Bitcoin mining is used to maintain the blockchain that supports the cryptocurrency. However, as competition increases, the question of profitability is raised. We offer a deep dive into the topic.
What does mining even mean in Bitcoin? The word «mining» is derived from the English word for «mining» and refers to the joint use of the computing power of a network. In mining, miners receive a reward based on how much computing power they provide to the network.
Because bitcoin is organized in a decentralized manner and is not printed by central banks, such as money, miners generate the bitcoins in circulation themselves. It is of immense importance as it has an impact on the blockchain and the creation of new blocks. Halving also has an impact on mining.
HOW DOES BITCOIN MINING WORK?
Modern bitcoin mining mostly uses powerful computers built for this very purpose, so-called «rigs», on which the corresponding software runs day and night. All rigs are to mine new Bitcoins. As people transfer bitcoins all the time, the network handles the transactions. It, therefore, collects all the transactions and adds it to a list, the block in the blockchain. Each miner confirms transactions and enters them into the account book, which documents a list of all blocks. As a reward, there are bitcoins.
To mine bitcoins, there are several options. Commercially available miners are connected to the router via LAN cable. They can then be configured via a web browser. Then, no additional device or software is needed. Current miners come with a power supply. Miners can cost a lot of money to purchase, however. However, these are very expensive to purchase. Costs for them range from 150 to 5000 euros.
Whether mining Bitcoins is worthwhile depends on various factors. The energy and power consumption during mining is immense. In addition, it takes a very long time for users to create a block. That is why mining pools are a good option. The required computing capacity is divided among all participating miners.
As a result, blocks are created more quickly in the blockchain. The bitcoins created are then divided among the users. The one who has created the most capacity skims off the most. For one block you currently receive 12.5 Bitcoins. In principle, you can mine Bitcoins continuously. However, the amount in circulation is limited to a maximum of 21 million coins.
IS BITCOIN MINING PROFITABLE?
In short, it is impossible to determine whether the practice of Bitcoin mining, in general, is profitable or not.
While it is not certain whether bitcoin mining can be profitable at this time, the following is certain: first, most bitcoin miners have made a profit in the early years. Second, at least some miners must be profiting from their activity, otherwise, there would be no incentive for them to continue. And third, although some miners can arguably continue to make money from it, bitcoin mining is less profitable than it used to be, and competition is tougher than ever.
ARE THERE ANY ALTERNATIVES TO BITCOIN MINING?
Besides mining, there are other ways to get involved in Bitcoin. The most obvious is to buy Bitcoin through one of the many cryptocurrency exchanges that make money by acting as middlemen to facilitate transactions. It is a safe and easy way to get new digital coins.
Interestingly, though, there are more ways to get cryptocurrencies (aside from buying or mining) than you might think. One of the largest cryptocurrency exchanges, Coinbase, purchased a service that allows users to «earn» cryptocurrencies by replying to emails and completing tasks. Companies use this to get people to fill out their surveys or rate their products in exchange for cryptocurrencies.
Some services also offer cryptocurrencies in exchange for watching videos; one new concept even seeks to reward users for time spent on a new ad-supported social media platform. Anyway, Blockchain will continue to find new, innovative applications as it continues to evolve. Even in the entertainment sphere, there are many online casinos (by the way, check the PlayAmo casino Australia) that accept Bitcoin or other cryptocurrencies. Have you already thought about Bitcoin mining?
