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How Bitcoin Mining Works: an A-Z Guide

08/28/2018
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  • Cryptocurrency
  • trading
  • bitcoin
  • for begginers
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The times when the word “Bitcoin” was known only to the handful of tech geeks are long gone; now Bitcoin is the buzzword among both computer geniuses and people far enough from the world of technology. Large investors and ordinary people – all wish to know more about the Bitcoin algorithm and get a share of the digital wealth it promises. So, what is mining and why do thousands of people see a magical formula of richness in them? Is Bitcoin already too over-priced to be a good investment? Let’s clarify the main issues about mining cryptocurrency and Bitcoin in particular.

Is Cryptocurrency Mining Worth the Trouble?

Altcoins, or cryptocurrency, are not a usual financial instrument; you can’t simply deposit these funds on a debit card and go to a shop to buy food or clothing with it. But they are worth money, and as the boom with Bitcoin pricing last year shows, they may cost a fortune! So, how does cryptocurrency work? And is there a place for a layman in this world of crypto-investment?

The first and most important thing to keep in mind that all experts caution against unwise financial decisions in this sphere; that is, you should not pull all eggs into one basket, as it’s a high-risk investment. Whether it is a good or bad investment – there is no definite answer, as this market is highly volatile, and you can get immensely rich one day, or lose all your savings. If you have still made up your mind to invest in crypto, consider the following tips:

  • It’s less risky to invest in coins that have been in existence for long, as this guarantees their stability. There are too many ICOs at present, and many of them fail, so you risk investing in a “young and promising” altcoin that will actually collapse tomorrow.
  • Choose coins with the highest market cap and highest circulation volume. In this way, you will become one of the many investors, sharing the risk with a greater number of people.

Looking at these recommendations, one can clearly see that Bitcoin corresponds to all features of a reputable, long-standing, ad stable coin in the crypto-market. Though it has also seen ups and downs, its longevity and volume are still indicators of its greater reliability as compared to other currencies.

What Is Bitcoin Mining?

The essence of mining Bitcoin is far from our traditional understanding of mining with picks and shovels. In fact, it is a deeply technical process that runs via the SHA256 double round hash verification processes. If these processes are accomplished successfully, this leads to transactions’ validation from the side of the Bitcoin network. This is basically the process of creating new Bitcoins.

Any Bitcoin mining calculator will have the MH/s as one of the variables, and this is the key parameter of your mining potential – hashes per second. This parameter actually stands for the computational power, which is used in the Bitcoin network and compensated to the miners with Bitcoins. In this way, a Bitcoin miner investing the greatest power into the computational process gets the largest share of the mined cryptocurrency volume.

How Does Bitcoin Mining Work?

Given the process of Bitcoin mining, you may wonder whether it’s generally necessary to obtain Bitcoin mining hardware to get rich with this cryptocurrency. Our answer is: sometimes. There are different ways in which you can involve in mining, and not all of them presuppose buying a Bitcoin mining machine.

  1. Mining alone. If you wish to mine Bitcoins on your own and receive all rewards, then it’s a good option to become an independent miner. You should buy mining hardware (the best is ASIC) and get everything up to initiate the mining process at your setting.
  2. Joining a mining pool. Since the complexity of mining Bitcoins has grown considerably within the past couple of years, an independent mining process is very lengthy and expensive, thus not always worth the trouble. A better decision is to buy an ASIC miner and join a mining pool. Together with dozens, if not hundreds, of other miners, you have much better chances to mine Bitcoins successfully at a faster speed, thus getting your earnings quicker.
  3. Joining the Bitcoin cloud mining platform. Buying a contract in a cloud mining company is not the best decision, as you may never check how it works in reality, and the return from such an investment is the lowest. However, it is a good option to consider for those on a small budget.

So, here’s everything you need to know about mining Bitcoin. To do or not to do that, depends solely on your choice, but that magical cryptocoin is definitely here to stay.

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