1.The concept of mining
BTC mining is when a user uses a device to calculate mathematical problems provided by the BTC network. The first user to answer correctly earns the right to bookkeeping and BTC rewards. The BTC network will automatically adjust the difficulty of the problems, calculating an answer every 10 minutes (that is, accounting every 10 minutes).
2. Mining vs. Buying
There are two ways of acquiring BTC: self-mining and direct purchase.
Mining is a method of issuing new BTC and is at the source of the BTC economic ecology. After BTC is generated through the mining process, it will enter the secondary market for trading. This is why the cost of mining coins is the lowest at this stage.
Take BitFuFu’s Antminer S19Pro 360 Day plan for example. As of August 6, 2021, the historical price of the plan is 27,859.80 USD, while coinmarketcap data shows that the currency price is 40,931.86 USD.
At present, mining requires the use of miners, a process described by Lebit CEO Jiang Zhuoer as “the chicken laying the golden eggs”. The physical life of a miner is 5–10 years, with an economic life span of 3–5 years. During this period, the miner can mine 24 hours with no interruptions and stable daily income.
Even if a bear market arrives, lower currency prices will result in low-performance miners, which will lead to a decrease in the hashrate of the entire network and the difficulty of mining, thereby increasing the mining output per hashrate unit. On the contrary, high-performance miners can produce more BTC. When the currency price rebounds, profits will be higher.
Because they are constantly making money, mining users will not be affected by short-term market conditions, and can easily sell BTC or mining machines, and even more easily hoard coins.
BTC has a halving round every 4 years. At that time, the price of the currency will await a new level. A miner will encounter at least one round of halving.
Coin purchasing is susceptible to market conditions and storage of coins is difficult. Moreover, the currency market is highly volatile, and added leverage results in a higher probability of losing money as well as greater risk.
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