Is it better to buy bitcoin or mine it?
To understand the surge of bitcoin, it is important to think of it not as an investment asset or currency but as a commodity. If you want to invest in bitcoin, there are three main ways to obtain it: buy it, receive it as a form of payment, or mine it. All these methods of obtaining bitcoin are self-explanatory, and debates are going around bitcoin as a currency and investment. Considering the third method, bitcoins are created through bitcoin mining, where computing power solves complicated puzzles. These puzzles are of hard math, which cannot be solved with a pen and paper, and therefore there is a need for computers to solve the puzzles.
The individuals who solve these puzzles are known as miners, and for their hard work, they are given bitcoins. So why invest in bitcoin by paying regular money as you can also earn it through the mining process. Why is there a need to buy bitcoin? To answer this question, think of all the unique features of bitcoin that make bitcoin different from other investments or currencies but share those features with commodities. People can also choose to trade bitcoin through Bitcoin Code App. It is also a great method to earn money.
Bitcoin isn’t a typical commodity.
The Trading Commission of the U.S. defines bitcoin as a commodity so that the derivative contracts similar to options and futures can be traded according to their value. But earlier, what people think of a commodity was different, and it has changed over time. Still, all commodities have at least some things in common: they are interchangeable or fungible. In most industries, when the commodity price goes up, its supply started to increase, which is the case with precious metals and gold. But if we talk about bitcoin, this doesn’t go with bitcoin as its price keeps on increasing, but its supply is fixed, and in fact, its supply keeps on decreasing over time as more and more bitcoins are getting into circulation.
Earlier, when mining started, the puzzles were simple, and it was easy for everyone to solve them, and solving puzzles didn’t require much hashing power. Over time the puzzles have become exponentially hard, and the time assigned to solve each block is the same. It requires high computing power, and according to computing power and miners, the difficulty is adjusted. In 2009, the difficulty of puzzles was 1.0, and the network’s hash rate was 4.21 million hashes per second, whereas today, the network’s difficulty has reached 20 trillion hashes per second. This is one of the main reasons behind the increasing demand for high processing power.
Now, it has been concluded that the computing power that is required to mine a block of transactions is higher as it was 12 years ago, but the time to mine each block is the same that is 10 minutes.
Supply of Bitcoins
The time given to mine each block of transactions is constant for the past few years, but the supply of bitcoin is increasing slowly. What is the reason behind it? The answer to this question is bitcoin halving. The first block of bitcoin was referred to as genesis block, and the reward for each block was 50 BTC. But once 210,000 blocks are mined that are mined after every four years, the block reward is cut down to half. After 2009, the first halving took place in 2012, and as of now, the block reward has been reduced to 6.25 BTC.
The supply of bitcoin is limited, and it can be a maximum of 21 million bitcoins. It is expected that the total supply of bitcoins will be mined by 2024, and at that time, the next halving will occur. Mining is getting high in trend, and more and more investors are coming forward to earn bitcoins through the halving process. But for every miner, it is important to have computing power that can help you solve puzzles, or miners can choose to join a mining pool for every miner. A mining pool is a group of miners where all miners contribute their computing power to mine bitcoins.