1. PixelPlaygroundHome
  2. Blockchain Briefs

Why is mining cheaper than buying coins (Why mining is profitable)

• Blockchain Briefs • 80 views

Why is mining cheaper than buying coins? The author of this article is Li Xiaol

Why is mining cheaper than buying coins (Why mining is profitable)

Why is mining cheaper than buying coins? The author of this article is Li Xiaolai.

1. The mining principle of Bitcoin: mining digital currencies through ASIC chips and establishing a proportional relationship between the mined assets and the computational power used. 2. Bitcoin stores a large amount of computing power, resources, and time units in the network, while utilizing CPU/GPU technology to enhance performance. 3. How the mined coins handle data analysis and transaction records. 4. Bitcoin’s network status update (block reward halving), which allows for more accurate prediction of the current network operation. 5. Many encryption algorithm projects currently on the market use this mechanism.

2. The mining principle of Ethereum: firstly, it uses the proof-of-work (PoW) blockchain; the second process is verifying transactions and transmitting the confirmed data to other consensus layers.

3. The basic operation process of Bitcoin is “transfer” – when a user sends a transaction, the system determines the validity of the transaction based on the block height of each block; when receiving a transaction, the system displays the corresponding token balance as the execution result to the customer. This means that the user’s funds will be locked on the chain for a period of time before they can be restored to normal status, and they will only be unfrozen after receiving these tokens. This process is called “packaging”, which means that to complete a complete work, the transaction needs to be broadcast to the entire node. Then, all the transactions are packaged and returned to the mainnet, avoiding the problem of duplicate checks. (Image source: CoinMarketCap)

Why is mining profitable

After the halving of Bitcoin, mining has become the focus of discussion. Why do wealthy people in the cryptocurrency circle buy mining machines? The reason is that due to the reduction in Bitcoin output and price increase, investors have started to invest in mining. All of this is attributed to the price and market demand of digital currencies.

So what exactly leads to people’s interest in the cryptocurrency market? The answer is simple, the price of Bitcoin keeps rising. With more and more government regulations and capital institutions entering the industry, and the increasing demand for crypto assets, Bitcoin has become a consensus as a store of value. “Bitcoin” is called “blockchain” and it represents the digital form of a virtual commodity (such as gold). But since it is a new means of production, its supply will not decrease. In other words, “These things are meaningless if we use Bitcoin and other crypto tokens as speculative tools.”

Therefore, “When a new project appears, many friends will ask me how to mine this coin?” So I came up with a way for them to make money through mining. Of course, if you don’t understand this method, you need to know how to buy Bitcoin first. What is mining? Miners need to pay attention to some important issues besides traditional financial services:

1. High operating costs of mining farms;

2. Large equipment maintenance costs of mining farms;

3. Shortage of electricity resources. (These are just for easy understanding)

In addition, mining companies generally have three main lines of business, which are mainly based on electricity fees or other economic models, including sales, maintenance, etc. Among them, the most typical is low electricity cost. But in fact, electricity costs are very expensive, even much cheaper than ordinary salaries.

In theory, mining is actually a small business – you can earn some wealth on paper as long as you spend some time. And remember that mining is also an emerging industry, once there are a large number of idle resources, it will generate a large amount of cash flow.

The reason why mining can bring such a large profit margin mainly lies in its higher efficiency and lower risks. And this is also an advantage of mining, it can help us better manage our financial situation. Is it worth calculating the profits of wealthy people in mining? Many people may think that the profitability of mining is reduced due to factors such as high barriers and high transaction fees. However, looking at it now, although the computing power has surged, mining is still one of the most popular choices in the entire network. After all, mining is still an emerging industry, which not only requires paying certain electricity fees but also bears corresponding social responsibilities and enjoys various dividends.

This article and pictures are from the Internet and do not represent Fpips's position. If you infringe, please contact us to delete:https://www.fpips.com/24342/

It is strongly recommended that you study, review, analyze and verify the content independently, use the relevant data and content carefully, and bear all risks arising therefrom.

Like (0)
Previous 08/16/2023 15:34
Next 08/16/2023 15:56

Recommended articles