Bitcoin Shopping for Beginners

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

Unlike paper currency, that is printed by both governments and issued by banks, bitcoins do not come in any physical type. That makes a significant risk, as hackers can theoretically produce bitcoins from nothing. Bitcoin mining is how the bitcoin network retains its transactions protected.

Bitcoin transactions are secured by blockchains, which compose a public ledger of transactions. Due to how blockchain transactions are structured, they're extremely difficult to alter or compromise, even by the best hackers. But in order to secure these transactions, someone needs to dedicate computing power to verifying the action and packaging the details in a block which goes into the bitcoin ledger.

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As a reward for doing the work to monitor and secure transactions, miners earn bitcoins for each block they successfully process. .

The bitcoin founders have set a limit of 21 million bitcoins offered for mining. Once that total is reached, miners will still be able to benefit from transaction fees, however they won't be granted bitcoins as a reward for their work. As of mid-January 2018, roughly 16.8 million of the 21 million bitcoins have already been mined.  Assuming the bitcoin mining industry doesn't change radically, it seems like we won't hit on the 21 million-bitcoin limit until the year 2140. .

During the early 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 is no longer sensible, because solving bitcoin transactions is becoming too hard for your computer to manage.

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The bitcoin network is designed to produce a certain number of new bitcoins each 10 minutes. If only a couple people have been bitcoin mining at any given time, then the network will probably be generous and share bitcoins easily in order to attain the predetermined number. However, now this bitcoin mining has become so widespread, the network is now much stingier about handing out bitcoins into miners.

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

To begin with your own mining rig, you buy hardware designed for mining bitcoin (or any other virtual currency), set it up, and let it run 24/7 solving bitcoin transactions. Ideally, this will result in a continuous stream of payments with no needing to get involved.

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While it's fairly simple to set up and use a bitcoin mining rig, really making money on the process is something of a challenge. Since more and more people are signing up to mine bitcoins, the mining procedure continues to get imp source more difficult and will probably keep doing so for a while.

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

If buying and maintaining your own mining gear doesn't appeal to you, then cloud mining may be the best way to go. Cloud mining companies invest in enormous mining rigs, often filling entire information centers with all the hardware, and then sell subscriptions to individuals interested in dipping a toe into bitcoin mining.

The biggest challenge facing cloud mining readers is avoiding fraud. The field is rife with pseudo-companies that sell thousands of multiyear subscriptions, cover for a couple of months, and then disappear into the sunset. If you decide to try cloud mining, do your homework in advance and confirm that the company that 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 Network Solutions), in addition to any mining company that"guarantees" gains or provides enormous incentives for referring new customers; anything over a 10% referral commission is profoundly suspicious, because valid mining pools just don't generate a high enough profit margin to pay huge commissions. .