Investors Earning Profit From Cryptocurrency: How Bitcoin Mining Works?
When it comes to cryptocurrency, the first thing that comes to one’s mind is; bitcoin. This pioneer crypto took the market of enthusiasts and traders by storm. Since its beginning, many people have tended to have doubts about this crypto and its trade.
One of the major questions that many tend to have is; how to earn profit and make money from bitcoin. The simple answer to the question is by trading and mining.
Trading is done by cryptocurrency exchanges, just like stocks and other commodities. But, bitcoin mining is not that clear to many people out there. Here is a simple explanation of bitcoin mining and how investors can gain from it.
Bitcoin mining, miners, and ledger
At the very crux of the bitcoin mining and network is blockchain. Blockchain is a network of blocks that are made of transactions. These transactions include everything from exchange trading of bitcoin to simple transactions made by people using bitcoin. These blocks are created by the miners who use computers to solve complex mathematical problems .
These blocks create a blockchain, a virtual ledger network consisting of every transaction made using bitcoin. It is very similar to accounting ledgers that keep track of every transaction. The miners will verify the transactions, which will be updated to the blockchain network.
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Bitcoin mining is how the network of miners and mining machines aka, computers, verify every single transaction made using bitcoin. This is crucial because Bitcoin as a currency is not regulated, and there is no centralized authority to keep track of the transactions made. This is peer managed network in which miners from all across the globe maintain the network.
However, bitcoin mining is not that easy of a process. It requires computers with high computational power to meet the mining requirements. Also, the miners need to solve complex algorithmic puzzles and problems before a block of the transaction is verified. The puzzles are kept complex so that nobody can mess with the network, add unverified transactions and change the ledger except the ones experienced and allowed.
One of the ways to earn profit from bitcoin is by trading, just like one can trade stocks and Forex. However, another popular way is by mining. But this is not the easiest way out there. One needs to have patience, practice, and equipment for mining bitcoins.
The miners will have to solve difficult algorithms using high-end complex computer software and installations in bitcoin mining. As the number of miners increases, the difficulty level of the algorithms is also on the rise. With every single solved question, the miners are given bitcoins in return. This way, one can earn bitcoins without having to trade them. But, as the difficulty of problems increases, the need to have complex computers and computational speed is really necessary. Also, the one who solves the question first will only get bitcoin as a reward.
One thing to keep in mind is that the reward is falling gradually. Before in 2009, solving one block earned one 50 bitcoins, but now it has reduced to 6.25 bitcoins only. One needs to have the patience to earn profits through mining. But if successful, it can lead to a major earning as per the current bitcoin rates.