On the other hand, Bitcoin mining is one of the ways that you can get Bitcoin, but it's sporadically rewarding, and compared to trading online, a painstakingly tedious process. Still, it has a magnetic appeal for users, especially with the appearance of mining farms and pools. Here we take a look at the pros and cons of mining and mining farms and pools.
How Does Bitcoin Mining Work?
The primary reason why people want to mine is, of course, the prospect of obtaining BTC. More specifically, the miners approve the block of transactions, and by doing that, new BTC enters the network while also making sure the network stays safe by validating the transactions.
That said, the role is extremely demanding. Although solving computational problems to legitimize the transactions in the network might sound easy, it's not actually. As the cryptocurrency gained more fame, the number of miners grew. Thus, today the competition is fierce and based on the entire computing power on the network, the difficulty of mining increases.
In addition, the block reward miners receive, which is, by the way, the main incentive for joining the network, is halved after 210,000 BTC. When the network was brand new up to 2012, it was 50 BTC. After the next Bitcoin halving in 2016, the reward was reduced to 25 BTC. Finally, in May 2020, it decreased from 12.5 BTC to 6.25 BTC.
That said, Bitcoin mining becomes less accessible to solo miners with each passing year. Otherwise, because mining is competitive, you will probably need specialized mining high-end equipment. So, it's safe to say that mining, especially at first, is a costly endeavor that takes a lot of time.
The Appeal of Trading Sites
This is one of the factors that prompted people to want to get into trading online. Nowadays, users can access a vast number of trading platforms from their smartphones and tablets. On online trading sites, you will be able to buy Bitcoin, exchange your BTC for other cryptocurrencies or even fiat currencies.
So, on great exchange sites like the Bitcoin Prime, you can easily invest in Bitcoin by creating an account on the website. Also, you need a minimum deposit of $250. On the platform, you can potentially make 60% in daily profits. As this is an advanced auto-trading system, users need to spend only a couple of minutes per day on the site. A great part of the work is done for you, which is awesome if you're busy most of the time.
Mining Pools vs. Mining Farms
The mining pools were created as a response to the increased competition in the blockchain system. Miners that are part of a mining pool contribute with their processing power to the pools that have a mission to quickly validate transactions and get more block rewards.
There are differences between mining pools in terms of the way they split the rewards. Most of them proportionally share the reward among the members of the pool. In other pools, also known as pay-per-share mining pools, all participants get an appropriate payout even when the pool didn't manage to get a block reward. A good idea is for users to learn more about mining, specific mining pools, and their policies before they join one.
For instance, some pools ask their participants to pay a fee in order to join the group. But, you need to calculate the return on investment based on your individual financial situation and costs.
Moreover, mining farms are situated in a large space, like a warehouse, and use thousands of computer systems dedicated to mining, fans to cool the equipment, and power supplies. There are even countries that have built massive mining farms.
Actually, some of the biggest mining farms are located in Russia, China, and the USA. It's worth mentioning that most mining farms are built by companies that have their own investors and intend to mine on a large scale, professionally. This means that mining farms have the enormous collective processing power and are able to reap the benefits of mining faster.
The Bottom Line
The cryptocurrency market is getting an unbelievable amount of attention due to the record-breaking bullish cycle of Bitcoin. Bitcoin mining, compared to trading, needs a great investment of not only equipment but also time and electric energy. Nevertheless, because mining is an essential part of the blockchain network, it will never lose its appeal. If you want to become an investor, it depends on your personal financial goals and research, to decide whether mining is profitable for you.