What is Bitcoin mining? Do you mine bitcoin yet? If not, you’re probably wondering how to make money with bitcoin mining. Here’s how it works and how to reap the biggest reward.
Are you mining bitcoin yet? If not, you might be missing out on a great source of passive income!
You may think it’s complicated, but you can get started making money with bitcoin with just the PC you’re reading this article from.
If you’re wondering how to make money with bitcoin mining, read on.
What Is Bitcoin Mining
Bitcoin Basics
Bitcoin is the world’s first and most popular cryptocurrency. It’s a form of electronic money which works without a central bank managing it. People trade bitcoin on the peer-to-peer Bitcoin network without any managing administrators.
Bitcoin value relies on verified transactions. Anyone can verify transactions through cryptography and record in the blockchain. The blockchain is a public ledger listing all bitcoin transactions. This way, nobody can counterfeit bitcoin.
Bitcoin was first released in 2009 by a person using the pseudonym Satoshi Nakamoto. Today, there are more than 5 million unique people using a bitcoin wallet.
What is Bitcoin Mining?
Mining is how people can make money with bitcoin. Bitcoin mining allows you to earn bitcoin without paying for it. So, to own bitcoin you can either buy it or mine it.
Mining is important because it is the only way to make new bitcoin available in the market. In essence, Bitcoin miners are “mining” new bitcoin. Right now, there are a little over 17 million bitcoin in circulation and more are getting mined as you read these lines.
The big catch is there will only ever be 21 million bitcoin, so after a few years, there will be no more mining left to do! So, mining gives you the power to “create” bitcoin without having to buy it.
Mining works by verifying bitcoin transactions to ensure they are unique. This requires tons of raw computing power, making it impossible to counterfeit bitcoin. To keep the transactions secure, miners have to dedicate processing power to verify transactions and package the details in a block which will go into the blockchain.
How to Make Money with Bitcoin Mining
To make money, you will need to mine bitcoin in “blocks”. Blocks represent 1 MB (megabyte) worth of bitcoin transactions. The prize for completing a single block is 12.5 bitcoin. Since the price of bitcoin chances so rapidly, it is impossible to give you a numerical example of how much this is worth when you read this article.
Once you have verified that 1 MB worth of transactions, you’re eligible to win that 12.5 bitcoin. 1 MB could represent thousands of transactions, or just a few dozen, depending on how much data each transaction takes up.
In the early days of bitcoin, miners could rig their PC to process bitcoin transactions. Today, this is no longer viable as bitcoin transactions have become a lot more complex. Since there is so much competition, the network is also a lot stingier when it comes to handing out bitcoins for mined blocks.
Modern miners have two viable options today. They can either invest in dedicated hardware or join a cloud mining group.
Specialized Mining Hardware
To mine a block – or part of a block – by yourself, you’ll need one or more computers specifically configured for the task. Since mining requires a lot of processing power, miners will use powerful GPU (graphics processing unit) cards or specific ASIC (application-specific integrated circuit) units for the task.
To get started, you have to buy one or more of the above and set it up to solve bitcoin transactions non-stop. The plan here is to let your bitcoin mining rig make you some money without any involvement apart from periodic maintenance.
Building a bitcoin mining rig isn’t particularly expensive. But, competition is fierce and rigs quickly become obsolete as other miners bring more processing power to the network. The mining hardware you buy today may be too slow in six months’ time.
The main drawback of this mining method is you will have to upgrade your rig every few months. Mining rigs also eat up a lot of electricity, which takes another bite out of your profits.
Cloud Mining
Cloud mining companies are a new hot trend in the world of bitcoin. These companies invest in ultra-powerful mining rigs and then sell subscriptions to people looking to mine bitcoins without their own rig.
When you get your cloud mining subscription, you are eligible to earn a percentage of the bitcoins the cloud mining company makes. This is a huge win-win for both miners and cloud companies.
But, the biggest risk with cloud mining is avoiding scams. The internet is flooded with fake companies who sell cheap subscriptions and then vanish after a few months, leaving would-be miners hanging dry. Most companies offer better rates if you buy a multi-year subscription, but this makes the investment even riskier.
To avoid cloud mining scams, you should do your research before buying a subscription. Avoid companies who don’t have an eponymous WHOIS registration. Also, avoid companies guaranteeing get-rich-quick schemes with bitcoin mining.
In the end, bitcoin mining is all about patience and perseverance. You can use it to make some money on the side, but don’t expect to make millions overnight. Anyone who promises you easy money is a scammer.
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