Over the months, we have had a lot of people requesting more information about BitClub Network and its operating model. It is not surprising that new technologies breed new ways of doing things, and BitClub Network is breaking the old moulds and setting new grounds in the bitcoin mining industry.
The following addresses some of the popular queries we have received, and provides a more background and behind-the-scenes info for the benefit of those who wish to participate in bitcoin mining with an established community. Some of the questions further below are also a little more advanced in nature, and would only make sense once you have begun mining with the community. You may skip those questions for now, and choose to come back to them later.
With a relatively “new” technology like Bitcoin, some words are bound to be unknown or even unheard of, and deserve elaboration. The explanation for these terms highlighted in green below may be referred to by hovering and keeping your mouse pointer briefly over each word or phrase for about one second.
We apologise for the lengthy detailed explanation below. But really, there is no easy or shortcut to explaining this properly. We believe that anyone who is serious and keen to invest some money into bitcoin mining would want to take the time to understand the intricacies of this operation. You may however, skip the questions that you already know about.
Frequently Asked Questions…
…on Bitcoin Mining and BitClub Network
What is bitcoin mining?
Put aside your notion about mining for a moment, especially where it applies to the extraction of precious metals and ore from the earth. In Bitcoin, mining is the process of adding transaction records to Bitcoin’s public ledger of past transactions. This ledger of past transactions is called the blockchain. The blockchain serves to confirm transactions to the rest of the network as having taken place. Bitcoin nodes use the blockchain to distinguish legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere. Bitcoin mining is a competitive race against all other miners around the world as miners try to secure and validate each new block and pass it on to the blockchain, essentially consuming a lot of computational power and electricity in the process.
For a quick introduction, please see the following video:
Why does bitcoin mining use up so much electricity?
Mining is intentionally designed to be resource-intensive and difficult so that the number of blocks found each day by miners remains steady. Individual blocks must contain a proof-of-work to be considered valid. The primary purpose of mining is to allow Bitcoin nodes to reach a secure, tamper-resistant consensus.
Where does bitcoin come from?
Mining is also the mechanism used to introduce Bitcoins into the system. Miners are paid small transaction fees as well as a reward of newly created bitcoins by the system for each transaction block successfully validated. This both serves the purpose of disseminating new coins in a decentralised manner as well as motivating people to provide security for the system. When bitcoin first started in 2009, 50 bitcoins were created and awarded to the miner with every successful block. The number of new bitcoins awarded is halved every 210,000 blocks, which takes roughly about 4 years. The first halving (on the 210,000th block) took place on 28 November 2012, with 25 new bitcoins created with every block, followed by the next halving (on the 420,000th block) to 12.5 bitcoins per block on 09 July 2016. This diminishing supply keeps bitcoins deflationary, until the set total of 21 million bitcoins have been fully disseminated by the year 2140. This total and halving schedule has been set in the Bitcoin system and cannot be altered or modified.
How is bitcoin mining done?
Bitcoin mining is done by connecting specialised computer hardware to the Bitcoin network, which then runs hashing functions to validate transaction blocks and obtain bitcoins as reward. When Bitcoin first started, only simple computing hardware such as a computer’s CPU and GPU was required to mine bitcoins. As the popularity of Bitcoin grew over the years and with more miners joining the network, the network automatically throttled itself to increase the mining difficulty. This was crucial to keep the number of blocks successfully validated to about every 10 minutes. With this increased in difficulty, the computational power afforded by CPUs and GPUs was no longer sufficient. These days, miners employ what is known as ASIC miners. This ensures the highest efficiency possible, both in terms of hashing rate and power consumption. ASIC miners have rendered the CPU and GPU obsolete in bitcoin mining, and using these CPUs and GPUs for mining is no longer profitable, as electricity cost and other overheads may equate to the value of nearly all or more than the bitcoins that could be mined.
Why would I want to get involved in bitcoin mining? Should I?
This is a question that only you can answer as risk attitudes and other factors differ from individual to individual. Allow us to first present to you some key information and facts. We will start with the risks. Bitcoin mining is a continuous race against all other miners around the world. How the number of miners grow with time, no one truly knows. The only thing which is certain is as more miners join the network, the mining difficulty increases accordingly (and vice versa as miners leave or quit mining). The other certainty is that miners with bigger hashing power will often get the larger piece of the pie in the form of bitcoins. Mining hardware can be very costly, and they are improved and upgraded quite often. Hence, miners with the latest mining hardware will usually be earning more bitcoins than those still using the older hardware. The downside to all this is, if you do not constantly keep up with the latest equipment, bitcoin mining may turn out to be less than worthwhile. Having said that, mining still provides you with the opportunity to obtain and accumulate bitcoins from the only place where it is created – from the Bitcoin ecosystem. If you understand bitcoin and what it stands for, and how it is already widely used as a currency and payment method today, then mining is a great way, if not the only way you can best capitalise on the future of money. Nevertheless, how you mine will ultimately determine your success in building your bitcoin stockpile. More will be explained as we explore this further below.
