While many investors, like Warren Buffett, are bearish on bitcoin, that hasn't stopped the iconic cryptocurrency’s surge. As its price continues to soar, so has an interest in bitcoin as an investment. If you're new to the concept of bitcoin mining, here's everything you need to know about obtaining the cryptocurrency and what the future might hold for it.
Bitcoin launched in 2009, just in the aftermath of the 2008 global financial meltdown caused by the mortgage crisis. That makes some believe the cryptocurrency was built for financial crisis, which partly explains why interest in bitcoin has soared in the COVID-19 pandemic.
Although bitcoin is the oldest cryptocurrency in use today, many people still don’t understand everything about itsuch as how to obtain bitcoin and the concept of mining it.
What is bitcoin mining?
You can obtain bitcoin in several ways. Merchants, for example, can accept it as a payment. Major retailers that accept the cryptocurrency as payment include Amazon-owned Whole Foods, Gamestop, Overstock.com, and Lowe’s.
The other way to obtain bitcoin is purchasing it using fiat currency like the dollar, which you can do at crypto exchanges. Then there’s bitcoin mining. Bitcoin mining is the process of adding transaction records to the Bitcoin blockchain. Miners who help maintain the blockchain receive new coins as compensation for their labor. Therefore, mining is the primary way new coins are created.
How do you mine bitcoin?
If you feel like getting into mining activity, you may wonder how bitcoin is mined. Cryptocurrency mining is a taxing activity that involves solving complex mathematical problems as part of verifying transactions on the blockchain.
Bitcoin miners rely on sophisticated computing machines to validate transactions on the blockchain for the chance to receive rewards. American chipmaker Nvidia is one of the suppliers of the powerful graphics processing chips used in cryptocurrency mining systems.
Is bitcoin mining legal?
Bitcoin mining is perfectly legal in the U.S. and many other countries. For example, China has a vibrant bitcoin mining industry, although authorities there routinely crackdown on the crypto industry.
Is bitcoin mining profitable?
Bitcoin mining can be profitable. However, several factors will determine whether a cryptocurrency mining venture actually nets a profit. The factors include the cost of mining systems and the electricity to power them. Cryptocurrency mining systems typically use a lot of power.
The other factor is the difficulty of mining. The more people involved in mining bitcoin, the harder it gets to solve the mathematical problems needed to maintain the network. Therefore, mining can be profitable if the price of the bitcoin reward you receive is higher than the cost of mining it.
Can bitcoin be converted to cash?
If you hold some coins in your digital wallet, you can sell them on a cryptocurrency exchange for cash in fiat currencies like the dollar. You can withdraw the cash to your bank account or through platforms like PayPal to spend on purchases. You can also convert bitcoin to cash through bitcoin ATMs. There are thousands of cryptocurrency ATM locations around the world.
Which bitcoin wallet is best?
A bitcoin wallet holds your bitcoin assets and keeps them secure from hackers. The best wallets for secure storage are from cryptocurrency wallet providers like Coinbase, Binance, Exodus, Trezor, Electrum, and Mycelium, all of which are highly regarded among the cryptocurrency community.
Is bitcoin a good investment?
Bitcoin may be a good investment for those seeking alternative assets outside the traditional financial system that offer protection from inflation. While central banks can print an infinite amount of fiat currency and continue to dilute its value, the iconic cryptocurrency has a fixed supply capped at 21 million units. Therefore, bitcoin investors don’t have to worry about inflation eroding the value of their investment.
Will bitcoin replace the dollar?
Some believe the dollar will collapse one day and cryptocurrencies will take its place. The idea that bitcoin will replace the dollar is one reason some believe it’s a good investment now.
The backlash that Facebook’s Libra cryptocurrency received from monetary regulators around the world, including the Fed, made some to believe cryptocurrencies really pose serious existential threat to the dollar. However, nobody knows when bitcoin would replace the dollar, if at all.