Mining (production) of the crypto currency or what is the price of electronic money emission. Alexander Sivtsov.
In this article, we’ll talk about mining or the production of crypto currency and see if modern electronic money has a price. So, the mining …
What is mining?
The very term “mining” in English means extraction of mineral resources, but with respect to crypto currency this concept is a little more extensive. As for the crypto currency, mining is needed not only to earn the crypto currency, but also to support the operation of the transaction and security system itself. Since there is no centralized management of the crypto currency, which is one of its advantages.
The mining is not the only system for the production of crypto-currency. An alternative to mining is forging (minting) and ICO. Often, only one of the known methods is used in the production of crypto currency. But, there are crypto-currencies, for porduction of which used a combination of several known emission methods.
Bitcoin Mining
The Bitcoin mining system is such that new coins are mined as a reward for generating a new data block into the transaction database. It is possible to use a new currency unit only after 120 confirmations or 20 hours after its issue. Every day, regardless of capacity, basically, about 144 blocks are generated, but at the same time the number of blocks can also decrease or increase with a slight deviation. The fact is that the complexity of block generation is reviewed every 2016 blocks (or about once every two weeks). And the generation complexity will change so that generation of one block takes 10 minutes, which is why it is impossible to obtain a large number of Bitcoin coins in a short time interval.
Is there an issue price for Bitcoin?
Despite the fact that Bitcoin can not be touched as real money and it is not confirmed by the gold reserves of any country, nor by any production, and so on, Bitcoin still has a price. Let’s start by recalling what includes the price of any product, for example, TV:
- Costs of raw materials for parts;
- The cost of electricity in the production process;
- Labor costs;
- Expenses for equipment for production;
- Costs for delivery;
- Taxes and extra charge.
At the same time, it should be taken into account that with the development of production technologies, prices for TVs may decline over time.
And now let’s figure out what it takes to issue Bitcoin:
- The cost of equipment that can constantly grow with the fact that the generation of a data block becomes more complicated. And more modern and expensive equipment is required for calculations, or simply an increase in computing power.
- The cost of electricity, which can also grow by increasing the capacity for computing.
- Labor costs, as all equipment needs to be serviced and constantly monitor the stability of its operation.
Considering that every 4 years the reward for each block is reduced by 50%, thereby reducing the production of coins, automatically the issue price of one Bitcoin coin is doubled.
Conclusion:
Drawing conclusions on this article, one can safely say that Bitcoin has a real reasonable price, which is not so small, but it is impossible to calculate it, even knowing about the formation of the issue price. The impossibility of calculating the price hides in the decentralization of emissions, which at least does not allow to calculate the exact costs for electricity and labor.
Read my previous article BITCOIN – THE DEVELOPMENT HISTORY OF THE MOST POPULAR CRYPTO CURRENCY AND THE REASONS OF ITS POPULARITY! ALEXANDER SIVTSOV.
Alexander Sivtsov