Cryptocurrency Mining: The New Gold In The Era Of Oil
Financial instruments are designed to build trust. Credit appeared in Medieval Italy and allowed business parties to secure funding when money was scarce or the parties did not trust each other. The first capital market opened in Amsterdam more than 400 years ago. It enabled a small but incredibly capable European nation to publicly fund the Dutch East India Company, one of the biggest business entities in history. After that, commercial banks started to issue credit in the form of classical banknotes, which national banks swiftly took up.
National banks are very much a different story than commercial ones: they are too big to fail. The governments that operate them have all the tools possible and a few impossible ones, giving them much power. It is a very unlikely government that has resisted the temptation. Obviously, this has eroded trust in the economy. The first cryptocurrency, Bitcoin, entered this trustless economic setting in the middle of the 2008 financial crisis.
What are cryptocurrencies?
Bitcoin is a financial instrument that is best described as digital gold. Its background lies in cybersecurity, making it secure against hacking and tampering. This robustness against tampering covers all attempts to print more bitcoins. The problem was that any central authority that may end up governing Bitcoin could also fall prey to the agency problem, just like commercial and national banks did in the past. Bitcoin was created with a specific goal not to allow this to happen. The solution: use the network approach.
Bitcoin, and all cryptocurrencies that came after, use the network technology called the blockchain to maintain the balance of payments between everyone who uses it. In addition, some new coins are regularly created, but they are given only to those who let the Bitcoin network use their computers. It's called mining and used to be so simple that a laptop was enough. Nowadays, however, it requires equipment rivaled only by research laboratories. In fact, the process is so elaborate that it is often best left to be dealt with by professionals who operate and maintain cryptocurrency mining equipment.
What is mining?
Mining is the process by which the network of computers maintains the blockchain. It checks the validity of Bitcoin transfer requests and makes sure no bad actors are capable of pretending to do the work while writing billions into their wallets in the meantime. Of course, whoever provides their computers to do all this work has to be rewarded, except the reward doesn't come as a regular paycheck; instead, it comes as a lottery ticket. In other words, after computers have checked the validity of the pending bitcoin transfer requests in the network, they have to guess a number. This is not a joke.
If a computer guesses correctly, it receives the reward, which, according to the official Bitcoin website, consists of newly minted bitcoins and transaction processing fees paid by ordinary users. The best part about mining and collecting rewards is that anyone can participate, but the worst is that no one stands a chance of getting the reward with a home PC. Today, bitcoin mining requires special equipment.
How to Choose and Operate a Bitcoin Mining Rig
Mining is extremely competitive since only one computer out of the world obsessed with cryptocurrencies can receive the reward for one blockchain block calculated every 10 minutes. Although mining can be performed on any computer or general-purpose computer equipment like GPUs, a common reason for the notion is that dedicated equipment should perform better. Statistically, even a home PC has a chance of winning the Bitcoin lottery, but the question here lies in the electricity costs of calculating one guess.
Professional dedicated Bitcoin mining rigs like Antminer S9, Antminer S19 95T, or Whatsminer M30S+ 100T have three main characteristics described below:
- Algorithm
- Hashrate
- Wattage
The algorithm used in the Bitcoin blockchain is called SHA-256. It is one of the standard algorithms used in information technology and a reference to Bitcoin's cybersecurity roots. Next, the hash rate is the speed with which the rig performs the guesses needed to win the lottery mentioned above. Last but not least is the wattage, the amount of power the rig uses. The ratio of the rig's wattage to its hash rate is the most useful characteristic of mining hardware. Once the best mining rig is chosen, all other organizational questions remain.
Where to Next?
Mining requires setting up a rig and maintaining it in the best operating condition 24/7. In addition, the modern mining business needs time and expertise to operate, troubleshoot, and access affordable electricity. Services that provide opportunities to invest in bitcoin mining in Dubai aim for customers who wish to invest in this new technology but do not necessarily have the expertise or the time to operate a private mining rig.
The profitability of Bitcoin mining comes from a combination of an efficiently-operated mining hub and the ability of investors to maintain the quality of equipment at a reasonably high level. Old mining hardware can be inefficient in terms of energy use per calculation unit. This can lead to a situation where the costs exceed the expected statistics-based Bitcoin earnings, which makes the whole operation a simple money-draining exercise. A combination of hardware maintenance and investment monitoring has the best chance of success.
