Mining Of Bitcoin and Digital Currencies — Understanding the Basics

The limitations of cash payments are well-known. The transactions are cumbersome; they are beholden by the governmental regulations and centrals banks, and limited to the country of origin. It is expensive to produce, hard to monitor and difficult to manage.

Shift to digital payments

The emergence of Bitcoin, which is borderless, non-physical in nature, and facilities highly safe and secure transactions on the revolutionary blockchain technology, has the potential to transform the payments and finances landscape forever. Bitcoin is the flag bearer of fundamental shift to digital money, with virtual wallets rapidly replacing online transactions for Visa transactions and eCommerce payments. The impact of digital currencies like Ethereum, Dash, Litecoin, besides Bitcoin, has never been greater as payments can be made accurately and securely between the consumers, merchants and traders, without the involvement of the banks.

How to create a bitcoin through mining

Bitcoin is to be mined to create. Bitcoin mining is legal and accomplished by running SHA256 double round hash verification process. This ensures requisite security for the public ledger of the network, and also validates the transaction. Hardware of certain specifications is needed to successfully mine the bitcoins. The miner is compensated for their effort by releasing the bitcoin. The more the computing power used by the miner, the greater will their reward be.

Getting started with bitcoin mining

Firstly, you need to acquire bitcoin mining hardware. Companies like Avalon offer excellent bitcoin mining hardware. One can also go for Bitcoin cloud mining contract. With this, the crypto currency mining process is greatly simplified but the risk is increased as you do not control the hardware yourself.

Once you receive your bitcoin mining hardware, you need to download a program to run the mining process. The two popular mining programs are CGminer and BFGminer.

Join a mining pool

The next recommended step is to join a Bitcoin mining pool. The pool consists of miners who work together to solve a block and share the rewards. One can opt to do mining oneself, but it can take over a year without the one earning any bitcoin. The better alternative is to join the mining pool and split the rewards.


Bitcoin mining process involves adding past transaction records to the public ledger of the network, known as Blockchain. It’s called so as it’s a chain of blocks. The block confirms the transaction taking place to the rest of the network. Bitcoin nodes rely on the blockchain records to distinguish the legitimate transactions from the ones that attempt to re-spend the coins that have already been spent somewhere else. This ensures the integrity and authenticity of the transactions.

Proof of Work

Bitcoin mining is intentionally designed to be highly complicated and resource-intensive. This ensures that the number of blocks found each day by the miners remain steady. Proof of Work (PoW) verifies bitcoin nodes each time they receive a block. PoW is actually a piece of data which is costly and time-consuming to produce. This is done to satisfy certain conditions. Bitcoin uses hashcash proof-of-work function.

Why it is called mining

Bitcoin mining is so called because it resembles the mining of gold and other commodities. It requires exertion to slowly make new currencies available. The rate of creating new crypto currencies is similar to obtaining gold from a gold mine.

Setting up a bitcoin wallet

You need to set up a bitcon wallet to receive the bitcoins you mined. It is important to keep the wallet safe from the potential threats with two-factor authentication process. One can also keep the wallet on an offline computer with no connectivity to the internet. Wallets can be obtained by downloading a software client to your computer. Bitcoin hardware wallets are also available.

Use of bitcoin and crypto currencies in investment funds

Cryptocurrencies are making inroads into hedge funds and other crypto investment platforms due to their faster confirmations, secure transactions and cross-border platforms. Crypto currencies are steadily entering into the mainstream financial and payment systems. Their wider adoption could be seen in investment options too, including hedge funds and other private investment funds. HedgeConnect crypto investment fund deserves special mention here. It has leveraged the blockchain technology to allow the investors do transactions in crypto currencies with ease. The fund makes investments in diversified portfolios to ensure that there are minimum losses and relatively higher return on investment for the investors. The hedge fund also offers lending platform that allows the traders reap benefits by lending money to the fund.