The Advantages and Disadvantages of Bitcoin Mining

CIOReviewIndia Team | Saturday, 21 November 2020, 16:20 IST

Bitcoin miningCurrently, there are over 4.8 million users that own bitcoin, and it’s very likely that this number will increase in the future. One of the factors that have made bitcoin successful is the peer-to-peer payment network that relies on miners to operate properly. 

Even though there’s an increased number of people that are more interested in trading online than mining, it is still a significant part of the network, and it can be profitable. However, there are both disadvantages and advantages associated with mining that you should be aware of. 

Blockchain Network

The peer-to-peer system is completely decentralized and operates without a central authority. That being said, it was created so one entity cannot control the network, hack, or alter the data in the system. The blockchain network is maintained on thousands of servers worldwide, while the network is essentially a ledger of digital transactions that are distributed throughout the network. Everyone can see the data on the network and the new entries that arrive. Hence there’s complete transparency. 

On the other hand, the transactions are recorded with a cryptographic signature called the hash. Therefore, it is impossible for someone to change blocks of transactions. Also, it helps that new block s of transactions are added constantly to the network. In fact, approximately every 10 minutes, there’s a new block of transaction in the network. But, in order for the transactions to be processed in the network, they need to be approved by the miners. 

Essentially, the role of the miners consists of securing the network and confirming blocks of transactions. They complete this task by solving difficult computational problems, and also, to get the reward, you need to be the first one who solves it. 

The Block Reward

The main advantage is that you will get bitcoin tokens for your work. Aside from your reward, you will also receive transaction fees. But, you should know that after each bitcoin halving, the reward gets smaller. At the moment, they earn 6.25 BTC, and the reward will be halved in 4 years when another halving occurs. But, as the price of bitcoin goes up, especially in 2020, where it reached $17,000 in November, there will be a great demand for BTC. 

So, the next best option is to invest in BTC on online trading platforms. You don’t need a huge investment; in fact, you can sign up on reputable exchange platforms in a couple of clicks. The bitcointrader.site is an excellent platform where you can earn a return on investment of up to 400% every day. But, in order to register on the site, you need to deposit  at least $250. 

On the other hand, the Bitcoin Trader software is an automated trading software that trades on your behalf. So, this exchange platform is the perfect choice for beginners. Besides, it has received a nomination for being the most profitable robot for BTC trading in 2020.

The Investment

But, even if you’re able to solve difficult math problems, you also need to be aware that you will also need to invest in bitcoin mining hardware. Moreover, you also need to put in the effort and time to be able to complete the task. 

On top of these costs, you also need to be aware of the electricity bill, as it will likely go up because mining is also time-consuming, and it needs a lot of computing power. Actually, mining automatically gets more difficult as the computing power rises in the network and gets easier when the collective computing power goes down. 

Join a Pool

However, on most exchange platforms, there are fees for using the site and making withdrawals and deposits. You will need to do your own research and pick a platform that suits your goals and budget. The same goes for mining. You need to calculate the costs and see if it is profitable for you to mine on your own. 

As we mentioned earlier, it is an investment, but there are generally smaller fees if you join a mining pool. You also might be able to reap better results faster because you will be part of a group of other miners and combine your resources and computing power. But, keep in mind that as soon as you get a reward, it will be divided between the participants of the pool.  

Voting Power

Another advantage is that miners get is voting power, which helps when new changes are proposed in the blockchain network. This means you will participate in the decision-making process that ultimately affects the entire network. So, if you want to become part of the bitcoin community, then this is another advantage that you should take into consideration, along with your short-term, long-term goals and financial situation.

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