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What Is Bitcoin Mining In Cryptocurrency: Note For Investors To Earn Profit

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Bitcoin is the most popular and coveted cryptocurrency globally. Investors, these days are quite aware of cryptocurrency exchanges and how crypto trading is being done virtually. However, there are few confusions about blockchain and mining. This article will discuss how bitcoin mining works and how is it important for investors in the crypto field. Bitcoin mining is quite an attractive opportunity now because you can earn bitcoin, even without buying it.

 

What is a ledger in crypto?

What is a ledger in crypto?

Through bitcoin mining, new bitcoins will enter into the virtual circulation. But before understanding bitcoin mining, you need to have an idea about blockchain ledger. A ledger can be identified as a virtual account book for the crypto. For creating an accounting system and keeping a record of bitcoin trading, a ledger is important. Bitcoin trading means - how many people are investing in what number/amount of bitcoin from the exchanges, against government-registered currencies.

Additionally, people can also make payments through bitcoin these days. To keep a record of this trading, the virtual ledger will use computers with an internet connection. All the computers, keeping track of bitcoin trading, will create a network among themselves, virtually. This network is called a blockchain, and the computers will be called mining machines. The person using the computer will be called the bitcoin miner. The mining machines will verify and confirm the bitcoin trading online, with the help of a computer network or blockchain.

Bitcoin mining machines and algorithm
 

Bitcoin mining machines and algorithm

Multiple mining machines or computers can verify and confirm your transaction, and it is a very complicated process altogether. All the mining machines are using a different algorithm, to maintain safety and privacy. The bitcoin miners solve the difficult algorithm that is extremely complex computational mathematics. Solving the difficult algorithm is called bitcoin mining. By bitcoin mining, a miner will simply complete the block, in the blockchain. Otherwise, with an accurate and difficult algorithm, it will be easy to hack the whole process and bitcoin trading will be unsafe for investors. Their money will be at stake.

Bitcoins, like all other cryptocurrencies, are not regulated by the government and can only be traded online. Almost the highest number of bitcoins are already mined, only a small number are not yet mined or accounted.

Profits from Bitcoin mining for investors

Profits from Bitcoin mining for investors

Why is bitcoin mining important for investors? The simple reason is that by mining bitcoin you can earn more profits. Bitcoin mining is done by people who are interested in cryptocurrencies and realize the potential of decentralized currencies. They can buy bitcoin from exchanges. But on the other hand, they can also solve the tough algorithm to get the bitcoin as a reward. So, without buying cryptocurrency, you can have the same. That is the reason why bitcoin mining is getting major popularity these days.

The difficulty level to mine bitcoin is being harder gradually. Hence, bitcoin mining firms are getting built by miners to make more profits. Also, not by any computer, you can mine bitcoin, you should have a computer with high configuration for that. You need to install accurate software for the same. To make more profits from bitcoin mining, you should have adequate knowledge for that, about the computer, and your computer should use sophisticated hardware and graphics card. An application-specific integrated circuit or ASIC is an important tool for bitcoin mining.

(Also read: Bitcoin Will Reach Half A Million In The Next Ten Years: Analyst)

How much profit for miners?

How much profit for miners?

A bitcoin miner confirms that the tokens are being used illegitimately, and a single token is not being used twice. However, it is not a very easy job. Additionally, you will have to be the first bitcoin miner who is solving the algorithm to earn the reward. So, there will be a proof of work (PoW), that you are the first miner. The numeric problems are very random, and the miners need to be very patient with them.

There is a total of 21 million bitcoin available virtually. According to data, till September 2021, around 18.82 million bitcoins were in circulation. So, the rest of it needs to be in circulation. Bitcoin miners are doing that. However, with time, the amount of profit or reward is being cut down by half roughly every 4 years. In 2009, you could earn 50 BTC by mining one block, when the bitcoin mining started. But, it was reduced gradually. In 2012, the reward was cut down to 25 BTC, and in 2016 to 12.5 BTC. Lastly, in 2020, it stood at 6.25 BTC.

At present, with all the volatility in the market, bitcoin is being quoted around $45,000/bitcoin, or around Rs. 28 lakhs/bitcoin. So, in 2020, you could earn around 28 lakhs * 6.25, if you complete a single block. It is a large amount of money. But the profits are reducing. Additionally, now you can also estimate how much bitcoin you can mine with the mining rig's hash rate. Websites will come with an adequate calculator for that.

(Also read: What Are The Top 4 Crypto Exchanges In India: Where To Buy Cryptocurrency?)

Story first published: Thursday, December 23, 2021, 13:38 [IST]
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