Bitcoin has continued to cause quite a stir, and interest in this cryptocurrency is increasing at an incredible rate. And no wonder, considering that the value of bitcoins has been soaring, reaching a record high in March 2017, when bitcoin value exceeded the price of an ounce of gold. However, for those fascinated with this revolutionary currency who are itching to become involved, one key question still remains: It is better to trade bitcoins or to mine them? To help answer this question, we shall explore the two options at length below.
A short history of bitcoin mining
Unlike others types of currency, bitcoin is not distributed and regulated by a central government. Each miner becomes directly involved by using a special software to solve math problems for which they receive a certain number of bitcoins as reward. However, the difficulty of the math problems varies depending on how quickly they are being solved in the bitcoin network. In the early days, miners used the processors in their computers to solve these problems. As bitcoin evolved, miners soon learned that graphic cards were more effective in this undertaking. However, graphic cards also required more electricity and generated more heat. These days, most miners invest in an ASIC, an application-specific integrated circuit chip, which has been specifically developed for bitcoin mining.
Bitcoin mining today.
Since bitcoin has continued to grow in popularity, more and more miners have joined the network. The result here has been that it has become increasingly difficult for individual miners to solve the math equations required to generate bitcoins, since they become more complex the larger the bitcoin network grows. To deal with this issue, many miners now work together in pools, and each miner is rewarded according to their specific efforts within the group. In addition, many individual bitcoin miners can no longer afford the equipment and time investment involved to mine on their own. However, even for mining companies and pools, one risky feature of bitcoin mining still remains: bitcoin halving.
What is bitcoin halving?
When mining bitcoins, miners create a ledger of previous transactions which create a chain of blocks known as a “blockchain”. But these blockchains are not endless: Bitcoin’s code requires the amount of bitcoins created to be halved once 210,000 blocks have been recorded. Although economists have many theories on what this might mean for bitcoin, one thing remains certain: halving is hardest on the miners themselves. The monetary base of bitcoins is set at 21 million bitcoins, and this amount can never be increased.
Adding new bitcoins can be costly in terms of time, electricity, and business overhead, and the inevitable reward halvings can put a damper on many a mining operation, considering it means their earnings will be cut in half. Although halvings can be anticipated, the end result is usual a big loss. In addition, mining equipment and effort involved has become too expensive and complex for most private individuals to handle. Therefore, bitcoin trading is the less risky and ultimately more lucrative option.
What is bitcoin trading?
Bitcoin trading can be profitable both for financial experts as well as absolute newcomers. The great thing about trading bitcoin is that the currency is not dependent on the economic well-being of a certain country or region and trading goes on around the clock. Bitcoin is also extremely volatile, with its pricing wildly fluctuating. As with any type of trading, beginners should start slow by investing small amounts of capital while learning the ropes both to protect their assets as well as minimize risk. In addition, each investor should pay close attention to market signals to increase their understanding as well as learn many key bitcoin trading strategies.
Where can I buy bitcoins?
If you’re looking to buy and trade bitcoins, the UK bitcoin exchange has many companies that can help you complete this process. Companies on the exchange can advise you on many bitcoin trading related issues, offer you a trustworthy exchange platform, a fast an efficient way to buy and trade bitcoins, as well as the option to pay in various currencies using a variety of payment methods.
