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bitcoin miningSeveral 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 BitCoin – Buy, Sell & Trade Using Anonymous Peer-To-Peer Currency BitCoin – Buy, Sell & Trade Using Anonymous Peer-To-Peer Currency Earlier this month two prominent US politicians wrote to US Attorney General Eric Holder to express concerns about the rise of a new online currency – BitCoin. The anonymous, peer-to-peer currency has become very popular... Read More , or our Bitcoin manual BitCoin – Buy, Sell & Trade Using Anonymous Peer-To-Peer Currency BitCoin – Buy, Sell & Trade Using Anonymous Peer-To-Peer Currency Earlier this month two prominent US politicians wrote to US Attorney General Eric Holder to express concerns about the rise of a new online currency – BitCoin. The anonymous, peer-to-peer currency has become very popular... Read More , or this feature Currency Of The Revolution, Or Tool For Online Vendors? The Many Faces Of Bitcoin [Feature] Currency Of The Revolution, Or Tool For Online Vendors? The Many Faces Of Bitcoin [Feature] It's become an annual event: the fall of Bitcoin. You've probably read about it multiple times, and maybe even believe that the online, decentralized currency is already gone forever. It isn't. Created by a mysterious,... Read More 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 guiminer - An Extensive Tool For Bitcoin Mining guiminer - An Extensive Tool For Bitcoin Mining As of late there's been a been a great buzz going around about Bitcoin, the latest P2P digital currency. One of the main activities of getting Bitcoins is through a process called mining. No need... Read More .

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.

Low Acceptance

bitcoin mining

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.

Unstable Value

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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?

bitcoin mining

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 What Is the Difference Between An APU, A CPU And A GPU? [MakeUseOf Explains] What Is the Difference Between An APU, A CPU And A GPU? [MakeUseOf Explains] Over the last five or more years, there have been a number of different terms swirling around to describe computer hardware. Some of those terms include but aren’t limited to APU, CPU, and GPU. But... Read More . 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.

Conclusion

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!

Image Credit: Forrestal_PL

  1. Patrick J
    April 22, 2013 at 9:03 am

    Anyways, Bitcoins still was (not anymore) the best investment when its value skyrocketted big time! But forr now, it's scripted fall has begun.

  2. Scott M
    April 12, 2013 at 10:53 am

    A good article.You are correct about it being gambling at this point.It is like bulletin board stock and attracts all of the get rich quick people.My personal feeling is the bubble will burst and it will be a good thing.They will learn from it,adapt and write a better program to eliminate the most blatant of speculation.Other new coin programs written in a more efficient manner will follow in any case.The minute financial newsletters began to mention investing in bitcoins I knew their would be a disaster.The bubble will burst but it doesn't prove that this system is a failure only that mankind is greedy.Things like this happen on every stock exchange in the world.Remember the banking crisis in Layman Brothers etc or Enron?

  3. JOtech
    April 12, 2013 at 6:33 am

    these companies make dedicated chips that MuoTechGuy is talking about and he is correct. It will bring the power question down to a non issue so whatever one you get will make a profit its just how much and fast. I got the small one first to see how long it takes to get to me and how much it helps. we will see in... 2 months when it actually ships. Im into it because its just fun. Its a different currency its used for bad and good things.

    http://www.butterflylabs.com/
    http://launch.avalon-asics.com/

    • Danny Stieben
      April 29, 2013 at 3:34 am

      Thanks for the links!

  4. Daniel Eluvathingal
    April 12, 2013 at 12:21 am

    its totally unsecure

    • Danny Stieben
      April 29, 2013 at 3:33 am

      How is it insecure?

  5. Carlo Vincente
    April 11, 2013 at 7:13 pm

    It doesn´t make any sense anymore.

    • Seth
      June 4, 2013 at 8:19 pm

      Sure it makes sense. In 2 months of mining, I've netted over $700 worth of Bitcoin. Use a guide like coinminingrigs.com to build your own. Do the math, $700 on under $3k investment in 2 months is rocking it!

  6. muotechguy
    April 11, 2013 at 6:56 pm

    You can't really mine with a computer anymore anyway - the only way to do it now is with dedicated mining chips.

    I don't see the value decreasing that much though - people are queuing up to buy them. I'm number 15,000 in a verification queue at MtGox for a start!

    • Lisa Santika Onggrid
      April 15, 2013 at 1:45 pm

      Is that so? What a pity.

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