Bitcoin came on the scene in 2009 and started gaining global attention within four years. It’s a cryptocurrency that comes into existence through “mining.” Participants in this network who use their computers to solve math problems generate new bitcoins, an emerging form of digital currency that can be converted into other, more traditional currency. Some bitcoin miners have generated enormous income, but their success usually has to do with investing in the right hardware and software.
Understanding the Blockchain
The digital foundation holding the bitcoin network together is called the blockchain, a public ledger of transactions on the network. One group of bitcoin transactions is called a block. The blockchain is connected blocks that permanently document transactions. Blocks are entered into the system by miners, who define each block after competing to solve a cryptographic problem, also known as a hash. Sufficient computational power is needed to solve these puzzles.
Each user has access to the ledger, although they will not know the identities of people making transactions. It’s an innovative way to confirm a transaction took place, while protecting privacy. The bitcoin mining platform finds new blocks about every ten minutes, as new bitcoins enter the system. PC World reported in 2013 how a software engineer quit his job to concentrate on accumulating new bitcoins, which became a six-figure venture. But it wasn’t just luck, as you need to invest in massive computing power, like Genesis Mining has done.
How to Become a Bitcoin Miner
In order to mine for bitcoins, you will need a computer and special bitcoin mining software. Ideally, this machine isn’t your primary computing device and is dedicated 100 percent to bitcoin mining. It’s best to use computers that were specifically designed for this type of automated activity. The software uses algorithms to solve problems, and then pays the miner with bitcoins. Prior to jumping into this exciting new way to make money, learn the vocabulary of this technology and have a clear understanding how it works.
Some miners hope to make extra money beyond their regular jobs. More entrepreneurial miners invest in multiple computers, needed to earn about $1,000 per month. People who rely on a single device are lucky to make pennies per day. As more players enter the bitcoin universe, the software has a more difficult time solving problems, making it harder to earn money. It’s similar to what miners went through in the old Gold Rush days. Bitcoins were designed to be finite and more scarce as time goes on.
Benefits of Bitcoin Mining
You can make money as a miner or by investing in bitcoin. The risk involved with mining is mainly your cost of electricity for powering computers, while the risk in investing is that bitcoin’s value fluctuates with wild up-and-down swings. Mining is probably the safer way to earn money, unless you purchased a bitcoin when it was under $100. In 2017 the per-bitcoin price reached $5,000. Key advantages to mining are:
- Transactions are final and cannot be reversed
- Cost of transaction fee is cheap
- Instant execution of transactions
- Alternative and efficient form of online income
What Miners Need to Know
Earning money through bitcoin mining was easier in its early days. Trading bitcoins is not a liquid market, meaning buyers and sellers sometimes need time to come together. Converting bitcoins to cash is also not easy, since such a new technology hasn’t become mainstream yet. Even though bitcoin mining has grown in popularity since its rise in the underground techie world in 2013, the easy money was made in the early years, known as the Gold Rush.
Bitcoin mining can be a hobby, but in order for it to pay off, you must take into account your electric bill and the cost of the appropriate gear. The key to mining success is associated with processing power, which demands energy. You will need to mine with several computers if you expect to make a living at being rewarded for solving math problems.