People are sending bitcoins to each other over the bitcoin network all the time, but unless someone keeps a record of all these transactions, no-one would be able to keep track of who had paid what. The bitcoin network deals with this by collecting all of the transactions made during a set period into a list, called a block. It’s the miners’ job to confirm those transactions and write them into a general ledger.
How Does Bitcoin Mining Really Operate?
If you’ve already found out about Bitcoin, you probably know that mining is one of the core concept underlying this blockchain technology. You’ve maybe also heard that mining involves numerous powerful computers which solve some magical puzzles. But do you really know how does mining works under the hood?
Science behind Bitcoin
Despite the fact that the blockchain technology takes advantage of a few sophisticated numerical algorithms, the underlying concepts are quite straightforward. And definitely, you don’t need an engineering degree in programming to grasp the gist of this particular revolutionary technology!
Is bitcoin mining profitable?
Many people wished they had not missed the Bitcoin mining bus before the great Bitcoin boom started back in 2013. At that time you could mine Bitcoins pretty easily at home and make a very nice profit on the currency exchange rate.
However, since then, the mining difficulty has increased immensely and today it is almost impossible to mine Bitcoin profitably at home with your very own hardware. The only exception is if you have very low electricity costs and manage to mine efficiently for at least 6 months without any major changes in this particular competitive landscape.
And that’s one of the reasons cloud mining was born
A seemingly sophisticated way to allow people to jump on the Bitcoin mining bus without the need of costly expenses. With cloud mining, you can rent mining equipment from a company that will give you back the profits from your rented mining rigs.
You do not need to deal with the electricity costs, cooling down the miners or storing them, all you need to do is send out a periodical payment and you are all set. Of course, this cloud mining idea quickly took off as people are always searching for new ways to make money online, however, how legit and profitable are these cloud mining contracts? That’s exactly what I’m about to unveil in the following post.
What is Bitcoin Mining? In Some Ways, Bitcoin Is Like Gold
One of the most common analogies that people use for Bitcoin is that it’s like mining gold. Just like the precious metal, there is only a limited amount (there will only ever be 21 million bitcoin) and the more that you take out, the more difficult and resource intensive it is to find. Apart from that, Bitcoin actually works quite differently and it’s actually quite genius once you can get your head around it. One of the major differences is that mining doesn’t necessarily create the bitcoin. Bitcoin is given to miners as a reward for validating the previous transactions. So how do they do it?
Bitcoin mining requires a computer and a special program. Miners will use this program and a lot of computer resources to compete with other miners in solving complicated mathematical problems. About every ten minutes, they will try to solve a block that has the latest transaction data in it, using cryptographic hash functions.
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