Much is discussed about bitcoin, but little about how to invest in bitcoin mining and make money from the technology rather than the digital token.
Bitcoin mining is the process by which new units of cryptocurrency are created. Unlike paper money which is controlled by a government, cryptocurrencies don’t have any regulatory oversight, and are in fact controlled by a group of people called miners.
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With bitcoin, miners use specific software to solve algorithms and quantitative problems and are rewarded a number of bitcoins in exchange.
The current reward for mining one bitcoin block is now 12.5 bitcoins.
Mining a block and “solving the hash value” can often take weeks or months.
Bitcoin mining typically includes two functions. One is adding transactions to the blockchain- the distributed ledger technology behind cryptocurrencies- and releasing new units of currency.
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By GlobalDataWhile bitcoin mining is a very difficult process, theoretically anybody can do it once they buy the equipment, and even sitting from home.
Invest in bitcoin mining
This was the case to begin with. But over time, the blockchain technology has become so advanced that miners need to invest in bitcoin mining by buying professional-grade equipment to get the most out of the process.
Bitcoin mining uses vast amounts of electricity and industrial level cooling systems.
As Vlad Policovsky, partner of UK-based bitcoin mining firm Picatrix Consulting says: ‘Forget bitcoin, invest in bitcoin infrastructure.
He adds: “There’s no certainty at this point which cryptocurrency will still be around in two, five, 10 years. But the blockchain technology is here to stay – whether you like it or not, this is a new world. So that’s where we are investing.”
He began bitcoin mining in 2015, and the lucrative opportunities he sought, compelled him to quit his job and found Picantrix Consulting, which sets up and operates bitcoin farms.
In October 2018, he shifted his business into a data centre in south London’s Croyden. He runs 63 mining computers in the centre, and it is an example of how one can invest in bitcoin mining.
Mining farms, which are centres which have a significantly higher electricity threshold are important because the process of bitcoin mining uses up significant amounts of electricity.
According to Digiconomist, the total use of bitcoin mining hardware is estimated at 31 terawatt hours annually. This implies bitcoin mining is using more electricity than 159 countries.
Venezuela launched its digital currency recently, which has used so much energy, prompting a spate of electricity blackouts in the Latin American country.
Chinese Bitcoin mining firm Bitmain announced on 6 August it will build a new $500m blockchain data centre or “bitcoin farm” in Texas in the future.
So to invest in bitcoin mining requires a huge amount of cash. While it can be a very lucrative proposition, there is a high degree of risk involved.
Read PBI’s article on “are bitcoins a good investment ?”
