New To Bitcoin, These Are the Six Common Questions

September 1, 2020 - Expert Commentary, How-To Articles

Bitcoin Mining Tutorial

The fear of the unknown.

An instinctive human trait, yet one that keeps most people from exploring amazing opportunities. 

Bitcoin is one of those assets that the more one gets to understand it, the more appealing it gets. Despite not having the mainstream media coverage other assets enjoy, this coin has managed to carve up a great reputation for itself.

There is probably no faster way to understand Bitcoin than to look at common questions from people who are learning.

Here are some of them, with answers for equal measure:

  1. What Is Bitcoin, And Who Controls It?

In the general sense, Bitcoin is a peer-to-peer digital currency. It doubles up as an asset because most of its owners don’t use it as a payment medium but rather a speculative asset. Bitcoin is decentralized, meaning that it does not have a central issuing authority like the Federal Reserve.

Therefore, no single person or entity can be said to control Bitcoin. It runs on an immutable digital ledger called the blockchain, which resides on thousands of computers called “nodes.” These nodes are vital in keeping the network decentralized and operational. A mysterious person or entity called Satoshi Nakamoto was visible in the early years of Bitcoin but has since receded into oblivion, leaving Bitcoin to run as a self-sustaining consensus network.

Bitcoin relies on cryptography to function. Cryptography utilizes encryption of data to ensure that each transaction is secure and between the transacting parties. Bitcoin is composed of bits of data accessed through encryption keys called private keys. Users must keep these private keys secure because loss translates to losing Bitcoin.

The blockchain acts as a permanent record of Bitcoin transactions. Transactions get bundled together into collections called “blocks” which are then added to the blockchain. Once a Bitcoin transaction is added to the blockchain, it cannot be reversed retroactively. 

  1. What Is Its Value Proposition? Is It A Scam?

To understand why Bitcoin is valuable, let’s give it some context. Go back to the year 2008. The defining event was a catastrophic financial crisis, followed by Central Banks printing money on overdrive to seal the cracks. 

The crisis was mostly caused by the irresponsibility of banks. After the crash, banks emerged largely unscathed, much to the dismay of the public. The entire crisis was an indictment of the banking system and centralized control of the monetary system.

This innovation came up in 2008, and it was no coincidence. Bitcoin eliminates centralized control and has a fixed total supply of 21 million to prevent reckless money printing that is a feature of today’s central banks. The stability in supply is at the core of Bitcoin’s value proposition.

It is, therefore, a form of digital gold. Admittedly, its value is way more volatile than gold. However, this should not be used to cast aspersions on the legitimacy of the coin because many traders reap benefits from the price fluctuations. Bitcoin is a legitimate asset that is here to stay.

Many cryptocurrencies have tried to emulate Bitcoin with mixed levels of success. However, its power of incumbency and being a pioneer are decisive. Bitcoin is still more valuable than all other cryptocurrencies combined.

  1. What Is Bitcoin Mining?

Bitcoin mining is the process by which transactions are verified and added to the blockchain. Remember that the network does not have a centralized supervisory entity. Mining plays a vital role in supporting the network and facilitating commerce. 

For their efforts, miners get rewards in the form of Bitcoin and transaction fees. The Bitcoin network adds a block to the blockchain roughly once every 10 minutes. A miner who successfully adds a block gets a reward of 6.25 Bitcoins, which at market rates is a cool $66,000 worth of Bitcoin at current market rates. 

Mining is a competitive process, and those with advanced computer equipment stand a better chance. Besides, mining is power-intensive and produces a lot of heat. This is why hosting services that provide natural cooling and cheaper power like VBit Technologies are popular.

  1. How Does Bitcoin Mining Work?

In mining, participants bundle together transactions into a “block” that is one megabyte in size. This may sound like a small space but is enough to represent thousands of individual transactions. 

Miners try to compete to be the one to add the next block into the existing blockchain by solving mathematical problems in a process called Proof of Work (POW). 

The solving of these math problems is done by computer, meaning that more powerful computers stand a better chance than slower equipment. 

Nowadays, miners rely almost exclusively on Application-Specific Integrated Circuits (ASIC) rigs for profitable mining.  These rigs have also undergone upgrades over the years to compete more favorably. 

Therefore, elite computer hardware makes it profitable to mine Bitcoin. You may need to invest initially, but the rewards make it worthwhile.

  1. Who Can Mine Bitcoin?

Anyone can mine Bitcoin is the short answer.

Provided you have the right equipment and conditions.   

You need computer hardware to mine Bitcoin, but not any kind of hardware. 

It is impossible to mine profitably using your home PC. One needs the latest generation of ASIC rigs to have an edge in this competitive environment. If you need a rig at home, a professional equipment reseller like VBit Technologies can help you get up to speed. However, get ready for an enormous power bill that could make mining unprofitable. 

This is why mining pools and hosting services have become popular. Getting the right conditions for a small scale miner is difficult.  

A hosting service like VBit Technologies helps even the playing field for you.

  1. What Do You Do With Bitcoin You Get?

Once you get into mining, there is the obvious question of what you should do with the Bitcoin you mine. As aforementioned, Bitcoin is both a medium of exchange and a speculative asset.

You can utilize Bitcoin to purchase items at many retail outlets. However, you first need confirmation that the retailer accepts Bitcoin before going ahead with this option.

Also, you can either trade the Bitcoin you mine or hold it waiting for price appreciation. Bitcoin has shown its potential to appreciate rapidly within short timeframes. The monster rally of 2017 is what struck the imagination of investors and made Bitcoin a household name.

Either way, you have to store Bitcoin safely. Hackers target Bitcoin owners with lax security to try and make a quick buck. This is one feature you have to place the highest priority.

Mine with VBit Technologies to Get Bitcoin

From the aforementioned, Bitcoin can be a lucrative asset. Upon understanding this asset better, one gets to appreciate its great potential. 

VBit Technologies has a direct line to the leading ASIC manufacturer, Bitmain. Should you wish to get started in mining, you need not look any further.

Mining solo can be challenging because of the power consumption involved. Besides, ASIC rigs need constant cooling. VBit Technologies offers hosting services in our data centers in North America that are strategically located to maximize on natural cooling and cheap renewable power. 

Having learned a bit about Bitcoin, VBit Technologies is the perfect ally to make the most of this crypto asset.

Sign up with VBit Technologies today and mine Bitcoin!

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