Bitcoin Mining; The Meaning!!

Posted by admin on November 11, 2020



Bitcoin Mining; The Meaning!!

What is bitcoin minning?

As before long as you return to know the idea of bitcoin itself, consequent question is sometimes “Where do bitcoins come from?”. though it takes a short time to completely perceive however bitcoins inherit existence, we have a tendency to hope that this text helps to a minimum of provide you with a basic understanding of bitcoin mining.

Where Do Bitcoins Come From?

The creation of new bitcoins comes from a complex mathematical process called bitcoin mining. Bitcoin mining does a number of things, it provides security of the network by providing proof of work.

For a more simple explanation of how bitcoin mining works, Ive written an article that explains bitcoin mining as solving a Rubiks cube and the game theory of how it all works.

What Is The Bitcoin Block Reward?

The Block reward is the newly mined coins that are rewarded to the miner or miner pool that finds the block. This reward is mathematically set to cut in half every 210,000 blocks (approximately every 4 years). As time goes on, the block reward will eventually be supplanted by the miner fees as the primary means of compensating miners.

What Is Bitcoin Mining?

Bitcoin mining is a competition between computers to complete a mathematical problem. Once someone has solved the problem, the bitcoin miners show proof of their work by publishing the solution publically. If their answer is correct, then the miner is awarded with some bitcoins.

The process of completing this math equation is commonly called finding a blockor mining a block.

As soon as each new block is mined, the miner adds as many of the pending transactions as they are able to (up to 1 MB of data per block is currently) can to the list of blocks before it. Its this chain of blocks that is commonly known as the blockchain.

What Do Bitcoin Miners Actually Do?

Bitcoin miners are responsible for doing a couple basic things.
They compete with each other to find the next block on the blockchain.
They verify and add bitcoin transactions to the next block and then add it to the blockchain.

In exchange for doing the above, there needs to be an incentive for them to do so. After each block is mined bitcoin miners are compensated in two ways.
They receive the bitcoins for each block that they find/mine. This is called the block reward.
They also receive all of the miner fees from the transactions that are included in that block.

Why Is Bitcoin Mining Important?

Bitcoin mining is important because it provides an incredibly secure network as well as processes the transactions that everyone sends and receives in the bitcoin blockchain. Without bitcoin miners, there would be no super secure network, no newly mined bitcoins and no way to send adn receive bitcoin.

What is a Miner Fee?

In order to send a bitcoin transaction, every user attaches a small amount of bitcoin to their transaction as an incentive for the bitcoin miner to include the transaction in the next block on the blockchain. This small amount of bitcoin will be different for each user. Since miners have an incentive to earn as much bitcoin as possible, they will naturally include the transactions in the next block that have the highest miner fees.

If a user does not include a large enough miner fee, then the miners may not include the transaction and the user will need to try again with a higher fee.

What is a Mining Pool?

In order to increase the likelihood of finding the next block and receiving the block reward, bitcoin miners band together in groups called mining pools to pooltheir computational resources. When the mining pool finds the next block, each user receives bitcoin proportional to the amount of mining power that they contribute.

For example. if a miner contributes 10% of the mining power to a mining pool and that mining pool receives 12.5 bitcoins for finding the next block, then the miner would receive 1.25 bitcoins for being part of the mining pool. (12.5 bitcoins x .10 = 1.25 bitcoins).

What is Bitcoin Mining Complexity?

Mining complexity is how difficult it is to mine the next block. In short, mining complexity is how much computational power is required to find the next block. If the complexity of mining bitcoin never increases, the amount of time between each block will get shorter and shorter as more and more miners begin mining in an attempt to get bitcoins.

To compensate for this, the complexity of mining bitcoin has to increase.

Why Is It Called Bitcoin Mining?

Bitcoins are a digitally scarce commodity and possess almost all of the same characteristics as gold. Since it takes time to mine it and over time the supply continues to shrink, the supply of new bitcoins being mined will eventually reach zero. Lets compare bitcoin mining to gold mining.

