Cryptocurrency is a fast-growing and emerging financial market. Investing in crypto mining can mean an interesting investment for the patient investor with a more stable return than trading in cryptocurrency. On top of that, the value of your Bitcoins or Altcoins can increase, a growth potential that can generate extra returns.
What is cryptocurrency mining?
In this example, let us use the Bitcoin specifically, since this is the most well-known cryptocurrency for most people. The Bitcoin works as a digital decentral currency based on a public log file. This log file contains every transaction that has ever been executed with Bitcoins. We call this public log file the blockchain in practice. The name is derived from the fact that the file groups multiple so-called blocks.
In practice, a block is nothing more or less than a special data block that functions as a solution for a mathematical formula. When the user knows how to crack the mathematical formula, he is rewarded with a certain amount of Bitcoins. This does not mean, however, that Bitcoin mining is merely a reward system. It is also a form of control. Mining cryptocurrencies such as the Bitcoin ensures in practice that all transactions sent over the network must comply with the applicable protocol of the cryptocurrency in question. In other words, a transaction cannot just be executed twice.
Miner versus trade
There are two options for investing in cryptocurrency. Firstly, you can trade in Bitcoins or Altcoins, or buy and sell coins, in the hope that you can sell this currency for a higher price than you bought it. The digital currency market is very volatile, making it a risky investment. The second option is to mine cryptocurrency, or to “create” it yourself from, for example, Bitcoins. This investment is often much more stable, since you can be paid out every day (lifetime) and in most cases you withdraw your investment within a year.
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