You must have heard about cryptocurrencies, especially Bitcoin. There could not be a single person out there who must not have heard about this cryptocurrency that rallied so fast in the last few years.
What is even more interesting to know is how the cryptocurrencies are produced or in other words mined. Cryptocurrencies are not produced like regular money. It is not governed by any central authority who can print it. Cryptocurrencies get produced by a method known as mining.
Mining of the new blocks
There is no central bank that regulates cryptocurrencies thus there is another way how every cryptocurrency transaction is gathered and recorded. This is done to form a new block. Those who carry out these tasks are known as dubbed miners. Every time some transactions are on the block when it gets appended a Blockchain. Those who append the block, in turn, get rewards with some amount of the cryptocurrency.
The task is hard to do and this is done so that the devaluation of the currency is prevented which could happen when lots of blocks are built. The miners would have to solve some complicated problems in order to mine cryptocurrencies.
Limitations of mining cryptocurrencies
The miners have to compete against each other when they are mining cryptocurrencies. The one who gets the right one forms a block and he gets a cryptocurrency payout.
The difficulty level gets higher and it gets harder as each new block needs to be mined. The rate at which the new blocks get created is steady. Also, there is a finite limit of the number of units that are generated.
Mining cryptocurrencies- Is it worth it?
Cryptocurrency mining can make some income for you and it can be done as a hobby. The digital currency is very assessable to the public now and a person can earn in hardware costs only. Cryptocurrency mining is definitely not a way to make enough income to be the primary source of income. You also need to invest a lot into hardware to start mining cryptocurrency in huge amounts.
It is late now and not as lucrative as it would have been had you can start mining Bitcoin in 2009.
The Bitcoin mining is not recommended for those who work on small scale. There is a lot of maintenance and investment costs and the process is also very difficult. This does not make it very profitable. It is profitable only when done on a large scale.