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Bitcoin is arguably the hottest investment on the planet right now. With blockchains gaining widespread recognition from multiple sectors of business and government, every semi tech-savvy person with some cash wants to get in on the action. However, trading is just one way to get rich through crypto. The other way is to mine coins yourself.
As a miner, you don’t need to have trading knowledge to start earning bitcoins. All you’ll need is a strong enough computer that can run bitcoin mining software 24/7. In this article, we are going to go over some facts and figures that you need to know if you want to get into mining.
Mining is the process by which bitcoins are generated. The way this works is - every time a block is set to be added to the blockchain, a computer running mining software has to verify its authenticity. This process requires the miner to guess a certain cryptographic hash and get chosen as the validator for that block, a process for which millions of computers around the world compete for 24/7. In the end, whoever gets there first is automatically rewarded with a certain amount of bitcoins.
To get into mining, you’ll need is a strong computer with beefy graphics cards. While there are specialized devices like ASICs that for hash calculations, as an entry-level miner, you’ll be fine with a good graphics card or two.
However, here’s the interesting tradeoff. Over the years, as bitcoins have appreciated, the reward for being a block validator has decreased. This means, as time goes by, you’ll have to commit more power to mine the same amount of bitcoins. After a point, the tradeoff might not be worth it.
To get a better idea about how this works, use the mining calculator on cryptocompare.com. By entering your GPU’s hash rate, power consumption, and the cost per kWh of electricity in your area, you will be able to estimate expected monthly profits.
One block is added to the bitcoin blockchain approximately every ten minutes. As more miners join the network, the “bitcoin mining difficulty” factor is adjusted to account for the increased power. This difficulty rate is adjusted after every 2016 blocks. The process takes about two weeks, at the end of which, the rate is tweaked based on whether it took more or less than two weeks to discover 2016 blocks. At today’s difficulty rate, a solo miner would take about five years to mine 1 BTC, even with the most efficient hardware.
At present, every block validation generates 12.5 BTC, a number that gets halved every four years. The system has been designed in a way that there can only ever be 21 million bitcoins in circulation. 18.1 million of those have already been mined, and 1800 new coins are added every day. According to experts, the last coin will be mined in the year 2140.
Bitcoins are known as deflationary assets, which means they are in short supply. As more miners join, the mining rewards decrease. However, even after a decade of its existence, mining bitcoins can be a great way to generate passive income for a lot of people, even if it doesn’t make you a millionaire overnight.