Gold Mining vs. Bitcoin Mining

Bitcoin has been called Digital Gold, Gold 2.0and The Bitcoin Standardby some pretty prolific thought leaders in the tech industry. Why would they make these sorts of claims about bitcoin if it didnt have any similarity to gold?

Gold Mining

In order to mine gold, entrepreneurs need to buy specialized mining hardware and set it up where they think they will produce the greatest return on their investment. They mine to find blocks of gold. These gold blocks can then be used for trade anywhere that others are willing to accept them or they can be sold off at an exchange. As they continue to mine gold, the supply of gold gets smaller after each time they find a block of gold and eventually, the supply of new gold will reach zero.

Bitcoin works in the same way but instead of a physical mine, the mine is digital.

Bitcoin Mining

In order to mine Bitcoin, entrepreneurs need to buy specialized mining hardware and set it up where they think they will produce the greatest return on their investment. They mine to find blocks of bitcoin. These bitcoins can be used for trade anywhere that others are willing to accept them or they can be sold off at an exchange. As they continue to mine bitcoin, the supply of bitcoin gets smaller after each time someone finds a block of bitcoins and eventually, the supply of new bitcoins will reach zero.

Who Can Mine Bitcoin?

While it is possible for anyone with a computer to mine bitcoin, it is a very technical process that probably belongs in the hands of those who have a firm technical understanding of math, bitcoin mining hardware, mining complexity (called the hash rate) and how mining algorithms work. Too many people get into bitcoin thinking that they are going to set up some bitcoin mining hardware and get rich quick from a machine printing magic internet money in their basement.

Unfortunately, Bitcoin mining doesnt work like that.

Since Bitcoin mining is such a technical process, specialized mining services have popped up all over the world to alleviate the cost and expertise by providing a service called cloud mining.

If you want to mine some bitcoins and you dont have a firm understanding of how bitcoin mining works, I would suggest that you first try a cloud mining service before you decide to buy your own mining hardware.

How Can I Make Money Mining Bitcoin?

Bitcoin mining profitability is not as straight forward as you would hope since there are a few things to take into consideration. You need to have a relatively reasonable understanding of how the hardware, the cost of electricity and the complexity of mining all work in relation to each other.

Mining Hardware

Bitcoin mining hardware can be very expensive and reasonably so. Not only do miners complete very complex mathematical computations incredibly fast but their price is relative to the amount of bitcoin they can mine. As soon as a bitcoin miner manufacturer builds a machine, the cost of selling the machine needs to be high enough to incentivize the manufacturer to sell it instead of just using it to mine bitcoin. Otherwise they could just keep it and mine bitcoin and sell the mined bitcoin for more money than they could sell the machine for.

Its a tricky little game.

Cost Of Electricity

Depending on where you live, the cost of electricity will vary. In parts of the world where electricity is abundant and therefore cheap, it makes more sense to mine bitcoin since your overhead will be less. This is one of the reasons why bitcoin mining tends to gravitate towards parts of the world where theres lots of cheap electricity.

If electricity is expensive where you live, you should probably not try to mine bitcoin in your own basement unless you have a secondary purpose for the heat that it generates.

Complexity of Bitcoin Mining

The complexity of bitcoin mining is called the hash rate. Dont get too worried about understanding the lingo but the higher the hash rate, the more difficult it is to mine bitcoin. The more difficult it is to mine bitcoin, the less bitcoin you receive for mining.

The complexity of the hash rate also changes every 2 weeks based on the number of people mining bitcoin. This is the mechanism that was put in place to simulate the scarcity of gold in a gold mine. As more people come to mine gold from a mine, it becomes more scarce. The same is true with Bitcoin. As more people mine it, it becomes more scarce.

Crypto Mining Heat

Bitcoin mining is a great side passion project but between the cost of the hardware and electricity, it can be pretty crazy. Not only that, but bitcoin miners also produce a LOT of heat. If youre not ready to spend a lot of money on specialized computers, lots of money every month on electricity and then deal with all of the heat that it generates, then bitcoin mining is definitely not for you.

If you live in a colder climate, you can possibly use the heat generated from mining to heat your home, garage, basement or even greenhouse. In my opinion, one of the future uses of bitcoin mining is going to be to find ways to harness the power of heat generated from bitcoin mining to heat things as well as find where electricity is otherwise wasted and turn that waste into bitcoin.

