Bitcoin mining has received a lot of attention thanks to a few recent controversies, but if you’re a beginning Bitcoin trader, you might not even know what this hot topic is. Before we dig into how to gain Bitcoin in this manner or whether or not it’s something that you should be pursuing, we first need to go over exactly what this process is and how it works.
If you’re new to Bitcoin trading, this is a must read article.
On a very basic level, Bitcoin mining occurs through software that processes Bitcoin transactions. As Bitcoin changes hands, it’s important that the processes be verified so that merchants and individuals can be assured that no fraudulent activity is taking place.
To be a Bitcoin miner, you would need to have special software running that helps these transactions take place. As a reward of using your computer space, a tiny proportion of the number of blocks—a unit of measurement for Bitcoin (kind of like a euro or dollar denomination)—is credited to your account. Think of it as the transaction fee, but instead of something like PayPal, Skrill, or your bank processing the transaction, your computer is doing the work.
Bitcoin mining occurs so that the process can stay safe for all users. Bitcoin transactions are meant to be anonymous, and to ensure that this occurs, a lot of encryption is needed. The downfall here is that as Bitcoin ages, this process gets more and more complex, and that means that it is tougher for computers to do. It makes sense, though. Cyber security is an always growing field, and to keep your BTC safe, developers need to keep making their security policies tougher. This will be an ongoing process in all cryptocurrency coins on the market.
The cost of mining to produce a 1 BTC profit today is much higher than it was five years ago. This has made Bitcoin mining a lot harder to do. We’ll look at some of those repercussions below.
Bitcoin Mining Has Changed
You’ve probably seen on other sites or in the news some of the drama that has arisen in regards to Bitcoin mining. We’re going to assume for the sake of simplicity that the mining software that you use, your wallet, and anything else you might need are not only completely legitimate, but completely safe and secure, too. These are concerns, however, and you should always check out any product that you plan on using thoroughly before you begin using it.
Even with all of those safeguards in place, the process of Bitcoin mining has changed. For one, it’s a lot harder to do now than it was four or five years ago. The amount of computer power needed to successfully and profitably be a Bitcoin miner has increased significantly. In many cases, you will end up losing money as a Bitcoin miner thanks to the accrual of costs that will occur.
That doesn’t mean that everyone should stay away from Bitcoin mining. In fact, for some, it can be quite profitable. We will talk about that on another page. But for now, it’s important that beginners know that Bitcoin mining is not as easy as it once was and it’s not for everyone. Be sure that you know the basics before you begin, but also be sure that you are familiar with the cost and the risks involved so that you can figure out if this is something that’s good for you personally.
Bitcoin Mining Pools
Because of the changes, it’s a lot harder to get started in Bitcoin mining today than it was several years ago. To combat this issue, many miners have joined together in mining pools. This helps individuals to share the costs associated with running this software. When you enter the pool, you agree to split the profits with the others in the pool. This is one of the bigger trends emerging in the field of Bitcoin mining, and it is worth taking a look at if you are a beginner in this field. Be aware that different pools have different rules, costs, and profit sharing policies.