We have been hearing a lot about comparisons of Bitcoin to Gold. How it will replace Gold in investments. So once we hear about Bitcoin mining, we assume something similar to Gold mining. Bitcoin mining is nowhere close to it, though there are some similarities in a broad sense.
So, what is Bitcoin mining?
As we know a block is somewhat similar to a page in a ledger book which has details of all the latest transactions which have not been entered into any prior blocks. All these transactions have to be validated and added to the public ledger known as blockchain. This method of validation is known as Bitcoin mining. Mining is also a mechanism of introducing new Bitcoins into the system. Mining requires computing resources and a software which has a special program to solve complex mathematical problems.
So miners around the world compete with each other and whoever solves the problem first will place the block in the block chain. For this he will be rewarded with appropriate payment in the form of bitcoins. Rewards are paid with transaction fee paid by the users and newly generated bitcoin.
What exactly is this mathematical problem?
Imagine you are a miner and you want to place a block in a block chain. So you and many miners will be given a kind off riddle to solve. This riddle cannot be solved logically but one has to guess the answer. This is done using a Hash function which is a one way function. This Hash function takes an input and runs an algorithm on it and an output of fixed length is generated known as Hash. You give input and a specific output is generated. You cannot get back the input from output.
So miners start with a known partial input which is derived from the latest date of the block chain to create a Hash target. Hash target is similar to a “combination to a combinational lock”. The miners thus have to guess the input given to the Hash function to create an output which meets Hash target, thus solving the problem. Hash rate can be defined as number of combination guesses per second.
If more computing power is used to solve the problem, the combination is made more difficult and thus increasing the difficulty level.
In early days, mining was possible from the PC’s and it was discovered that graphics card used for gaming can be used to solve the problems at a faster rate but at a cost of more power. From then on many commercial Bitcoin mining products have come to the market which were developed specifically for the purpose of Bitcoin mining.
As more and more people started mining, the difficulty was increased and miners made less money. So miners started to make pools and share their profit evenly.
For a layman it is difficult to buy Mining hardware and software, though it is easily available due to lack of knowledge regarding the system setup and nuances of maintenance. Hence cloud mining services started which offer contracts to end users. There are many companies which offer Bitcoin mining contracts (SHA-256) and one has to make a thorough research of these companies from whom the contracts are bought as there were a few scams. There are two well-known and legit companies which offer Mining contracts.
Genesis mining is the largest and most trusted cloud mining provider in the world. The company was founded in 2013 and now owns mining farms located in Europe, America, and Asia. They have four different plans
1) Gold - $179 for 1TH/s
2) Platinum - $845 for 5 TH/s
3) Diamond - $3975 for 25 TH/s and custom plan as well.
The pay will be daily payouts. You will be given a share of BTC mined which depends on how much hash power you have bought. Maintenance fee of $0.00028 per GH/s per day will be taken from your share of Bitcoin. As these contracts are for life time (as long as mining is profitable) it is the most favorable contract. These contracts are sold like hot cakes and as of now they don’t have any Bitcoin contracts to offer and one has to always look forward to when they offer.
There were many people who got to know about Bitcoin mining later and found out Genisis mining isn’t offering any contracts. Hashflare has come to the rescue. The author has personally invested in Hashflare. It is the second well-known and legit company offering cloud mining contracts.
There are no plans, but you can buy starting from 10GH/s for $2.20. So you pay $220 for 1TH/s and the contracts last for one year. Payouts are daily and similar to Genisis mining. Maintenance fee of $0.0035 per 10GH/s per day will be taken from your share of Bitcoin. There will be a minimum amount of BTC which can be withdrawn and once it has reached you can withdraw and send to your wallet. There is also a feature of reinvest where you can reinvest your BTC to buy more Hash power and hence mine more Bitcoin and earn more Bitcoin.
I personally feel mining is still profitable and may vary from others opinion.
You can use this link to sign up for Hashflare : https://hashflare.io/r/C426ED0C