Importance Of Cryptocurrency Exchange
Is it Worth Mining Crypto Coin - What Your Cryptoc Experts Say?
If you'd have posted this question to a Cryptocurrency Exchange expert five years ago, the answer would be a resounding yes. Back then, before crypto became as popular and as mainstream as it is today, very few bitcoin miners were applying their computer power to mining bitcoin, and the difficulty (which is the limiting factor in the supply side of the equation) was very low.
To put this another way, it didn’t take very much at all by way of computing power and in turn, time and electricity to verify a block and to pick up some bitcoin as a reward.
There are some now infamous stories about individuals leaving their computers on overnight to mine bitcoin in the very early days and then throwing away their hard drives when they upgrade setups, not realizing bitcoin would eventually be worth thousands of dollars apiece.
Anyway, over time, the difficulty rate of bitcoin mining has increased dramatically, and it now takes huge dedicated mining rigs to do what one laptop was able to go back in 2010.
These mining rigs are expensive to buy. We're talking thousands of dollars apiece for the low end. No doubt, they consume a lot of electricity.
With difficulty being so high right now, they also, need a fair amount of operational time to return any degree of reward.
In other words, if you bought a bitcoin mining setup today, it would probably cost you more in electricity and initial outlay than you would be able to generate (in bitcoin, as a reward) in years of operation.
So why do people still do it?
Well, those that do mine bitcoin now are generally either large-scale operations that can afford to bankroll the setup of thousands of miners and then process transactions in the anticipation of a price rise (which, of course, would serve to increase the dollar value of their return even if difficulty increases) or groups of individuals that come together to for what is called mining pools?
A bit about mining pools
Mining pools are designed as a way to allow individuals with smaller amounts of processing power to contribute to the verification side of the equation and – in turn – benefit from rewards, without having to outlay a large amount of money to get it set up.
The pools combine the processing power of all of their members and then use said power to process and verify bitcoin transactions through the method outlined above in the What is bitcoin mining?
When the blocks are verified, and the mining pool receives a reward which, as mentioned, is paid out in bitcoin the pool distributes the reward to its members. Generally, the distribution is directly proportionate to the amount of hash power each member contributes to the pool.
So, if one member is contributing, say, 3% of the pools total hash power, he or she will receive 3% of the reward offered on that block, minus a small fee which is taken by the pool. This fee structure is a generalization sometimes the charge is taken from the first reward with the remaining portion distributed among members, sometimes a long-time member gets a more significant portion, etc. However, the concept is pretty much standardized across the major pools.
Some of the more popular pools include:
Antpool which is owned by Bitmain, one of the largest bitcoin mining companies in the world and the producer of the Antminer, the gold standard mining hardware in the space.
● BTC.top
● Slushpool
● BTC.com (also owned by Bitmain)
● Bixin
More than 80% of the networking hash power, spread across these pools, is located in China. This is for various reasons but is primarily rooted in the fact that electricity is cheap in certain parts of China and this maximizes profitability on the mined bitcoin.
There is an ongoing debate as to how this proportionate representation plays into the future of bitcoin. Specifically, is it safe or smart to have one nation and, for that matter, one very highly regulated and, to some extent, socially and politically unstable nation control transaction verification to this degree?
The answer is probably no, but there's not much that can be done about diluting processing concentration right now.
There's also a good chance that Bitmain, the king of the space, will launch an IPO near term.