How To Start Bitcoin Mining

If you want to get started mining bitcoin, the best way is to probably start with familiarizing yourself with certain bitcoin mining calculators. These calculators take into account the amount of computational power that your miner has, the cost of electricity and the current complexity of the hash rate and gives a prediction of how much bitcoin your computer could potentially mine at the current mining conditions.

If all of this sounds a bit too much to take in all at once, you can also familiarize yourself with bitcoin mining by doing something called cloud mining.

Bitcoin Cloud Mining

Cloud mining is a type of bitcoin mining where instead of users owning their own mining hardware, they opt-in to a contract and lease bitcoin miners to/from other users around the world via the cloud.

Since the cost of bitcoin mining is relative to the cost of mining hardware and electricity consumed to mine the bitcoins, cloud mining services tend to set up operations in parts of the world where the electricity is cheap. This sort of globally distributed supply and demand allows people to mine bitcoin on the other side of the world even though it may be cost prohibitive in their own locale.

Cloud mining is typically more common in parts of the world where electricity is generated from natural sources such as wind, solar, hydroelectric and geothermal. Since sometimes the wind blows when towns and cities are sleeping, the electricity generated at night by wind turbines is often wasted. In order to prevent this surplus energy from being wasted, cloud mining services buy this cheap electricity and use it to mine bitcoin. This type of cheap electricity is why cloud mining services tend to gravitate to where electricity is the cheapest and most abundant.

So, how can you mine bitcoin on the cloud?

Trusted Cloud Mining Sites

Cloud mining has become more competitive in the more recent years which has given rise to a more competitive cloud mining market. A few different trusted cloud mining sites have risen to the top as the more dominant players and each one has their pros and cons.

Lets look at each one in a bit more detail.

Genesis Mining

Genesis Mining is a cloud-based mining service with mining facilities all over the world with their most notable operation set up in Iceland where there is an abundance of cheap hydroelectric and geothermal electricity.

You can purchase a mining contract from Genesis and you will receive all of the bitcoin that is generated by the miner that you lease for the duration of your contract. Since Genesis has mining operations all around the world, they can typically mine bitcoin at a lower cost than you can mine in your own home.

Nice Hash

Nice Hash functions a bit differently than Genesis. Instead of only offering the supply of bitcoin miners, they provide a service for both the supply and demand for bitcoin miners to come together. So, instead of your renting bitcoin mining power from a centralized service like Genesis, you rent it from someone else who has bitcoin mining hardware set up in their own home or office in another part of the world.

NiceHash is a unique service since it helps to keep bitcoin miners decentralized which increases both privacy and security of the entire bitcoin network. They also help bitcoin miners in parts of the world where there is an abundance of cheap electricity.

MinerGate

MinerGate has an even different business model for mining. Instead of renting computers from someone else, you use your own computer to mine bitcoin or other cryptocurrencies by installing their software on your computer and their system finds the most profitable cryptocurrency to mine with your particular hardware.

Sometimes Bitcoin will be the most profitable to mine while other times it might be more profitable to mine a different cryptocurrency that you can easily trade for bitcoin or maybe even directly sell for your own fiat currency.

MinerGate puts you on control of your own hardware so it helps to keep bitcoin miners decentralized while also doing everything possible to keep the miners as profitable as possible.

The Pros and Cons of Cloud Mining

Although bitcoin cloud mining services offer a unique value to their users, they dont come without their fair share of downfalls and risks. Since cloud mining facilities are often centralized companies it is easier for bitcoin mining to become more centralized. Without individuals being able to mine on their own, it can create problems for the long term prospects of the security of bitcoin.

Bitcoin miners being distributed all around the world keeps the system decentralized and makes it more difficult for a single entity to monopolize the industry or for governments and corporations to seize control of the bitcoin network.

Beware of Cloud Mining Scams!

Theres also no shortage of scams in the bitcoin space and cloud mining is one of the easiest ways to scam users since many cloud-mining servicesare actually Ponzi schemes that simply redistribute money from users with a little bit of newly mined bitcoins being added to the mix to help make it seem legitimate.