Can’t I just buy bitcoin and hold until they appreciate in value?
Yes you can. In fact, that is also a very good and straightforward way you can invest in bitcoin. And that is also what we at Coin Purveyor do. We set aside a small stash of bitcoin in our wallet for capital appreciation. But we go a step further and also purchase a few contracts that allow us to mine from a number of bitcoin mining pools. We see it this way – and it is best to draw an analogy with bitcoin’s precious metal counterpart – gold! While buying and keeping gold may be a great way to invest in gold, it would be even more profitable if one owned a share in a gold mining operation. That is, if such an opportunity ever presents itself, which doesn’t happen in the real world very often, if at all. Also, the costs required to own and run a gold mine would be huge. Bitcoin mining offers this unique opportunity to anyone who is interested in mining for a small sum. For less than 2 bitcoin at today’s prices, anyone can get started on a contract that mines bitcoins from a number of mining pools. In fact, the contract to mine from just a single mining pool starts at a fraction of one bitcoin based on today’s prices. So yes, while buying a keeping a bitcoin is certainly a great way to invest, we believe that getting a contract to mine bitcoin is even better in the medium- to long-term.
You may refer to our simulated projections in comparisons made between buying and holding versus mining.
How can I get involved in bitcoin mining?
A long time ago, one could easily mine bitcoins with a home computer, by simply utilising a computer or laptop CPU or GPU. The daily volume of bitcoin transactions today has made this way of mining no longer feasible or worthwhile. The way to mine bitcoins these days is with ASIC miners, and especially with the latest version that runs at the fastest hashrate and at the lowest power consumption. Also, due to the expanding number of miners around the world, the way to mine profitably today is to join a mining pool. A mining pool is where a group of people or community combine their ASIC miners and computing power to increase their odds to get a larger share of the daily global bitcoin reward. As it turns out, pool mining is one of the best ways for an individual or a group of people to mine profitably today. We believe that the best place to do that is with BitClub Network.
Who is BitClub Network (BCN)?
For starters, BitClub Network are not owned by any single person or entity. They are a group of like-minded enthusiasts made up of people from different backgrounds from all walks of life. BitClub Network and their team of programmers operate a very simple business around a very complex industry that provides a platform for anyone interested to get involved and start bitcoin mining, and have been doing so since August 2014. They are one of the top global crowdfunded community of bitcoin miners in the world today with an organised plan and program for sustainable mining operation with continual increasing hashrates. See Join A Bitcoin Mining Pool for steps on how to get started.
Where is BitClub Network mining done?
BitClub Network have their mining centres at a number of locations around the world, but the main centre is at Reykjavik, Iceland, simply because it provides the perfect environment for large scale mining. Where and how bitcoin is mined are very important factors for consideration. These are outlined at the benefits of joining BitClub Network.
Why is it important where and how bitcoin mining is carried out?
Bitcoin mining is very resource-intensive, requiring high amounts of electricity and cooling as mining hardware runs high hashrates, consuming a lot of power and heats up quickly in the process. As bitcoin mining is also a competitive race against all other miners around the world, having the fastest machine counts. It is these factors which make mining from home no longer feasible in current times. BitClub Network operate their mine in Iceland for a few very good and important reasons. Iceland provides 100% clean and renewable energy by utilising natural hydroelectric and geothermal technologies, resulting in lower electrical tariff which is cheaper than almost anywhere else in the world. This keeps electricity cost down, which means most of the bitcoins earned from mining can be kept as profits. Iceland is also naturally cool all year round, which means the operation does not need to rely on air-conditioning and related expenses, which again reduces overheads so that more bitcoins earned are kept as profit. The use of clean and renewable energy in BitClub Network’s mining operation does not pollute the air, and provides a very responsible and green method in bitcoin mining. BitClub Network are taking a proactive step to be green in mining as they anticipate the amount of electricity used in mining will be outrageous due to the continuous growth of the global combined network power of Bitcoin.
What mining hardware does BitClub Network use?
