The cryptocurrency community is usually divided into three major camps when it comes down to potential ways to earn money.
The first is inhabited by traders, believing that the best way to make profits is to take advantage of the volatility in the market by trading.
The second comes in the form of long-term investors, also known as Hodlers. They believe in a cryptocurrency’s (usually Bitcoin’s) value and that it will increase notably over the years, so they don’t trade it – just hold it.
The third option – enter miners. Those are people who have invested a large amount of money in hardware so that they can mine a particular cryptocurrency. Today we will take a more in-depth look into mining as a whole and will try to answer the question of whether or not it’s still profitable in 2020 or miners should use that money to invest directly.
What is Bitcoin Mining?
Even though plenty of different coins are “mined,” we will provide the examples and explanations using Bitcoin, as it introduced the term “mining” in the industry, being the first-ever cryptocurrency working on this principle.
Bitcoin miners use high-powered computers to solve complex computational math problems, and the whole process is called the “Proof-of-Work” consensus algorithm. The result of this endeavor is two folded – miners “create” new bitcoins, and they also help verify each transaction, keeping the payment network secure and trustworthy.
The latter happens when the miners clump transactions together in “blocks” and then add them to a public record, called “blockchain.” By doing this, they are making sure the transactions are accurate, and that double-spending cannot occur.
In return, miners receive bitcoins as rewards for completing each transaction, and the amount of new coins released with each mined block is called “block reward.” It decreases in half every four years in a process called… Read More...