Unlike conventional currency systems where government institution prints money and decides how it is distributed, in the cryptocurrency system, for this case Bitcoin, it is “mined”. Mining of bitcoin is related in parts to the age old concept of discovering (mining) of precious stones like gold and sapphire etc, however for bitcoin it is little more complex. Several computers combine using special software to compete to solve complex mathematical problems and by doing so mine bitcoin.
This mathematics based model therefore provides a secured, reliable and tamper-proof way of producing bitcoin without fear of inflation and breach of process. Because a lot of resources, like power, hardware etc go into bitcoin mining, rewards in bitcoin of course are awarded to the computers (people) involved in this process.
How does it work?
Since bitcoin operates under the blockchain technology which is a distributed ledger, certain measures have to be put in place to eliminate problems such as double spending. This is done through transaction confirmation. This is where bitcoin mining takes center stage.
Therefore bitcoin mining can be described as a method of bitcoin transaction confirmation using aggregated computational power.
The process is initiated from a block of transaction data and terminates with the production of a Hash. The hash produced for a block serves as a signature for the block and a link to the next block that will be attached- hence forming a Blockchain. Therefore altering a hash will render the block unrecognizable and as such will not be confirmed as part of the Blockchain. This way the ledger remains protected from fraudulent meddling.
However this whole process is designed to be resource intensive with increasing difficulty level to ensure a steady creation of blocks. The bitcoin protocol implements this using a technique called “Proof of Work”.
A Proof of work is a random process with low probability such that trial and error is greatly involved to produce a valid hash for a block to be accepted into the blockchain network.
So What is the Reward for Mining
Since miners commit so much resource to confirm transactions (hardware,power,time), monetary reward is necessary as an incentive to keep working hard even as the process gets more difficult. This means that miners are in constant competition to be the first to confirm transactions as they are created in the public ledger or blockchain. Therefor when a block is discovered (a hash is found successfully). The miner is awarded with a defined number of bitcoins unanimously agreed upon by all members of the network. The value currently stands at 12.50 bitcoin for every 210,000 blocks discovered and will half every 4 years depending on mining power evolution. This is explained further in the controlled currency supply
Secondly miners are rewarded through fees paid by users sending transactions. Just like in conventional banking, these fees serve as incentive for the miner to include the transaction in their block. These transaction fees will make up the bulk of miners monetary reward in the future when the number of new bitcoin a miner can add to the block diminishes.
Investing in Bitcoin Mining – Cloud Mining
Now that we have understood what Bitcoin mining is, let us explore the more exciting part – Making money through Bitcoin cloud mining.
There are two main ways of investing in bitcoin mining;
- Bitcoin Mining Through Hardware Integration
- Bitcoin Cloud Mining
The hardware integration method requires physical acquisition of bitcoin mining hardware and then of course “wrapping” your head around all “that” discussed above…..well good-luck!!. How to start mining with your own GPU.
But bitcoin cloud mining will be our focus for this article.
Bitcoin cloud mining which is also known as cloud hashing is a mining method that enables users to purchase Bitcoin mining power from Bitcoin mining company hardware placed in remote data centers. It enables people to earn Bitcoins without the hassles of owning and managing bitcoin mining hardware, software, electricity, data bandwidth and several issues associated with mining.
Several cloud mining companies and services exists out there but care has to be taken when choosing so that the services offered can align with your investment expectations. Most of the bitcoin cloud mining companies offer time based contracts which a are usually tied around profitability.
I have put together a list of verified and “legit” bitcoin cloud mining services below. Genesis Mining (recommended) has expanded tremendously in the last 2 year and are strongly positioned. I have also used Hashflare.io cloud mining service but overall the under-listed mining services are legitimate. All you need to do is, find the contracts that suits your investment plans.
Genesis MiningBuy Genesis Mining Contracts
Hashflare MiningBuy Hashflare Mining Contracts
Hashing24 Mining Buy Hashing24 Contracts
EOBOTCloud Mining Go to Eobot Cloud Mining
Hashnest MiningBuy cloud mining contract
MinerGate Mining Minergate free Mining
How to Identify Scam Cloud Mining Services
It is also important to understand that despite the fact that cloud mining is profitable it also comes with its risks just like any business venture. Secondly careful consideration has to be taken when choosing a cloud mining service to avoid being scammed. Here is a guide on how to identify cloud mining scams
The best way most times is to try and then learn by experience…..On that note, Happy Mining!!
Image credit: Cointelegraph
I have been in the Cryptocurrency ecosystem for about three years. My passion for this niche of financial tech space inspires me to share with you all I can in the world of Cryptocurrency, Blockchain and financial technology.