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If you want to join in the bitcoin frenzy without simply buying the digital currency at the inflated prices, then bitcoin mining is another way to get involved. But, mining bitcoins does come with expenses -- and risks -- of its own. And the more popular bitcoins become, the harder it is to mine profitably. .

Unlike paper currency, that can be printed by both governments and issued by banks, bitcoins do not arrive in any physical form. That makes a major risk, as hackers could theoretically create bitcoins from nothing. Bitcoin mining is the way the bitcoin network keeps its transactions secure.

Bitcoin transactions are secured by blockchains, which compose a public ledger of transactions. Because of how blockchain transactions are structured, they are extremely tough to alter or undermine, even from the best hackers. However, in order to secure those transactions, someone needs to dedicate computing power to verifying the activity and packaging the details in a block that goes into the bitcoin ledger.

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As a reward for doing the work to monitor and secure transactions, miners earn bitcoins for every block they successfully process. .

The bitcoin founders have set a limit of 21 million bitcoins available for mining. Once that amount is reached, miners will continue to be able to benefit from transaction fees, but they won't be granted bitcoins as a reward for their work. As of mid-January 2018, roughly 16.8 million of the 21 million bitcoins have already been mined.  Assuming that the bitcoin mining industry doesn't change dramatically, it seems like we won't hit the 21 million-bitcoin limit until the year 2140. .

During the early days of bitcoin mining, miners would often download a software package designed to allow their computers to process bitcoin transactions in the background. Unfortunately, that is no longer sensible, because solving bitcoin transactions has become too difficult for your computer to manage.

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The bitcoin network is designed to produce a certain number of new bitcoins every 10 minutes. If only a couple people are bitcoin mining at any given time, then the network will be generous and discuss bitcoins readily in order to reach the predetermined number. However, now this bitcoin mining has become so widespread, the network has become much stingier about handing out bitcoins to miners.

These days, in order to have a chance at being rewarding, miners need to adopt one of two approaches: 1) buy technical hardware (aka a bitcoin mining rig) or 2) join a cloud mining pool. .

To begin with your own mining rig, you purchase hardware designed for mining bitcoin (or some other digital currency), set it up, and let it run 24/7 solving bitcoin transactions. Ideally, this will result in More about the author a continuous flow of payments without your needing to get involved.

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While it's fairly simple to establish and use a bitcoin mining rig, actually making money on the course of action is something of a challenge. Because more and more people are signing up to mine bitcoins, the mining procedure continues to get more difficult and will likely keep doing this for a while.

And since bitcoin mining rigs aren't cheap -- expect to pay at least $1,000 for the hardware, or even several times that to get a top notch rig -- having to replace it every year or two takes a huge bite from any profits you earn from mining. Plus, most mining rigs consume enormous amounts of power, which means you also have to subtract that expense from the bitcoins you earn to determine your own profits. .

When buying and maintaining your own mining gear doesn't appeal to you, then cloud mining might be the way to go. Cloud mining companies invest in enormous mining rigs, often filling entire information centers with all the hardware, and then market subscriptions to individuals interested in dipping a toe into bitcoin mining.

The biggest challenge facing cloud mining readers is avoiding fraud. The field is rife with pseudo-companies which sell thousands of multiyear subscriptions, pay out anchor for a couple of months, and then disappear into the sunset. If you choose to try cloud mining, do your homework in advance and learn this here now confirm that the company you're dealing with is a true cloud miner and not a scheme.

Avoid companies with anonymous domain registration (you can look up their registration info Network Solutions), as well as any mining company that"guarantees" profits or offers huge incentives for referring new customers; anything over a 10% referral commission is deeply suspicious, because legitimate mining pools simply don't generate a large enough profit margin to pay big commissions. .