Crash course to Bitcoins and Bitcoin mining with ASICs
A recent US Senate committee hearing declared that virtual currencies are, “a legitimate financial service” and has given it the stamp of respectability. Since then the value of the bitcoin has soared to over $1,000.
Enthusiasts of the currency say it is a very efficient way to handle global money transfers, and are astounded to see its value rise so much within five years of trading. It was only January, when it was less well known, that its value was just $20, to say it has fluctuated wildly is putting it mildly, $230 during April, below $70 during July, then over £600 in November. The Bitcoin is sometimes described as a new type of currency, but as for all currencies, its value is determined by how much people are prepared to exchange it for.
In order to process a transaction a computer must solve a mathematical problem which has a 64 digit answer, this is called mining bitcoins. The miners now use bespoke flexible chips, application-specific integrated circuits, known as ASIC, when a problem is solved, the processing of a block of Bitcoins is completed, and the miner receiving a reward of new Bitcoins.
This acts as an incentive to supply the required computer processing power to resolve the problem, the complexity of the problems is changed to secure a consistent stream of new bitcoins, around 3,600 per day, and there are currently eleven million in existence.
Investing in Bitcoin mining power online
Instead of buying an ASIC computer, having it stand in your house; using electricity and the risk of systems going down while doing the calculations; you can also invest and trade in computer calculation power online on the CEX.io website. The mining power is typically measured in GigaHash per second [GH/s]. When this news post is written, the fastest mass produced ASICs have a computational power of roughly 550 GH/s; meaning you would mine BTC to a value of 441 USD per day.
One of the main and most reputable ASIC Bitcoin mining resellers on the market is the Swedish based KNCMiner.
Receiving Bitcoins
To be able to receive a Bitcoin, a user has to have a virtual bitcoin address, this is made up of a combination of between 27 and 34 numbers and letters. No registry of Bitcoin addresses is in existence, thus providing anonymity for users. The address is stored in a wallet and used to manage the funds, similar to operating a private bank account.
A drawback of this is that if the data is lost, so are the bitcoins. So once you have got your Bitcoin wallet setup, make sure you password protect it and take regular backups of your wallet files; for example to a USB stick.
Buying Bitcoins
There are several different ways of buying Bitcoins. One of the quickest and most straight forwards ways is to use VirWoX, which is a virtual money exchange where you can buy Bitcoins with Paypal, Skrill/Moneybookers or a credit card. You first buy SLL (Second Life currency) which you can exchange into BTC (Bitcoins). Once done you can withdraw your Bitcoins to your Bitcoin wallet.
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