If you are going to use a cloud mining service, it is incredibly important to do your own research when selecting a service to use. We will be doing all we can to help our users make the most educated decisions with reputable cloud mining companies.

There are also a lot of helpful videos on YouTube created by users who have done the market research on whether or not a cloud mining service is a scam or if they are legitimate.

Buying Bitcoin vs. Mining Bitcoin

This one seems to be one of the biggest conundrums in the bitcoin space. Should you buy bitcoin mining hardware so you can mine bitcoin or should you just buy the bitcoin and see which one ends up being more profitable. We would like to do some case studies in this in the future but we think that until bitcoin can become a more stable store of value, it is probably best to buy it rather than mine it. Either way, we suggest that you HODL as much as you can for at least 210,000 blocks.

Bitcoin Is An Energy Solution, Not An Energy Problem

One of the most common myths about bitcoin is that it consumes too much electricity. There are a number of flaws with this sort of thinking but we will get into that in another post. Bitcoin is actually an energy solution and not an energy problem. Bitcoin miners can be set up just about anywhere since they are just hardware and produce bitcoin wherever there is a surplus of energy that is being wasted. Heres just a few ways that it is being done.

Solar Bitcoin Mining

Energy is wasted all over the world every day. Solar plants generate electricity when the sun is out but most energy consumption is the highest in the morning and evening when most people are at home.

This surplus of electricity during the middle of the day could be diverted to mine bitcoin in an attempt to offset overhead costs of the power plant.

Wind Turbine Bitcoin Mining

Wind energy is generated at any given time of the day or night. When wind turbines generate electricity in the middle of the night and people are sleeping, that energy is wasted rather than being put to use.

Bitcoin mining could be used to divert this surplus wind energy into bitcoins to help to pay for the existing wind turbines or to build additional ones.

Geothermal Bitcoin Mining

Geothermal power plants are more common in parts of the world where volcanic activity is high. This is particularly common in places like Iceland and New Zealand. Iceland actually imports aluminum from other parts of the world and melts it down and sends out the finished product at little cost to Iceland since they use geothermal energy to melt the metal. This actually makes geothermal energy one of Icelands primary exports.

Its geothermal and hydroelectric power plants that provide most of Icelands electricity which is why so many bitcoin mining farms have chosen to set up operations there. Genesis mining is just one of many cloud mining services that are there.

Hydroelectric Bitcoin Mining

Hydroelectric dams have a bit more control over when they use the water to generate electricity by opening and closing the spillways of the dam. Sometimes it can be more costly to shut down the generators at night than it is to simply let the dam to keep generating electricity.

Bitcoin mining could be a great solution to help to reduce the costs of the dam overhead by turning the surplus of electricity into bitcoins.

Gas Flare Bitcoin Mining

When oil is pumped out of the ground, it releases methane gas as a by-product. Since methane gas is a substantially worse greenhouse gas (approx 30x more damaging than CO2), oil wells burn it off in a process called gas flaring. Youve probably seen this kind of burn off at oil well sites in the form of a torch that is constantly burning.

One Canadian company sees this gas flaring as an opportunity to turn excess energy into bitcoin by creating mobile bitcoin mining operation that is installed on oil drilling sites and uses this otherwise wasted energy into bitcoin. This could have massive potential to create a more efficient oil.

Conclusion

Bitcoin mining is the system that creates bitcoin and keeps the system honest by auditing the transactions every time a new block of bitcoins is mined. If you dont have the technical expertise to mine bitcoin, you can use a cloud mining service to create a lease agreement to rent the mining hardware and you just receive bitcoin in relation to how much computational power you lease.

Beware of bitcoin cloud mining scams since many of them are often Ponzi schemes with some newly mined bitcoin.

If bitcoin mining doesnt make sense to you and you would still like to have some bitcoin, Id suggest that you just buy some and HODL for at least 210,000 blocks.

you may ask if Bitcoin Mining Still Profitable in 2020? read the article to discover the fact about bitcoin mining in 2020.

