What is the use of coins obtained from mining (Where does the money for mining come from?)

08/16/2023 16:24 • Digital Disruptors • 55 views

What is the use of coins obtained from mining? What is the use of coins obtained from mining?

In the blockchain industry, cryptocurrencies such as Bitcoin, Litecoin, and Ethereum are considered essential components of the digital economy. However, mining does not possess these attributes, which means that anyone cannot participate in various activities in the network ecosystem.

Therefore, the coins obtained from mining can be categorized as follows: mining profits, purchasing goods, investing in cryptocurrency assets, and using them as a means of payment, such as transaction fees, and more. Among them, there are mainly two types of coins obtained from mining: one is buying and selling virtual currencies on trading platforms, such as Ether and Stellar. The other is buying some tokens on exchanges for exchange and obtaining corresponding tokens, and then selling them to the seller to earn profits.

What are the coins obtained from mining? According to CoinMarketCap data, as of September 15, 2018, the price of BTC is $11,450, with a 24-hour increase of 18.6%, and a total market value of approximately 400 million dollars; ETH is priced at $6.97, with a 24-hour increase of nearly 7%.

Where does the money for mining come from?

According to Coindesk’s report, where does the cost of cryptocurrency mining come from? There are mainly three types: hardware, software, and human capital. Hardware is calculated through ASIC devices (such as graphics cards) or generated by machines through automatic calculations.

For blockchain technology, both of these processes are similar to the Bitcoin network itself. If an application is used to mine blocks and conduct transactions, it will receive corresponding income. In this case, these tokens will become the fundamental part of the payment system, and smart contracts are tools used to execute this task.

Due to the inefficiency and energy-intensive characteristics of ASIC chips, the demand for hardware is reduced. Therefore, miners must purchase some dedicated integrated circuit design units (ASIC) because they do not want to manufacture their own products or use other people’s computer processors.

In order to stabilize the price of ASIC chips, mining companies need to provide additional electricity to their customers to help developers expand their scale and reduce expenses. However, in reality, most ASIC manufacturers do not do this. Instead, they use them as “middleware” – also known as “servers” – to achieve business operations automation, rather than directly cooperating with users.

According to data from the National Institute of Standards and Technology, from January 2017 to early 2018, more than half of the Bitcoin mining machines from China were still being installed. However, as more large enterprises join this field, their sales are also increasing. For example, Canaan announced plans to launch a new mining project called AvalonX in July of this year.

Although the stock prices of mining companies have been performing well, they still have insufficient network bandwidth. It is estimated that about 90% of companies worldwide have shut down their nodes, and most employees are still in their positions, causing the inability to continue operations. Therefore, even if no company can stop operating, mining pools can reserve a portion of assets as a repository for storage.

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What is the use of coins obtained from mining (Where does the money for mining come from?)

Where does the money for mining come from?

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