Make Money Mining Bitcoin for Dummies

If you want to join in the bitcoin frenzy with no simply buying the digital currency at today's inflated prices, then bitcoin mining is another way to become involved. However, mining bitcoins will include expenses -- and risks -- of its own. And the more popular bitcoins become, the harder it is to mine them profitably. .

Unlike paper currency, which can be printed by both governments and issued by banks, bitcoins do not come in any physical type. That makes a major hazard, as hackers could theoretically create bitcoins from nothing. Bitcoin mining is how the bitcoin network retains its transactions secure.

Bitcoin transactions are secured by blockchains, which make up a public ledger of transactions. Because of how blockchain transactions are structured, they are extremely tough to alter or undermine, even by the top hackers. However, in order to protect these transactions, someone needs to dedicate computing power to verifying the activity and packaging the details in a block that goes into the bitcoin ledger.

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As a reward for doing the job to track and secure transactions, miners earn bitcoins for every block they successfully process. .

The bitcoin founders have set a limit of 21 million bitcoins available for mining. Once that amount is reached, miners will continue to have the ability to benefit from transaction fees, but they won't be granted bitcoins as a reward for their work. As of mid-January 2018, approximately 16.8 million of those 21 million bitcoins have been mined.  Assuming the bitcoin mining industry doesn't change dramatically, it seems like we won't reach the 21 million-bitcoin limit until the year 2140. .

During the first days of bitcoin mining, miners would often download a software bundle designed to allow their computers to process bitcoin transactions in the background. Unfortunately, that's no longer practical, because solving bitcoin transactions is becoming too difficult for your computer to manage.

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The bitcoin network is designed to make a certain number of new bitcoins every 10 minutes. If only a couple people are bitcoin mining at any given time, then the network will probably Read Full Article be generous and share bitcoins easily in order to attain the predetermined number. But now this bitcoin mining has become so widespread, the network is now much stingier about handing out bitcoins to miners.

These days, in order to have a chance at being profitable, miners need to adopt one of two approaches: 1) buy specialized hardware (aka a bitcoin mining rig) or 2) join a cloud mining pool. .

To get started with your own mining rig, you buy hardware designed for mining bitcoin (or some other click to read digital currency), set it up, and let it run 24/7 solving bitcoin transactions. Ideally, this will result in a continuous stream of payments without your needing to get involved.

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While it's fairly easy to set up and utilize a bitcoin mining rig, really making money on the process is something of a challenge. Because more and more people are signing up to mine bitcoins, the mining process continues to have more difficult and will probably keep doing so for some time.

And since bitcoin mining rigs aren't cheap -- expect to pay at least $1,000 for your hardware, or even several times that for a top-quality rig -- having to replace it every year or 2 takes a massive bite out of any profits you earn from mining. Plus, most mining rigs consume enormous amounts of electricity, which means you also need to subtract that my blog expense from the bitcoins you earn to determine your own profits. .

When buying and maintaining your own mining hardware doesn't attract you, then cloud mining might be the way to go. Cloud mining companies invest in enormous mining channels, often filling entire data centers together with all the hardware, and then sell subscriptions to individuals interested in dipping a toe into bitcoin mining.

The largest challenge facing cloud mining readers is avoiding fraud. The field is rife with pseudo-companies which sell thousands of multiyear subscriptions, pay out for a couple of months, and then vanish into the sunset. If you decide to try out cloud mining, do your homework in advance and confirm that the company you're dealing with is a true cloud miner and not a strategy.

Avoid companies with anonymous domain registration (you can look up their registration info at Network Solutions), as well as any mining company that"guarantees" profits or provides huge incentives for referring new clients; anything above a 10% referral commission is profoundly suspicious, because legitimate mining pools just don't generate a high enough profit margin to pay huge commissions. .