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Bitcoin Mining; The Meaning!!

Posted by admin on November 11, 2020

Bitcoin


Bitcoin Mining; The Meaning!!

What is bitcoin minning?

As before long as you return to know the idea of bitcoin itself, consequent question is sometimes “Where do bitcoins come from?”. though it takes a short time to completely perceive however bitcoins inherit existence, we have a tendency to hope that this text helps to a minimum of provide you with a basic understanding of bitcoin mining.

Where Do Bitcoins Come From?

The creation of new bitcoins comes from a complex mathematical process called bitcoin mining. Bitcoin mining does a number of things, it provides security of the network by providing proof of work.

For a more simple explanation of how bitcoin mining works, Ive written an article that explains bitcoin mining as solving a Rubiks cube and the game theory of how it all works.

What Is The Bitcoin Block Reward?

The Block reward is the newly mined coins that are rewarded to the miner or miner pool that finds the block. This reward is mathematically set to cut in half every 210,000 blocks (approximately every 4 years). As time goes on, the block reward will eventually be supplanted by the miner fees as the primary means of compensating miners.

What Is Bitcoin Mining?

Bitcoin mining is a competition between computers to complete a mathematical problem. Once someone has solved the problem, the bitcoin miners show proof of their work by publishing the solution publically. If their answer is correct, then the miner is awarded with some bitcoins.

The process of completing this math equation is commonly called finding a blockor mining a block.

As soon as each new block is mined, the miner adds as many of the pending transactions as they are able to (up to 1 MB of data per block is currently) can to the list of blocks before it. Its this chain of blocks that is commonly known as the blockchain.

What Do Bitcoin Miners Actually Do?

Bitcoin miners are responsible for doing a couple basic things.
They compete with each other to find the next block on the blockchain.
They verify and add bitcoin transactions to the next block and then add it to the blockchain.

In exchange for doing the above, there needs to be an incentive for them to do so. After each block is mined bitcoin miners are compensated in two ways.
They receive the bitcoins for each block that they find/mine. This is called the block reward.
They also receive all of the miner fees from the transactions that are included in that block.

Why Is Bitcoin Mining Important?

Bitcoin mining is important because it provides an incredibly secure network as well as processes the transactions that everyone sends and receives in the bitcoin blockchain. Without bitcoin miners, there would be no super secure network, no newly mined bitcoins and no way to send adn receive bitcoin.

What is a Miner Fee?

In order to send a bitcoin transaction, every user attaches a small amount of bitcoin to their transaction as an incentive for the bitcoin miner to include the transaction in the next block on the blockchain. This small amount of bitcoin will be different for each user. Since miners have an incentive to earn as much bitcoin as possible, they will naturally include the transactions in the next block that have the highest miner fees.

If a user does not include a large enough miner fee, then the miners may not include the transaction and the user will need to try again with a higher fee.

What is a Mining Pool?

In order to increase the likelihood of finding the next block and receiving the block reward, bitcoin miners band together in groups called mining pools to pooltheir computational resources. When the mining pool finds the next block, each user receives bitcoin proportional to the amount of mining power that they contribute.

For example. if a miner contributes 10% of the mining power to a mining pool and that mining pool receives 12.5 bitcoins for finding the next block, then the miner would receive 1.25 bitcoins for being part of the mining pool. (12.5 bitcoins x .10 = 1.25 bitcoins).

What is Bitcoin Mining Complexity?

Mining complexity is how difficult it is to mine the next block. In short, mining complexity is how much computational power is required to find the next block. If the complexity of mining bitcoin never increases, the amount of time between each block will get shorter and shorter as more and more miners begin mining in an attempt to get bitcoins.

To compensate for this, the complexity of mining bitcoin has to increase.

Why Is It Called Bitcoin Mining?

Bitcoins are a digitally scarce commodity and possess almost all of the same characteristics as gold. Since it takes time to mine it and over time the supply continues to shrink, the supply of new bitcoins being mined will eventually reach zero. Lets compare bitcoin mining to gold mining.

