Bucky Wucky does have sponsors, and we may work with companies to provide you with the best content, information, and data on business and personal finance. Some links on our site may be affiliate links. While our sponsors may pay us, we only work with companies that align with Bucky Wucky’s values.
What is Bitcoin Mining?
The process of cryptocurrency mining is an energy-intensive endeavor, driven by raw processing power, and is tantalizingly profitable for those with the means to pursue it. At present, Bitcoin still represents one of the best mining models due to its high prioritization of security, decentralized nature, large market cap, and hard asset qualities.
Cryptocurrency mining is a computational process in which computers compete to solve complex algorithms and in return, are rewarded with cryptocurrency. In Bitcoin’s case, each block is added to the blockchain every 10 minutes, and miners first need to confirm, verify, and store the transaction data within that block before it can get added to the blockchain.
The participants who successfully add a block to the blockchain are rewarded with a predetermined number of Bitcoin. For this reason, people are flocking towards Bitcoin mining in order to earn some money. In the best-case scenario, people are looking to obtain Bitcoin through mining and then watch as Bitcoin grows in value. It is essentially being given an asset in return for working through those algorithms. Once the Bitcoin is obtained, the person who is running the miner is able to either sell or hold the bitcoin in a wallet.
The reason that Bitcoin mining has come about is that it is necessary to regulate and maintain the ledger of transactions that Bitcoin works off of. For that reason, Bitcoin mining is likely here to stay. In addition to that, People have found this to be a way to profit off of cryptocurrency. The process of bitcoin mining was making people a lot of money a few years ago and became a craze of sorts; however, these days, it is going to make more sense for most people to just invest in cryptocurrency and grow a portfolio.
With that being said, you may be one of the few who can become profitable with Bitcoin mining. If you are interested in learning more about Bitcoin mining to see if it is right for you then here is an in-depth overview of Bitcoin mining.
Curadebt: Curadebt offers FREE debt relief counseling as one of the most trusted providers.
Mainvest: Invest in businesses with Mainvest and take a share of the profits.
Goalry: Goalry is a FREE personal finance app that helps you achieve your financial goals.
Koinly: Koinly helps you calculate and reduce your cryptocurrency taxes.
Cryptohopper: Cryptohopper offers a powerful, world-class AI-powered crypto trading bot.
Due to Bitcoin’s hard cap of 21 million Bitcoin, no more than 21 million Bitcoin can ever exist; this process has thus created a form of digital scarcity. Additionally, every four years, an event known as the halving takes place which cuts the miner block rewards in half. This inflation cut is an essential part of the stock-to-flow aspect of Bitcoin, which compares the relatively newly minted supply to the usability and production costs of mining.
Digital scarcity is part of the reason why Bitcoin is so high in price, especially when compared to other forms of cryptocurrency. As more and more Bitcoins are taken out of circulation, there is a lower supply for those who want to either mine or invest in Bitcoin. The basic laws of supply and demand suggest that the price will rise as digital scarcity increases. There are, of course, other things that come into play when determining the price of Bitcoin or any other digital assets, but this is certainly one of the main factors.
RELATED: Learn How To Buy Bitcoin Safely.
Many rely on the stock-to-flow model as an integral property in determining Bitcoin’s future valuation as this concept is widely accepted and utilized through other commodities such as precious metals. In addition, this preset inflation decrease will continue until the block reward eventually reaches 0, approximately in the year 2140.
A predictable inflation rate limits the new supply of Bitcoin added to the market, incentivizing individuals to store it as a form of wealth. Additionally, to ensure flexibility, a difficulty adjustment system prebuilt into the blockchain ensures that whether there is an abundance of miners or a shortage, blocks will continue to be added at an average of 10 minutes to prevent stagnation.
In recent months, even some of the world’s largest hedge funds have been buying into Bitcoin and other cryptocurrencies. Ray Dalio, the founder of Bridgewater Associates and one of the greatest financial minds alive, claims that Bitcoin is a good hedge against inflation. Most of these hedge fund owners and institutional investors were very skeptical about the cryptocurrency market at first. However, after seeing the bull runs in both 2017 as well as 2021, many hedge funds and more conventional investors are gaining trust in the market and are buying into these assets.
This could be looked at as both a good thing and a bad thing. It is a good thing because there are banks and other institutions that are slowly beginning to accept cryptocurrency. As more places are able to accept different cryptocurrencies, there will likely be an increase in the value of the market. On the other hand, some of the institutional investors and influential people of the world are working in ways that manipulate the market. This potential for mischief could lead people, businesses, and governments to continue to feel a reluctance toward accepting cryptocurrency.
Is Bitcoin Mining Legal?
While Bitcoin mining is a legal endeavor in most countries, with Russia being the main exception, it is still a relatively difficult operation to pursue. Bitcoin mining requires highly specialized computers often utilizing ASIC chips whose sole purpose is to mine cryptocurrency with high levels of efficiency and exuberance. In addition to the upfront purchasing fees, electricity bills, storage room, and cooling units are added expenses that could make it very difficult for new and inexperienced miners to approach profitability.
