Bitcoin Mining does it work or is it a scam.
Seems like in just about every get rich quick or home based business blog I see they are promoting online bitcoin mining. Bitcoin online mining is advertised just about every way you can imagine and you hear things like bitcoin mining client, earn bitcoins mining, cuda bitcoin mining, bitcoin reward and many other variations of the theme that you can mine bitcoins online with your computer.
Now, of all the get rich quick or home based business (I stretch to call bitcoin mining a business) this one seems the most implausible. I guess one way you could stretch bitcoin mining online into a business is if you are trying to sell the process to others for a profit. Maybe that way I could see the business angle.
So what is a Bitcoin?
To make the process more simple, I will summarize what I found on Wikipedia.
A bitcoin is a cryptocurrency and payment system. It works without a central bank or administrator which is one thing that brings up some red flags to me, but that is just my suspicious mind.
According the Wikipedia, Bitcoins are created as a reward for mining (we will get to that in a minute) which based on the recent spike in bitcoin prices and the fact that you can bitcoin mining free then the process must have gotten much more difficult. That or the concept of supply and demand do not apply to cryptocurrencies. It should also be noted that just because you can bitcoin mine free does not mean there is no effort in it.
Bitcoin is the first decentralized and uncontrolled currency.
Something to think about: If you lose your private key or hard drive with your wallet gets corrupted, or loss your bitcoin wallet seed your bitcoins are gone forever.
What is Online Bitcoin Mining?
Ok, if you are not familiar with the concept of bitcoin mining this is going to get a little weird.
Bitcoins are created or mined using computers to solve math problems and are paid in bitcoins (or fractions of them) in exchange. This both issues more bitcoins and gives people a reason to mine them.
Bitcoin mining online is basically the process of adding transaction records to the public record of the block chain (past transactions). This chain confirms to the rest of the network that transactions have taken place.
As we stated above bitcoin mining serves two purposes:
- Confirms a transaction when enough effort (computer power) is devoted to a block.
- Issues new bitcoins to a block.
Below is a step by step look at the process.
- Transactions – verify they are valid.
- Bundle the transactions in a block.
- Selects the header of the most recent block and inserts it into a new block
- You must solve the proof of work problem (computer does this).
- Once you find the solution, the new block is added and the blockchain is propagated to the network.
To mine bitcoin you need time, hardware (could be your computer) and electricity. Many of the arguments I have seen that online bitcoin mining is scam are based on the fact that once you add up the time, hardware and electricity mining bitcoins actually costs more than you get.
If you are serious about bitcoin mining, you can actually buy special hardware to help you bitcoin mine online and store your bitcoins once mined. You could set up entire networks with tens of thousands (or more) of dedicated hardware just for the purpose of online bitcoin mining. You could spend an infinite amount of time, money and theoretically an entire power plants energy production just funneled into bitcoin mining.
Remember you are trading hardware, energy and time in exchange for bitcoins. Bitcoins are not exactly free other than it is free to try to mine bitcoins (assuming you have hardware). But online bitcoin mining is not creating a bitcoin from nothing. You must work for bitcoins just like you work for anything else. You are trading one set of assets for another.
What Makes Online Bitcoin Mining Difficult?
I really wish there was a simple section in this article, but here goes. Basically in order to keep a limited or predictable supply of bitcoins the process as to be easier or harder depending on the number of miners and the resources being applied to bitcoin mining.
If more miners join the network the block creation rate increases which increases the block creation rate. This causes the average mining time to decrease therefore mining difficult automatically increases. This causes the block creation rate to go down and the average mining time goes back to normal. Basically the more people and resources applied to online bitcoin mining causes the difficulty to increase to reduce the production of bitcoins.
Wow, right? Just keeping it simple the more people that do it the more resources and time you need to apply.
This would seem to imply that if the cost of bitcoins is going up exponentially, then the resources necessary to create a bitcoin must be going up exponentially since this is in essence a trade of a bitcoin for energy, hardware and time. Therefore, if bitcoins are really expensive you can assume they will be very difficult to mine.
What is Bitcoin Cloud Mining? Also called Bitcoin Cloud Hashing
This process enables you to purchase mining capacity in data centers as opposed to setting up your own hardware for online bitcoin mining.
Your expenses for hardware, software, electricity and bandwidth are in the price you pay for the bitcoin hashing site. This does enable you to better understand the exchange rate between the time, effort and hardware as compared to your actual bitcoin production.
This would seem to be a better solution but there are a number of things you need to take into consideration.
With the hash mining you will not have to deal with hardware upkeep, heat and noise. You will have no electricity costs and will not have to sell your equipment when online bitcoin mining is no longer profitable. Sounds goods promising right. Well there are some disadvantages also.
First of all how do you know the online bitcoin cloud you are using is honest? Are you actually getting all of your bitcoins? You have no real way to verify the operation or your bitcoins. You profits over the long term might be smaller because the online bitcoin cloud service will probably have other operating expenses you pay for in your fees. The could service could simply go out of business.
Overall if I were serious about bitcoin mining I might start with a cloud service but long term I think I would like to control the operations. Cloud mining is a good way to start if you are interested. No reason to spend a fortune on hardware for something that might not ever be profitable for you.
What do you need to get started online bitcoin mining?
Above I stated that you could use your computer, which may be true if you have a super high end computer but in all probability you are going to need to purchase special hardware designed for bitcoin mining. If you do not, you will spend more on electricity than you will get in bitcoins. Sorry, times have changed.
There are a number of bitcoin could or bitcoin hashing sites you can use for cloud mining. Which I suggest as a starting point.
(I have not reviewed or verified the below sites, they are just for your information).
Assuming you are not going to use a bitcoin hashing site, you are going to need to purchase your hardware.
Once you get your hardware and get it set up you will need to download free bitcoin mining software. Below are some links to some bitcoin mining pc software.
Bitcoin mining software download.
(I have not reviewed ore verified the sites below. Just for your information)
The bottom line on getting started is you must be REALLY committed if you want so set up your own hardware and software system for online bitcoin mining. You other choice is to trust a web based service to give you more money back than you give them. You are trusting them to be honest and trustworthy.
I guess I am not that trustworthy. I do not believe I can pay someone to mine for me and then just turn over all the profits to me. Yes, they might give me some back but it would be way too easy for them to easy for them to skim off the top. Not sure how you would really know.
There is a lot of debate on whether bitcoin mining is currently a scam or not. Noticed I said currently, it is possible in the beginning it was not but now ‘may’ be. I say may because you can actually mine bit coins therefore it is not a scam in that sense, unless you are dealing with disreputable cloud mining service. I did not review those for this article so do your own research.
I think the reason many people feel that online bitcoin mining is a scam now is because it can be effectively argued that your cost in hardware, energy (power) and time will be greater than anything you will get as a bitcoin mining reward.
Yes, if you are 100% committed and jump in to the deep water with the full power of a huge computer center at your back already you might be able to make money. But just starting out, I am just not sure online bitcoin mining is the best use of your limited time and energy (literally). There are better options out there.
If you don’t believe me, CLICK HERE.
If you decide to continue forward with your bit coin mining expedition, good luck and let us know how it goes.
Please comment below with your experiences and questions.