How Does Bitcoin Mining Work?
& Other Burning Crypto Questions
Bitcoin kind of seems like magic. Now, if you know the technology behind the platform, it’s clearly not created with Harry Potter’s wand. But, that’s not what this Bitcoin FAQ is about. Instead, you’ll get the down low on some of the most popular questions about Bitcoin.
One quick side note. "Bitcoin" with a capital "B" is the platform. "bitcoin" with a lowercase "b" is the cryptocurrency.
How Does Bitcoin Mining Work?
Before diving into how to mine, it’s important to understand what mining is.
Miners are people who validate transactions on a blockchain. The first miner to submit a correct answer is rewarded with a set amount of tokens. Mining doesn’t take manpower. Instead, it takes electricity. Be aware of the costs of mining ahead of time. If you live in an area with high electricity costs, you may not want to mine by yourself. I’ll get to that later in the section.
If you choose to mine on your own, there are a few things to consider.
-Cost of electricity
-Power of your graphics card/CPU
-Popularity of cryptocurrency you’re looking to mine
Keep these in mind, and you’ll set yourself up for mining success. As a general rule of thumb, the bigger your graphics card or CPU, the better. Low cost of electricity allow you to keep your computer cranking for a minimal fee.
Bitcoin is an extremely popular cryptocurrency. There are so many miners trying to get in on a reward, it’s mind blowing. In the early days of mining, you could easily use your own computer at home to mine.
Now, there’s so much competition in the market, you’ll more than likely lose money if you try to mine on your own without a mining rig. So, there are two options for popular crypto.
Mine With a Rig
A mining rig is basically a super powerful computer meant solely for mining cryptocurrency. All computing power goes towards this act, and it eats up a lot of electricity. You can either build your own mining rig, or you can purchase one online.
Mine With a Pool
Since there are so many like-minded miners who would like to get in on mining the bitcoin, people have formed mining contracts. They work like a co-op. You pay in on a monthly or yearly contract, and you receive a specific percentage of payout as you mine.
Collective mining is an easy set-it-and-forget-it move. Once you sign a contract, you’ll receive payouts based on whatever the collective decides. When you mine, you have the chance to get cryptocurrency in two ways.
The first, of course, is with the reward of being the first to validate a block. The second is the mining itself. When you mine, you will receive cryptocurrency in small bits. Over time, you’ll receive a nice little nest egg of crypto--even if you don’t win a single block. This is called a mining fee.
Looking for information on potentially investing in bitcoin? Peep this article.
Looking for information on potentially investing in bitcoin? Peep this article.
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