Gold Mining vs. Bitcoin Mining

Bitcoin has been called Digital Gold, Gold 2.0and The Bitcoin Standardby some pretty prolific thought leaders in the tech industry. Why would they make these sorts of claims about bitcoin if it didnt have any similarity to gold?

Gold Mining

In order to mine gold, entrepreneurs need to buy specialized mining hardware and set it up where they think they will produce the greatest return on their investment. They mine to find blocks of gold. These gold blocks can then be used for trade anywhere that others are willing to accept them or they can be sold off at an exchange. As they continue to mine gold, the supply of gold gets smaller after each time they find a block of gold and eventually, the supply of new gold will reach zero.

Bitcoin works in the same way but instead of a physical mine, the mine is digital.

Bitcoin Mining

In order to mine Bitcoin, entrepreneurs need to buy specialized mining hardware and set it up where they think they will produce the greatest return on their investment. They mine to find blocks of bitcoin. These bitcoins can be used for trade anywhere that others are willing to accept them or they can be sold off at an exchange. As they continue to mine bitcoin, the supply of bitcoin gets smaller after each time someone finds a block of bitcoins and eventually, the supply of new bitcoins will reach zero.

Who Can Mine Bitcoin?

While it is possible for anyone with a computer to mine bitcoin, it is a very technical process that probably belongs in the hands of those who have a firm technical understanding of math, bitcoin mining hardware, mining complexity (called the hash rate) and how mining algorithms work. Too many people get into bitcoin thinking that they are going to set up some bitcoin mining hardware and get rich quick from a machine printing magic internet money in their basement.

Unfortunately, Bitcoin mining doesnt work like that.

Since Bitcoin mining is such a technical process, specialized mining services have popped up all over the world to alleviate the cost and expertise by providing a service called cloud mining.

If you want to mine some bitcoins and you dont have a firm understanding of how bitcoin mining works, I would suggest that you first try a cloud mining service before you decide to buy your own mining hardware.

How Can I Make Money Mining Bitcoin?

Bitcoin mining profitability is not as straight forward as you would hope since there are a few things to take into consideration. You need to have a relatively reasonable understanding of how the hardware, the cost of electricity and the complexity of mining all work in relation to each other.

Mining Hardware

Bitcoin mining hardware can be very expensive and reasonably so. Not only do miners complete very complex mathematical computations incredibly fast but their price is relative to the amount of bitcoin they can mine. As soon as a bitcoin miner manufacturer builds a machine, the cost of selling the machine needs to be high enough to incentivize the manufacturer to sell it instead of just using it to mine bitcoin. Otherwise they could just keep it and mine bitcoin and sell the mined bitcoin for more money than they could sell the machine for.

Its a tricky little game.

Cost Of Electricity

Depending on where you live, the cost of electricity will vary. In parts of the world where electricity is abundant and therefore cheap, it makes more sense to mine bitcoin since your overhead will be less. This is one of the reasons why bitcoin mining tends to gravitate towards parts of the world where theres lots of cheap electricity.

If electricity is expensive where you live, you should probably not try to mine bitcoin in your own basement unless you have a secondary purpose for the heat that it generates.

Complexity of Bitcoin Mining

The complexity of bitcoin mining is called the hash rate. Dont get too worried about understanding the lingo but the higher the hash rate, the more difficult it is to mine bitcoin. The more difficult it is to mine bitcoin, the less bitcoin you receive for mining.

The complexity of the hash rate also changes every 2 weeks based on the number of people mining bitcoin. This is the mechanism that was put in place to simulate the scarcity of gold in a gold mine. As more people come to mine gold from a mine, it becomes more scarce. The same is true with Bitcoin. As more people mine it, it becomes more scarce.

Crypto Mining Heat

Bitcoin mining is a great side passion project but between the cost of the hardware and electricity, it can be pretty crazy. Not only that, but bitcoin miners also produce a LOT of heat. If youre not ready to spend a lot of money on specialized computers, lots of money every month on electricity and then deal with all of the heat that it generates, then bitcoin mining is definitely not for you.

If you live in a colder climate, you can possibly use the heat generated from mining to heat your home, garage, basement or even greenhouse. In my opinion, one of the future uses of bitcoin mining is going to be to find ways to harness the power of heat generated from bitcoin mining to heat things as well as find where electricity is otherwise wasted and turn that waste into bitcoin.

