Cryptocurrency is fast gaining popularity in Australia. Statistics show that about 4.6 million Australians own at least one crypto coin, while 1 in 5 people have invested in a currency. It also has the third-highest crypto adoption rate in the world.
Bitcoin is still the most famous cryptocurrency, with 74% of the people investing in it. Ethereum and Ripple come next, with 28% and 27% ownership among the people. Most people investing in this currency are below 35 years of age.
But who creates Bitcoin, and how does the process work? You should click here to get an idea about the entire process. What are its advantages? Is it profitable, and what are the rules related to crypto mining in Australia?
Get the answers to these questions below and know the essential details.
What is Bitcoin mining?
To understand how mining works, you should first know about blockchain. It is a technology that enables users to record information in a public ledger across a network.
It comprises two words: block and chain. What are they? A block is a place for storing transactions, and a chain is a series of blocks joined together.
The data on a blockchain exists in a framework called nodes, and they are connected and support the entire infrastructure. Nodes are based on a peer-to-peer network with a decentralized system without a central authority.
Before a user completes a transaction, miners must solve a complex mathematical problem. Once they solve the problem and the nodes verify the transaction, they become a block.
The network rewards the miners for completing the process with a freshly minted Bitcoin for completing the process. They usually offer Bitcoins to miners who solve the complicated puzzle first.
You could think of them as auditors, involved in validating a deal and getting rewarded.
Is mining Bitcoin legal in Australia?
Australia does not have any rules prohibiting the mining of Bitcoin or other cryptocurrencies. However, the government advises miners to exercise caution for cloud-based mining.
What happens during a transaction?
As seen above, a miner has to solve a complex problem before they can complete a transaction. They do this by solving a “hash code”, an algorithm that effectively secures and hides transaction details from being seen by others.
Bitcoin uses the SHA-256 algorithm, first developed by the United States National Agency in 2001. It contains information not just on a recent transaction but also on the one before it.
Unless they solve the hash code, users will be unable to send or receive Bitcoins. Miners ensure the Bitcoin working mechanism is smooth and free from disruptions.
What are the ways you can mine Bitcoins?
You can mine Bitcoins in two ways: personal and cloud.
In personal mining, you will require a personal computer (PC), graphics card unit (GCU), and an application-specific integrated circuit (ASIC) miner chips. It’s not as easy as clicking on “click here” to get started. You need to have the right equipment and extensive computing power for mining.
You don’t need your PC for cloud mining. Instead, you can buy physical mining hardware located in a mining farm facility.
The most popular type, called leashed hash power, lets you enjoy profits while paying a fee to the facility for renting their computing services and equipment.
Is mining profitable in Australia?
The profitability of Bitcoin was highest at its earlier stages. However, you can still expect handsome profits from mining, despite the increased competition and difficulties in earning rewards.
The Australian Bureau of Statistics saw a 4% increase in profits by mining between 2021 and 2022, while the June quarter saw a 16.7% increase.
Even though you can expect profits from mining, you should consider the costs. For example, if you’re mining at home, your electricity bill will increase substantially from increased electricity use.
You could purchase the latest hardware and equipment to cut down electricity costs, but that will only get you so far. The chances of earning profits from expensive equipment are relatively higher than standard ones.
Do you have to pay tax?
The Australian Taxation Office regards cryptocurrency dealing as a capital gains tax (CGT) asset, including investing, trading, and gifting. Since mining is equal to crypto trading, it follows the trading stock rules.
Bitcoin mining in Australia can be a profitable venture when you have the necessary equipment and become good at it with time. Before starting your journey as a miner, you should acquaint yourself thoroughly with the processes, techniques, and protocols.