In a previous post I described how mining bitcoins can be profitable. In this one I will describe how you can apply this principle to other markets as well. First, let’s consider the most popular form of trading and that is Forex trading. One of the reasons that Forex trading has flourished over the years is that the supply of major world currencies is pretty consistent, which increases the odds of someone being able to sell you (and therefore acquire some profits from) a Forex trade.
The problem with this situation is that in order for the average person to be able to access the value and power held by the largest buyers and sellers of Forex, there must be a way for those entities to verify transactions. For example, if there were only two major currency dealers and they were willing to establish a central database where all of their public records were stored, then there would be no need for mining bitcoins. The blocks of code that make up the ledger would simply be too large to fit into the existing database. It would be like building the Empire State Building and then trying to use the blocks to keep track of your lawn care items. You couldn’t do it because the building wouldn’t stand.
However, you can follow another path and still realize the same rewards. That path is to use what is called a “hash” function to verify or authenticate all of the public keys that make up a specific address. Once you have a valid address, then all you have to do is get the necessary public key and paste it into the hexadecimal equivalent of that address into a script that connects to the correct miner for the exchange. Once that script is complete, you have secured the rights to transfer funds to and from that address. That’s about as simple as it gets, but it can have big payoffs when you are just starting out.
By now, many users of bitcoin have switched gears and are moving away from mining. There are many good reasons for this, most notably because there have been more than one major scam involving this practice. When the incentive for miners to keep on mining decreases, the result is the same: less incentive for new miners. The fewer miners there are, the lower the price of each coin.
At the present time, the vast majority of miners are playing an important part in stabilizing the value of the cryptocurrency. When more people begin mining currencies that use a proof of work system instead of proof of mining, the more effective the system becomes. Proof of work is a system by which the developers proof-read and verify each and every transaction that goes through the bitcoin miners. In order for the transaction to go through, the transaction must be 100% valid. Even though this may not seem like a big deal, it actually is.
When new miners start generating blocks, they add their own transaction into the pool of valid transactions. This causes all of the previous miners to mine the block at the same time. The more work that gets done, the more proof-of-work there is and the higher the price per block. Once a sufficient amount of proof-of-work has been generated, the developers will decide if the longest chain should remain intact and continue to be called the winner.
A couple years ago, the biggest challenge for a new miner was how to convince other miners that their algorithm would be beneficial enough to continue to be profitable. Today, however, the landscape is entirely different. Because more than half of all mined blocks are already full, it makes it virtually impossible for a new entrant to earn any revenue. Those who remain will only be guaranteed a portion of the rewards from those blocks that are still available.
As long as there are enough people online to mining bitcoins, the price per block will continue to climb. Eventually, those who earn the most will have an income that rivals the value of all of the gold and silver that have ever been placed into circulation. If you want to earn money from your computer but don’t want to use the traditional methods, then you should definitely look into this new form of investing. It’s a little riskier than the world of stocks and shares but the potential for a large windfall is substantial.