How does Bitcoin mining work
Without trading experience and knowledge of the specifics of the currency market, successful trading is unlikely. Users can not understand, how does bitcoin mining work. Therefore, ordinary users engaged in the mining of crypto currency — the extraction of digital coins with the help of a series of computer calculations. Is it profitable to mine digital coins today and what is cryptocurrency mining — in simple words in our article.
The main principle of cryptocurrency mining is to find the only correct result of this puzzle (hash), which must correspond to the properties established by the system. Bitcoin mining is legal in many countries. When a solution is found in a block with information stored in a decentralized electronic database (blockchain), a cell appears, and the user receives a digital record — access to the cell. The execution of the specified algorithm is rewarded with a cryptocurrency, which is credited to the digital wallet.
Types of cryptocurrency mining
Two years ago, main question in crypto was how does bitcoin mining work? Only a personal computer was required for mining cryptocurrency at home. But with the increase in the number of blocks, mathematical calculations become more complicated. As a result, the process of mining cryptocurrency even with fastest bitcoin mining machine becomes longer and requires more computing power.
With the development of the crypto-currency market, new ways of mining have appeared: based on the use of fastest bitcoin mining machines, which are called “cryptocurrency farms”, and virtual space.
There are four types of mining
Using a personal computer for mining
Cryptocurrency mining on the computer is carried out through special software. Bitcoin mining is legal at least in two ways.
Using a cryptocurrency mining farm
The principle of operation of any farm is to optimize the device for continuous production of digital coins. The following types of farms are considered popular.
Use a standard processor (CPU) for mining
Mining cryptocurrency on the built-in or purchased the graphics card (GPU). In recent years, manufacturers of computer components specifically produce graphics cards for this purpose.
The option is suitable for single miners who are unfamiliar with the work of farms and starts mining cryptocurrency from scratch. The main drawback — it is impossible to get a Bitcoin mining profitability due to lack of computing power.
ASIC (Application-specific integrated circuit)
Bitcoin mining hardware for sale specially designed for the production of digital currency, resembles a computer chip with a cooling system in a protective housing. Disadvantages: requires constant maintenance, high cost and power consumption.
Using the farm on an industrial scale increases bitcoin mining profitability, but requires large investments in Bitcoin mining hardware for sale, personnel, electricity and cooling system.
Cryptotrading as an alternative
Understanding on how Bitcoin mining works, leads to another point. Cryptotrading is almost the same as trading on other currency markets. The investor uses Bitcoin mining profit calculator when making transactions to buy or sell cryptocurrency. The main principle is to buy cheaper, sell more expensive.
Trading is conducted on cryptocurrency exchanges — electronic platforms offering various financial instruments depending on the type. Before the start of trading, an analysis of the cryptocurrency rate is carried out and an investment portfolio is formed taking into account the received forecasts. If you do not want to trade on their own, the assets can be trusted to a broker who will independently conclude transactions for a fee.
It’s very hard to build your own bitcoin mining machine. Unlike mining, trading in the cryptocurrency market does not require special bitcoin mining equipment and a large initial capital. When using margin leverage (borrowed funds), you can start trading with $ 100-200.
The advantages of cryptotrading before hashing
Success is not affected by external factors (electricity rates, Bitcoin mining equipment failure)
The opportunity to make a profit on the depreciation
Unlike mining, you can work with several cryptocurrencies at once
Cryptotrading — the best way of earning digital currency of the options considered. Mining can become profitable again with a significant increase in the exchange rate of coins. A lot depends on how bitcoin mining works. To date, the production of cryptocurrency does not guarantee coverage of costs, not to mention a stable profit. Therefore, more and more miners are beginning to engage in trading, learning from scratch financial instruments and market nuances, consulting experienced professionals and practitioners.
But trading and mining on own bitcoin mining machine has a common feature — for profit it is important to understand the intricacies of the functioning of the system, to know the nuances and existing rules.