Genesis Mining is the largest Bitcoin cloud mining provider. Genesis Mining offers three Bitcoin cloud mining plans that are reasonably priced.  Ethereum, Dash, Litecoin, Zcash, Monero mining contracts are also available.

Hashflare: Another well known and long established cloud mining provider.  Bitcoin, Ethereum, Zcash and Dash mining contracts are available.

So, guys, this is an overview of Bitcoin mining.

If you liked it, share it with your friends and post your thoughts in the comments below.

 

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