Bitcoin, a virtual currency, is gaining in popularity. Investors everywhere are starting to buy Bitcoins or invest in Bitcoin investment funds. And there are still plenty of ways for you to get in on this latest investment rage.
Bitcoin was developed anonymously in a 2008 paper published by someone going by the name Satoshi Nakamoto.
Simply put, it’s virtual money. You can’t hold it, but you can use it to buy things. Websites like Wordpress.com and OKCupid have started to accept it as currency.
And Bitcoins are acquired through process called mining, but there’s a limit to this. There’s only 21 million Bitcoins available. They can’t be created, so once all of them are mined, that fixed amount will remain in circulation. But there have only been about 11.7 million mined so far.
The value of Bitcoins rises and falls just like currency. And it’s become much more valuable recently. It’s now around $135, which is 10 times higher than just a year ago.
Mining for Bitcoins
Mining Bitcoins is quite different from the way courageous miners work to find precious metals. Actually, all of the work is really done by equipment.
Decentralized network of computers have the job of solving algorithms. The computers keep track of all of the solutions, or transactions. As puzzles are completed, Bitcoins are awarded.
Since the mining of Bitcoins isn’t possible without powerful machines, it’s boosted the market for this equipment. Some of them are costing more than $20,000. Of course, the more sophisticated the equipment, the better able it is to bring in Bitcoins.
The most popular companies for Bitcoin mining equipment are Butterfly Labs, CoinTerra, KnCMiner AB, and Robocoin Technologies. Butterfly Labs sells equipment for more than $22,000. Jeff Ownby, vice president of marketing and e-commerce for the company, says its revenue has tripled each year. And CoinTerra recently sold a machine for $140,000.
As popularity grows, these companies are bringing in big profits. There are about 1 million Bitcoins being mined every year, and as more people get involved, that number will grow.
The Alternative to Mining
But you don’t have to mine to invest in Bitcoin mining. You can always invest in funds, such as the Havelock Investments Mining fund. This company has mining equipment doing the mining, and when you invest, you are basically buying Bitcoins from them. You make money off the price of Bitcoin, as it is volatile.
Bitcoin’s value dropped 33 percent when the U.S. Federal Bureau of Investigation shut down Silk Road Hidden Website, an online marketplace for drugs and other illegal items. But value has rebounded and continues on a positive path.
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How to Get Started
The first thing you need to decide on is if you want to use the equipment to mine Bitcoins or go the easy, less profitable route of investing in a fund. Keep in mind, the equipment isn’t small, nor is it cheap. It’s rather large, it makes a lot of noise, and it produces a great deal of heat. It also uses massive amounts of electricity.
But people continue to use them because they are making money – much more than they invested in the equipment and electricity to run it. Some people even have multiple machines.
If you decide to sink your money into funds, keep in mind you won’t get as much of a profit as you would with mining. There are fees attached to buying the Bitcoins and with selling them when you want to make a return.
With mining, you have the option of using Bitcoin in two ways. You can either use it as currency to buy things online, or you can sell it someday for market value, since it will surely rise over the years. When you invest in funds, you have one option: selling when prices rise. But that won’t be a bad bet either.