Bitcoin mining and how it works?

Learning about Bitcoin

One of most popular types of cryptocurrencies, Bitcoin is a digital medium of exchange that only exists online. Bitcoin operate on distributed computer network, or distributed ledger, that tracks cryptocurrencies transactions. A new bitcoin is created or mine when the computer on the network validates and processes transaction.
These computer networks or miners process transactions in the exchange for the bitcoin payments.
Bitcoin use blockchain, technology that powers many cryptocurrencies blockchain is the distributed ledger for all transactions on network. A set of the approved transactions together forms block and combined into chain.

To successfully added the blocks, Bitcoin miners compete to solve the very complex mathematical problems which requires use of expensive computers and lot of energy. The require computer hardware called an application-specific integrated circuit and can cost $10,000. ASICs consumes lot of electricity, which has criticized by environmental groups that limits profitability of miners.
If miners successfully add block to blockchain, they will rewarded with 6.25 bitcoins. The reward amount halved every four years or every 210,000 blocks.
However, the prices of the Bitcoin is so volatile that it is very difficult or impossible for miners to know that value of their payment each time receive it.

It depends Even if the Bitcoin miners successful, it is unclear that whether their efforts will be profitable. . According to a 2019 report by the Coongressionaal Reseearch Servicee, the power of the one ASIC can use same amount of energy as the500,000 PlayStation 3 devices.

Wallet:

This is where bitcoins are earn through mining are store wallet is an encrypted online accounts that store, transfer and accept Bitcoin and other cryptocurrencies. Companies such as Coinbase, Trezor, offer cryptocurrencies wallet options.

Mining Software

There are several mining software that providers, many of which free too download and run on the Windows and Mac computers . Once you have connect the software to the required hardware, then you will be able to mine Bitcoin.

Computer Equipment

The most expensive aspect of the Bitcoin mining is involve the hardware. Successful Bitcoin mining requires the powerful computer that use a lot of electricity.

Price volatility

Bitcoin price changed since its launched in 2009. Bitcoin traded for the less than $30,000 last year, near $69,000.

Regulation

Few governments have adopted thebcryptocurrencies like Bitcoin, since these currencies are not under their own control, many may skeptical. There is always a chance that government will ban bitcoin or cryptocurrency.

It is important to remember that the the effect of taxes on the Bitcoin mining. As asset prices have been risen in recent years, the IRS is trying to crackdown on the cryptocurrencies owners and the traders.

If Bitcoin mining is your business, you can deduct the cost that you incur for te tax purposes. Earnings are value of the bitcoins that you earn if mining is your hobby then you may not be able to deduct cost.

If Bitcoin or other cryptocurrencies successfully mined, then the fair market value when the coins received will be taxed at normal income tax rates.

If you sell the bitcoin at higher price than you received it, it considered as capital gain and taxed like the traditional assets like stocks or bonds