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How to Acquire Bitcoin: Understanding Bitcoins Trading vs. Mining

How to Acquire Bitcoin: Understanding Bitcoins Trading vs. Mining
The Siliconreview
30 March, 2022

Blockchain technology is a shared and distributed database with a list of digital transactions that identifies and verifies it. It is Open, and any user can view, access, and verify the transaction. Blockchain is best known for its vital role in acquiring, transferring, and storing cryptocurrencies, such as Bitcoin, Ethereum, and XRP. It also helps maintain a decentralized and secure record of cryptocurrency transactions. For example, the Bitcoin blockchain records every time someone receives, trades, or sends Bitcoin. This article compares Bitcoin mining and trading through blockchain.

How Does Blockchain Work?

One important characteristic of blockchain technology is how it structures and stores data. A blockchain is a set of transaction data and information collected in groups called blocks with a limited storage capacity. The blocks are closed and then linked to the immediate previously filled block when filled. The linked blocks form a chain of data called the blockchain with all transactions right from the beginning. Every newly formed block is added to the chain as the blockchain grows.

Think of blockchain as a ship's anchor with linking chains, but in the case of blockchain, every linked chain is a block of information containing transaction data. The last information to be stored in the chain is the latest information, and as the chain moves down, there are older transactions. You can trace the chains (data) until you reach the anchor (the blockchain's first-ever data) at the bottom. If the blockchain is a cryptocurrency, you'll have viewed every transaction in its history.

The blockchain gives cryptocurrencies a great security advantage of an open, public, and transparent record or ledger over its entire history. This means, if any user tries to manipulate any transaction in the chain, the link will break, making the entire network see who tried it and what happened.

How Do You Acquire Bitcoin?

Essentially, if you want Bitcoin, there are three methods to acquire it:

  • Buy Bitcoin
  • Mine Bitcoin (just go get it)
  • Receive Bitcoin from others as payment

Both trading (buying and selling) and mining Bitcoin involve blockchain technology either in the transfer process or in the creation. Every Bitcoin mined, released, sent, received, or traded has a particular digital signature that identifies it and its sources through the chain. This prevents duplication of the already mined coins and helps identify the source of the coin. 

Buy Bitcoin

Bitcoin is typically the oldest and most popular cryptocurrency and is what people think about whenever one mentions cryptos. This also makes it the most sought-after cryptocurrency in the world.

If you want to acquire Bitcoin, buying it is the easiest way to obtain it unless you receive it as payment. You can buy Bitcoin through online exchanges like Netcoins page, Coinbase, or directly from crypto brokerage or marketplaces through individuals holding them.

How Do You Buy Bitcoin?

How you buy Bitcoin depends on where you're buying it from. To own Bitcoin, you'll need a digital wallet and a crypto account where you'll store it. The best way to buy any amount of Bitcoin is through a platform like Netcoins. These platforms make it easy for individuals to buy, send, sell, store and receive Bitcoin and other cryptocurrencies without holding it. In addition, you’ll find a community of like-minded individuals on these platforms who can support your venture with ideas, forecasts, and knowledge about Bitcoin, including how you can invest further.

Advantages of Buying Bitcoin

  • It's an instant transaction that can take as little as 15 minutes
  • You can own any value of Bitcoin from the smallest unit called a Satoshi, equivalent to 0.00000001 BTC or up to a whole unit
  • You won't worry about the fluctuating prices of Bitcoin as you would in mining

Bitcoin Mining

An alternative to buying Bitcoin is mining it. Bitcoins mining is the process of bringing the 'coins' into circulation. The Bitcoin mining process involves two things:

  • Verifying Bitcoin crypto transactions on the blockchain. This involves accumulating recent Bitcoin transaction blocks (chains) and solving a cipher puzzle
  • Releasing new Bitcoins into circulation. This is called "blockchain reward," It involves rewards in Bitcoins for the process involved in the verification

Among the many people in the blockchain that carry out Bitcoin mining, only the first participant to be able to solve the puzzle gets to put a new block on the chain. This comes with a bitcoin reward that the participant can claim in the process.

In addition, there is also a transaction fee as a reward. The transaction fee is awarded to the miner who successfully adds a block to the chain and releases a new Bitcoin to the market. However, the transaction fees are voluntary and whether or not a block will have a transaction fee is a miner's voluntary decision to make. Two factors are involved in the Bitcoin mining process:

  1. Since Bitcoin is decentralized, anyone can mine it
  2. Mining requires a proper internet connection, powerful hardware, and better electricity. This means mining requires a high investment involved in the mining equipment

As a result of mining costs and difficulty, miners only get profits when the rewards are higher than the cost.

Is Mining Bitcoin Still Profitable?

Today, many people are mining Bitcoin for the "gold rush," and rewards have shrunk. In addition, big mining farms have better, more sophisticated mining equipment than thousands of coolers and graphics cards. These equipment give them more efficiency in mining than single or individual Bitcoin miners. This makes it difficult for a single individual or average miner to mine Bitcoin, get rewards, or successfully make a profit. And since mining Bitcoin takes time, it looks less profitable than buying.

Endnote

We've laid out the important points for and against mining vs. buying. The decision is yours to make. Whichever way you choose to acquire it, there's never been a better time to acquire Bitcoin than today. Corporations like Tesla and MicroStrategy are already acquiring Bitcoin, and entrepreneurs such as Jack Dosey, Paul Tudor Jones, and Ray Dalio are already trading in it. Even investment banking outfits like JP Morgan, Goldman, and Citibank have recognized bitcoin's value and nations like El Salvador now accept it as legal tender.