How To Start Bitcoin Mining

If you want to get started mining bitcoin, the best way is to probably start with familiarizing yourself with certain bitcoin mining calculators. These calculators take into account the amount of computational power that your miner has, the cost of electricity and the current complexity of the hash rate and gives a prediction of how much bitcoin your computer could potentially mine at the current mining conditions.

If all of this sounds a bit too much to take in all at once, you can also familiarize yourself with bitcoin mining by doing something called cloud mining.

Bitcoin Cloud Mining

Cloud mining is a type of bitcoin mining where instead of users owning their own mining hardware, they opt-in to a contract and lease bitcoin miners to/from other users around the world via the cloud.

Since the cost of bitcoin mining is relative to the cost of mining hardware and electricity consumed to mine the bitcoins, cloud mining services tend to set up operations in parts of the world where the electricity is cheap. This sort of globally distributed supply and demand allows people to mine bitcoin on the other side of the world even though it may be cost prohibitive in their own locale.

Cloud mining is typically more common in parts of the world where electricity is generated from natural sources such as wind, solar, hydroelectric and geothermal. Since sometimes the wind blows when towns and cities are sleeping, the electricity generated at night by wind turbines is often wasted. In order to prevent this surplus energy from being wasted, cloud mining services buy this cheap electricity and use it to mine bitcoin. This type of cheap electricity is why cloud mining services tend to gravitate to where electricity is the cheapest and most abundant.

So, how can you mine bitcoin on the cloud?

Trusted Cloud Mining Sites

Cloud mining has become more competitive in the more recent years which has given rise to a more competitive cloud mining market. A few different trusted cloud mining sites have risen to the top as the more dominant players and each one has their pros and cons.

Lets look at each one in a bit more detail.

Genesis Mining

Genesis Mining is a cloud-based mining service with mining facilities all over the world with their most notable operation set up in Iceland where there is an abundance of cheap hydroelectric and geothermal electricity.

You can purchase a mining contract from Genesis and you will receive all of the bitcoin that is generated by the miner that you lease for the duration of your contract. Since Genesis has mining operations all around the world, they can typically mine bitcoin at a lower cost than you can mine in your own home.

Nice Hash

Nice Hash functions a bit differently than Genesis. Instead of only offering the supply of bitcoin miners, they provide a service for both the supply and demand for bitcoin miners to come together. So, instead of your renting bitcoin mining power from a centralized service like Genesis, you rent it from someone else who has bitcoin mining hardware set up in their own home or office in another part of the world.

NiceHash is a unique service since it helps to keep bitcoin miners decentralized which increases both privacy and security of the entire bitcoin network. They also help bitcoin miners in parts of the world where there is an abundance of cheap electricity.

MinerGate

MinerGate has an even different business model for mining. Instead of renting computers from someone else, you use your own computer to mine bitcoin or other cryptocurrencies by installing their software on your computer and their system finds the most profitable cryptocurrency to mine with your particular hardware.

Sometimes Bitcoin will be the most profitable to mine while other times it might be more profitable to mine a different cryptocurrency that you can easily trade for bitcoin or maybe even directly sell for your own fiat currency.

MinerGate puts you on control of your own hardware so it helps to keep bitcoin miners decentralized while also doing everything possible to keep the miners as profitable as possible.

The Pros and Cons of Cloud Mining

Although bitcoin cloud mining services offer a unique value to their users, they dont come without their fair share of downfalls and risks. Since cloud mining facilities are often centralized companies it is easier for bitcoin mining to become more centralized. Without individuals being able to mine on their own, it can create problems for the long term prospects of the security of bitcoin.

Bitcoin miners being distributed all around the world keeps the system decentralized and makes it more difficult for a single entity to monopolize the industry or for governments and corporations to seize control of the bitcoin network.

Beware of Cloud Mining Scams!

Theres also no shortage of scams in the bitcoin space and cloud mining is one of the easiest ways to scam users since many cloud-mining servicesare actually Ponzi schemes that simply redistribute money from users with a little bit of newly mined bitcoins being added to the mix to help make it seem legitimate.

