Several times since the beginning of this decade, Bitcoins have been slowly but surely been causing a (good) disturbance in the way people think about currency. If you don’t know yet what Bitcoins are, then reading this introduction, or our Bitcoin manual, or this feature on the matter should get you caught up. Now, if you know what they are or have just read the provided materials, you’ll know that Bitcoins can be used after they’re “discovered” through a process called “mining” using a miner application like this.
There are a few advantages to bitcoin mining, which include receiving a chunk of 50 bitcoins after solving the “puzzle”, or getting a portion of bitcoins by helping out in a mining pool. Best part is, as the time of writing, bitcoins are worth $93.38 each. However, there are plenty of disadvantages that come with bitcoin mining, and one has to be absolutely sure that the advantages outweigh the disadvantages if they want bitcoin mining to be worth their time.
Unless you’re planning on exchanging your bitcoins into other currency, you’ll need to look for shops which accept bitcoins for currency. All of the shops or other places which do accept bitcoins will be online – I have yet to hear of a brick-and-mortar store which accepts them. While online commerce isn’t the issue, the relative number of bitcoin-friendly stores is very small.
There are only a few credible online stores, and then sites like Reddit and WordPress that accept them for payment. Otherwise, you’ll have to switch it to traditional currency, which sort of defeats the purpose of bitcoins.
Another one of the biggest disadvantages of bitcoin mining is the fact that the value of bitcoins can fluctuate. While it’s true that all currencies fluctuate in value, bitcoins appear to be a lot more unstable compared to trusted currencies like the US Dollar or Euro. In fact, bitcoins can deflate in value whenever people seem to put less trust in it or if a technical glitch occurs with the system or bitcoin exchange markets.
It can range anywhere from less than $5 per bitcoin to its current high value to far beyond. The value should stabilize if more people use the currency, but that trend is going very slow.
Lack Of Protection
Since there is no central organization which controls bitcoins, there’s also no form of protection when dealing with bitcoin transactions. If you want buyer protection, you won’t have any with bitcoins. If you want your bitcoins to be insured like money is in banks, that doesn’t exist.
If you happen to lose your bitcoin wallet by accidentally deleting it, wiping your hard drive, etc., and have no backups, then your bitcoins are gone. Stuff happens, so while the chances of actually losing your bitcoins is rather low with regular backups, technology can still break.
Undiscovered Technical Flaws
Bitcoin is a software system, made up of code. Any programmer will know that while code can be in very good condition, it is never perfect and technical issues can always occur. If they do, it could have devastating effects on the bitcoins which you own or your anonymity.
It’s a common risk when doing anything digitally, so you’ll need to take that into consideration if you want to keep the chances of randomly losing all your money down to a minimum.
Are You Even Making a Profit?
Last but not least, a disadvantage of the actual practice of mining – the price of electricity in order to mine bitcoins. It’s a better option to use a powerful graphics card for bitcoin mining because of their greater number-crunching capacity compared to regular processors. If you’re not sure why this is the case, this article can help explain. Sadly, graphics cards suck up a lot of electricity, and that multiplies as you have more graphics cards running (the more cards, the more number-crunching occurs).
By the time you’ve built all these computers packed with powerful graphics cards to increase your chances, you’ll be increasing your electric bill by quite a bit. You’ll also have to factor in the cost of the hardware, as well as hardware replacements if something bites the dust. In the end, the net profit of bitcoins earned vs. electricity used for mining may be large, small, or even in the negatives if the value of bitcoins decreases.
Ultimately, mining bitcoins is almost a form of gambling in the currency market — if you can even use bitcoins appropriately or exchange them for traditional currency, you’ll be playing a big game to see if you can net a profit by mining bitcoins or end up losing money. Currently, if you find a chunk of 50 bitcoins via mining, you’ll have earned yourself $4,669. However, that could easily go back down to as low as a mere $50. The downsides are definitely there, so you should only consider bitcoin mining if you’re feeling lucky.
Do you use or mine bitcoins? What has your experience with the digital currency been like? Let us know in the comments!
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