If you purchase a Bitcoin miner and set it up the correct way, then you have nothing to worry about when it comes to the law. Unfortunately, there have been many criminals that flock towards cryptocurrencies because they are decentralized so there is less of a way to trace them.
RELATED: Need To Figure Out Your Crypto Tax?
Should You Purchase a Used Miner?
While on the topic of illegal use of crypto, it is important to touch on the problems that have been faced by used crypto miners. There have been reports of people purchasing used crypto miners online that were tapped so the person who sold the miner can steal anything that gets stored on your hardware wallet. This unfortunately had some people getting the cryptocurrencies that they either mined or bought stolen.
It is very important to understand this if you are thinking of purchasing a used miner. If a friend or family member is selling a miner that they have used themselves then you are likely not in any danger. Though people selling Bitcoin miners on eBay or Facebook Marketplace may not be as trustworthy as you may think. If you don’t personally know someone who is selling a miner then you are better off just buying a miner brand new.
Is Bitcoin Mining Worth It?
The early days of mining Bitcoin from home on your PC are largely over, as it has turned into a highly specialized task and one where those who can’t keep up are ruthlessly wiped out.
Bitcoin mining and its deterministic nature on how supply increases occur is an intrinsic factor in determining Bitcoin’s success. By assuming a predetermined stock-to-flow model that is extremely scarce, the inflation rate sits near gold and will drop lower at the next halving in 2024. For this reason, many speculate that due to the fact Bitcoin shares many of the same qualities as gold in addition to increased transportability, decentralization, and divisibility, it can be used in the long term as a hedge against inflation and as a storage of wealth.
Many who aim to protect their wealth are likely incentivized to store it in deflationary assets during periods of uncertainty and chaos, which is why you see investors flock to gold during times of crisis.
There is also an underlying issue that comes about when going into Bitcoin mining. The issue is that this is something that requires a lot of power. There have been multiple sources claiming that Bitcoin mining is something that is very bad for the Earth, but this power requirement also makes it harder to be profitable. If you are using a miner that is getting its power from your home, then your bills are going to skyrocket. This is something that requires way more power than putting a couple of air conditioners in the windows, Bitcoin mining takes some serious power.
As the Bitcoin mining industry has grown in popularity, people have been drawn towards it as a sort of passive income. Though it is often forgotten that there is some serious competition when it comes to this endeavor. China has some very low energy costs, which has allowed some of the people in China to create massive mining farms that dominate the market. Their algorithmic process is far beyond what most people can come up with due to the high prices of electricity in most other countries.
For those reasons, Bitcoin mining is not right for many people, most are much better off just investing in cryptocurrencies in order to earn some capital gain. Of course, there are exceptions to this and there are some people who are benefiting greatly from Bitcoin mining. The majority of people are much better off just investing money into Bitcoin. If you think of it, you are going to be spending hundreds if not thousands on the mining hardware. Putting that money directly into Bitcoin is likely to provide a better benefit to the majority of people.
There are the select few people who have the money for the purchase and upkeep of a crypto miner as well as the proper mindset going into this endeavor. The most important thing is to understand that if you start up a Bitcoin miner today, you are likely to not see any profit for around a year. This is in no way a get-rich-quick sort of thing, but it can provide some excellent financial benefits down the road if you are willing to persist.
RELATED: Take a peek at our Coinbase review
An Alternative to Bitcoin Mining
There are certainly people who are doing very well with crypto mining, but that doesn’t necessarily mean that you are going to get the same results. You could spend thousands of dollars to purchase and run a crypto mining rig for it to produce somewhere around $5 per day. This means that it could be over a year before you break even. For some people, this is worth it, and they are willing to wait out the time that they need in order to be profitable. If you understand the risk tolerance and patience that you need to be a crypto miner, then this is a viable option for you.
On the other hand, there are some other options for you to earn crypto without having to do much. If you take the couple thousand dollars that you would be putting into a crypto mining rig and instead put it into interest-earning crypto then you are going to reap the benefits much quicker than you would with crypto mining.
In the last year or so, there has been a mass of innovation present in the cryptocurrency world. Part of this was some programs that allow you to earn interest on the crypto that you have stored in your wallet. One of the main companies that do this is the Celsius network. Celsius is a crypto lending platform that allows people to take out loans while using their cryptocurrency as collateral. People are enjoying this crypto lending platform because it offers much lower rates than a traditional bank would.
In addition to the lower rates, there is another incentive for working with Celsius and similar crypto lending companies. This would be the interest offered by these companies. If you store crypto in a Celsius wallet, they will give you 5%-12% interest on those coins. They are able to provide such a high interest rate because they distribute 80% of the company profit to people who have their cryptos stored with them.
For someone who may not have a ton of money to throw into purchasing and running a cryptocurrency miner, this may be an excellent alternative. You are essentially earning rewards in crypto that can either be used as passive income or as a means of further growing a cryptocurrency portfolio.
