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If you want to join in the bitcoin frenzy without simply buying the digital currency at the inflated prices, then bitcoin mining is another way to become involved. But, mining bitcoins does come with expenses -- and risks -- of its own. And the more popular bitcoins become, the harder it is to mine profitably. .

Unlike paper currency, which can be printed by both governments and issued by banks, bitcoins do not arrive in any physical form. That creates a major risk, as hackers can theoretically create bitcoins from nothing. Bitcoin mining is how the bitcoin network keeps its transactions secure.

Bitcoin transactions are secured with blockchains, which compose a public ledger of transactions. Due to the way blockchain transactions are structured, they are extremely difficult to change or undermine, even by the best hackers. However, in order to protect these transactions, someone needs to dedicate computing power to verifying the activity and packaging the facts in a block which goes into the bitcoin ledger.

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As a reward for doing the work to monitor and secure transactions, miners earn bitcoins for every block they successfully process. .

The bitcoin founders have put a limit of 21 million bitcoins offered for mining. Once that total is reached, miners will still be able to benefit from transaction fees, but they won't be granted bitcoins as a reward for their job. As of mid-January 2018, roughly 16.8 million of the 21 million bitcoins have been mined.  Assuming the bitcoin mining industry doesn't change dramatically, it looks like we won't hit the 21 million-bitcoin limit until the year 2140. .

During the early days of bitcoin mining, miners would often download a software package designed to allow their computers to process bitcoin transactions in the background. Unfortunately, that's no longer practical, because solving bitcoin transactions has become too difficult for your computer to manage.

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The bitcoin network is designed to make a certain number of new bitcoins each 10 minutes. If only a couple people are bitcoin mining at any given time, then the network will be generous and discuss Discover More bitcoins easily in order to attain the predetermined number. However, now that bitcoin mining has become so widespread, the network is now much stingier about handing out bitcoins to miners.

These days, in order to have a chance at being rewarding, miners need to adopt one of two approaches: 1) buy specialized hardware (aka a bitcoin mining rig) or 2) join a cloud mining pool. .

To begin with your own mining rig, you buy hardware designed for mining bitcoin (or some other virtual currency), set it up, and let it run 24/7 solving bitcoin transactions. Ideally, this will result in a continuous stream of payments with no needing to get involved.

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While it's fairly easy to establish and use a bitcoin mining rig, really making money on the process is something of a challenge. Since more and more people are signing up for mine bitcoins, the mining procedure continues to have more difficult and will likely keep doing so for some time.

And because bitcoin mining rigs aren't cheap -- expect to pay at least $1,000 for your hardware, or even several times that for a top-quality rig -- having to replace it every year or two takes a huge bite out of any profits you earn from mining. Plus, most mining channels consume enormous amounts of power, which means you also need to subtract that expense in the bitcoins you earn to determine your profits. .

When buying and maintaining your own mining gear doesn't appeal to you, then cloud mining might be the way to go. Cloud mining companies invest in huge mining channels, often filling entire information centers with all the hardware, and then market subscriptions to individuals interested in dipping a toe into bitcoin mining.

The largest challenge facing cloud mining subscribers is avoiding fraud. The area is rife with pseudo-companies which sell thousands of multiyear subscriptions, cover for a few months, and then vanish into the sunset. If you decide to try out cloud mining, do your homework in advance and confirm that the company that you're dealing with is a true cloud miner and not a strategy.

Avoid companies with anonymous domain registration (you can look up their registration info Network Solutions), as well as any mining company that"guarantees" gains or provides huge incentives for referring new clients; anything over a 10% referral commission is profoundly suspicious, because legitimate mining pools simply don't generate a high enough profit margin to pay huge commissions. .