If you are going to use a cloud mining service, it is incredibly important to do your own research when selecting a service to use. We will be doing all we can to help our users make the most educated decisions with reputable cloud mining companies.

There are also a lot of helpful videos on YouTube created by users who have done the market research on whether or not a cloud mining service is a scam or if they are legitimate.

Buying Bitcoin vs. Mining Bitcoin

This one seems to be one of the biggest conundrums in the bitcoin space. Should you buy bitcoin mining hardware so you can mine bitcoin or should you just buy the bitcoin and see which one ends up being more profitable. We would like to do some case studies in this in the future but we think that until bitcoin can become a more stable store of value, it is probably best to buy it rather than mine it. Either way, we suggest that you HODL as much as you can for at least 210,000 blocks.

Bitcoin Is An Energy Solution, Not An Energy Problem

One of the most common myths about bitcoin is that it consumes too much electricity. There are a number of flaws with this sort of thinking but we will get into that in another post. Bitcoin is actually an energy solution and not an energy problem. Bitcoin miners can be set up just about anywhere since they are just hardware and produce bitcoin wherever there is a surplus of energy that is being wasted. Heres just a few ways that it is being done.

Solar Bitcoin Mining

Energy is wasted all over the world every day. Solar plants generate electricity when the sun is out but most energy consumption is the highest in the morning and evening when most people are at home.

This surplus of electricity during the middle of the day could be diverted to mine bitcoin in an attempt to offset overhead costs of the power plant.

Wind Turbine Bitcoin Mining

Wind energy is generated at any given time of the day or night. When wind turbines generate electricity in the middle of the night and people are sleeping, that energy is wasted rather than being put to use.

Bitcoin mining could be used to divert this surplus wind energy into bitcoins to help to pay for the existing wind turbines or to build additional ones.

Geothermal Bitcoin Mining

Geothermal power plants are more common in parts of the world where volcanic activity is high. This is particularly common in places like Iceland and New Zealand. Iceland actually imports aluminum from other parts of the world and melts it down and sends out the finished product at little cost to Iceland since they use geothermal energy to melt the metal. This actually makes geothermal energy one of Icelands primary exports.

Its geothermal and hydroelectric power plants that provide most of Icelands electricity which is why so many bitcoin mining farms have chosen to set up operations there. Genesis mining is just one of many cloud mining services that are there.

Hydroelectric Bitcoin Mining

Hydroelectric dams have a bit more control over when they use the water to generate electricity by opening and closing the spillways of the dam. Sometimes it can be more costly to shut down the generators at night than it is to simply let the dam to keep generating electricity.

Bitcoin mining could be a great solution to help to reduce the costs of the dam overhead by turning the surplus of electricity into bitcoins.

Gas Flare Bitcoin Mining

When oil is pumped out of the ground, it releases methane gas as a by-product. Since methane gas is a substantially worse greenhouse gas (approx 30x more damaging than CO2), oil wells burn it off in a process called gas flaring. Youve probably seen this kind of burn off at oil well sites in the form of a torch that is constantly burning.

One Canadian company sees this gas flaring as an opportunity to turn excess energy into bitcoin by creating mobile bitcoin mining operation that is installed on oil drilling sites and uses this otherwise wasted energy into bitcoin. This could have massive potential to create a more efficient oil.

Conclusion

Bitcoin mining is the system that creates bitcoin and keeps the system honest by auditing the transactions every time a new block of bitcoins is mined. If you dont have the technical expertise to mine bitcoin, you can use a cloud mining service to create a lease agreement to rent the mining hardware and you just receive bitcoin in relation to how much computational power you lease.

Beware of bitcoin cloud mining scams since many of them are often Ponzi schemes with some newly mined bitcoin.

If bitcoin mining doesnt make sense to you and you would still like to have some bitcoin, Id suggest that you just buy some and HODL for at least 210,000 blocks.

you may ask if Bitcoin Mining Still Profitable in 2020? read the article to discover the fact about bitcoin mining in 2020.

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