The Celsius Network specifically pays out their interest every week. This means that your cryptocurrencies stored in the wallet will be compounding once a week, which could stimulate some serious growth as time goes on. Or, if you are looking to put your crypto into Celsius for passive income then you have the ability to get passive income payouts once per week.
This technology is still fairly new, that is why many people who were already earning cryptocurrency through a crypto mining rig are sticking with it. However, if you are just starting out then it is very important that you understand all of the options before you pour four figures into a crypto mining rig.
Crypto Credit Cards
In addition to earning interest on cryptocurrency through a wallet like Celsius, there have been crypto rewards cards that have been coming about the market. These cards allow you to earn up to 4% on average in crypto that you choose.
Gemini, a popular crypto wallet app, has recently introduced the idea of a credit card that rewards you with cryptocurrency when you swipe it for everyday purchases. The card has grown to become so popular that there is currently a waitlist to be able to obtain one.
While you are making regular purchases you now have the ability to take rewards in one of 30 different cryptocurrencies, including the most popular ones like Bitcoin and Ethereum. This is a great way for people to either start or continues investing in cryptocurrency because it does all of the work for you, all you have to do is choose which cryptocurrency you would like to receive your rewards in.
If you are looking for a credit card that has zero annual fees and the ability to make some great rewards options, then you should certainly look into obtaining the Gemini crypto rewards card. This could assist you in building up a solid cryptocurrency portfolio that could bring wealth over time.
The Future Of Bitcoin Mining
However, the question on everyone’s mind is if Bitcoin can fulfill its use case as an alternative hard asset or crumble in the face of adversity. Legendary hedge fund manager Paul Tudor Jones has already started to break the notion that Bitcoin is “fools’ money” and has publicly announced he has positioned a portion of his portfolio into Bitcoin as a hedge against inflation. Other institutions have already started to follow suit, and they will likely make holders of Bitcoin as well as miners immensely profitable in the years to come.
This all came from the lack of trust that people have had in Bitcoin and other cryptocurrencies. It is now being made more and more clear that the cryptocurrency market is here to stay and there are likely going to be many cryptocurrencies that increase greatly in value.
There is no doubt that you can start crypto mining and eventually become profitable by doing it. This is a very interesting endeavor that certainly poses some risk, but at the same time is giving some people or organizations excellent benefits. Purchasing a crypto miner and setting it up does not guarantee that you are going to be profitable but if you take the time to educate yourself and then apply your knowledge then you are certainly setting yourself up for success.
The awesome thing about crypto mining is that once you have everything set up and running, there is not all that much upkeep in order to allow it to earn you some cryptocurrency. This is what makes so many people want to get into crypto mining, but many do seem to overlook the fact that there is a lot of money and time that goes into this upfront.
For those who know and understand what it takes to become profitable with Bitcoin mining, this can become an excellent way of growing wealth. Just make sure that you understand what you are doing before getting into it. Talk to people with real experience in doing this in order to gain a realistic expectation.
Frequently Asked Questions (Faq)
What is crypto mining malware?
Online hackers infect computers with malware to use the computer’s resources for mining cryptocurrencies.
What is Bitcoin mining hardware?
Bitcoin mining hardware is computers used to mine Bitcoin. The computers are highly specialized and use a lot of electricity.
What is the best Bitcoin mining machine?
Some of the more popular Bitcoin mining machines are:
- Bitmain AntMiner S5
- Bitmain AntMiner S9
- Bitmain AntMiner S7
- AntMiner T9
- AvalonMiner 741
Bitcoin mining is a very interesting thing that many people have been phasing into over the course of the last few years. From the outside looking in, it is a very attractive way of making passive income or growing a portfolio. The reason being is that once you have everything set up then you are able to allow the miner to solve the algorithms and eventually earn you some crypto. On average, people are spending thousands of dollars to set everything up and then have the potential to earn around $5 per day, give or take.
If you are able to run a Bitcoin miner for over a year, then yes, it clearly has the possibility to be profitable. This is something that many do not understand when they are first breaking into the Bitcoin mining world. It can certainly be profitable, but you will definitely need a reserve of persistence and dedication when going into this pursuit. It is also extremely important to understand what you are doing before getting into this as it is certainly not for everyone. Going into it blindly will almost certainly leave you disappointed with the results.
The good news is that there are so many different ways to profit off cryptocurrency. Whether it is trading, staking, or long-term investing there are options for everyone when it comes to the world of cryptocurrency. Bitcoin mining is a process that brings about an intense level of energy and while it is very interesting, it is one of the slower ways of profiting in cryptocurrency. For these reasons, there are many individuals who get into Bitcoin mining, and you won’t be alone if you decide to take this leap.
Looking To Buy & Sell Bitcoin?
Get started with Coinbase
Enjoy our article: What is Bitcoin mining?
You may also be interested in What Is Cryptocurrency?
Check out our Cash App Review.
Figure out your Crypto Tax With Koinly.