Bitcoin is gaining traction as its price is reaching new records. The latest example is a price of $60,000 that Bitcoin just hit in March. The growth of over 200% in a year is definitely attracting massive attention by Bitcoin users and new investors.
However, one thing should be noted that without bitcoin mining, the entire blockchain system will collapse. Bitcoin mining takes another from as a lot of miners work as a team in a mining farms or pools. In this article, we take a look at the booming Bitcoin mining industry and the main advantages of mining pools and farms.
What Makes Mining Expensive?
There are a couple of reasons why Bitcoin mining is getting more expensive, and before we dive in, we will review how the blockchain network operates. The blockchain network operates a peer-to-peer-based payment system that is decentralized, and it functions without the interference of financial institutions or any third party for that matter.
The miners are the ones that are actually responsible for the basic operations in the network. They work on computer systems ‘nodes’, which make up the peer-to-peer-based blockchain system. The role of the miners is processing and adding the blocks of transactions on the network. This is a very important process because it validates BTC transactions, and resolves the double-spending problem. Also, thanks to the mining process new BTC are issued in the network.
The main costs related to mining are associated with the equipment, including computer systems, hardware, electricity. The other costs are the time the miner spends on the network in order to verify the transactions and to solve computational problems because it’s the only way for them to gain the block reward. Essentially, the gap between the computing power you need to mine and the reward you can earn is what makes mining a profitable or unprofitable venture for individual miners.
When it comes to the reward, Bitcoin halving cuts in half the quantity of the new BTC, along with the block reward of the miners, so, after 210,000 blocks are mined, or after four years, the reward is halved. Otherwise, this is one of the reasons why online trading sites are getting more users. For instance, Immediate Edge is a mobile-friendly automated trading system, which can place up to 15 trades for you per minute. Furthermore, it utilizes the latest encryption technology, which means this is a safe trading site. You can become a member by depositing $250.
In terms of mining pools, they are composed of a group of miners that work collectively in order to improve their chances of obtaining the block rewards, by sharing the resources and decreasing the costs of the mining as a group.
There are different kinds of mining pools, and they have their own governance structure. Some mining pools require a joining fee from their members, and they only share the block reward among the participants who worked specifically in that instance on the network.
Others don’t charge a fee and share the block rearward as well as the transaction costs among the members of the group. But basically, the mining pool combines its computing power in order to receive the block reward quickly and to make mining profitable for the members of the pool. According to the latest data, there are approximately 15 mining pools on the network.
On the other hand, mining farms function similarly to mining pools, but they operate on a large scale, even as businesses. In fact, there are a lot of mining farms are registered as start-ups, and they have their own employees and investors, while they are located in large warehouses supplied with specialized computer systems for mining. The computing power on the blockchain network generated by these farms is proportionally bigger than the mining pools or individual miners.