Apart from the factors of energy consumption and cooling requirements discussed above, the use of the appropriate hardware is also of paramount importance. Similar to using the biggest and fastest bucket-wheel excavators when mining for ore, using the fastest and most efficient hardware to mine bitcoins is incredibly crucial. BitClub Network always use state-of-the-art mining hardware and currently use the BitMain AntMiner S9 in their mining operation. The special thing about BitClub Network is that they do not wait for mining equipment to become outdated or obsolete. When a new, faster and more efficient model is released to the market, the current “older” hardware is quickly sold off on the second hand market while they still fetch a good price. The money is then reinvested back into the community to purchase the newer machines without capital reinjection from members. This was done previously with an older model prior to the S9. BitClub Network also have a special arrangement with the manufacturers of mining hardware so that they do not face a shortage of supply in equipment or parts maintenance. By using the latest mining hardware, a high hashrate is continuously maintained whilst running at the lowest power consumption possible. This ensures that BitClub Network are always ahead of the game – it is a plan that differentiates itself from solo home mining and cannot be underestimated.
What is the Return On Investment (ROI) like?
For a commodity like bitcoin and especially with bitcoin mining where mining difficulty and total number of miners change all the time, speculating on the ROI for bitcoin mining can be difficult or futile. ROI is determined by a few factors – the number of bitcoins mined in a given time, and the price of bitcoin at any given moment – both of which changes daily. There is also the changes in mining difficulty over time, and switching of repurchase percentages by individual members and the full and partial shares that they own. Based on historical records, the break-even period is usually about a year to a year-and-a half, although some members have been known to break even as early as 6 months. It all depends on the price of bitcoin and when it is sold. Just to give an idea, before the last halving in July 2016, a Founder Pool with BitClub Network typically earns about 3 bitcoins per year on average. Even as the amount of bitcoin supply halves every 4 years or so, its value generally appreciates a few folds in the same period, resulting in a net gain in investment. With BitClub Network, members are also given the full control of how they would like to allocate their daily earnings to repurchases of partial shares. A higher percentage may be set on the repurchasing of partial shares, which provides the member with a higher number of partial shares in the pool, leading to higher earnings once the percentage is set back to the default minimum at a later period. Pool mining with a community like BitClub Network generates higher earnings in bitcoins compared to mining from home, especially after deducting earnings for 24/7 overheads, maintenance and keeping up with upgrades.
Is BitClub Network a ponzi or pyramid scheme?
No, BitClub Network is not a ponzi or pyramid scheme, although it may appear so to those encountering it for the first time, or to those who do not have a thorough understanding of its background plan. In fact, when BitClub Network first started, Roger Ver believed it to be a pyramid scheme, resulting in his tweet to never have anything to do with the community. However, after a deeper understanding of how BitClub Network operates, he has since changed his stand and removed the tweet, as shown in this video. Just to elaborate a little, a ponzi scheme requires continuous injection of funds from new members to keep the operation sustainable, and usually promises a high net return almost immediately or within a short span of time. Ponzi and pyramid schemes often collapse quickly upon themselves as the base becomes too big and no new members join to keep the payouts and operation going.
BitClub Network has been operating since August 2014 and have been consistently paying out bitcoins daily to the members of the community since then, whether they bring in new members or not. This is largely because BitClub Network do not require new membership fees for them to be sustainable. Profits are generated through actual mining activity, a tried and tested model which ensures steady and consistent passive income payouts as has been proven over a few years now. BitClub Network also provide a platform for their community members to earn referral commissions and bonus payouts if they wish to.
In fact, if no new members join BitClub Network today, there will be more bitcoin distributed to the existing members based on their individual full and partial shares. This is essentially a direct opposite of what a ponzi or pyramid scheme really is.
Is BitClub Network’s referral based system necessary, and why?
Most people (as Roger Ver once did) and website reviews make the mistake of assuming this as a pyramid scheme without understanding the hows and whys behind BitClub Network’s referral based system. It is important to note that in BitClub Network, no sponsoring is required to earn mining pool payouts. Any member can choose to acquire a mining contract, sit on it and do nothing else and receive profits in bitcoins for years to come. Some members have already been doing that for more than 2 years now. This fundamentally makes it not a ponzi or pyramid scheme.
However, BitClub Network’s referral based system is there for two main reasons, the first of which is to cater to the network marketers who see it as a business which they can build upon. Those who carry out seminars and presentations often do it at their own expenses, and the referral commission that they receive helps to pay for their time, the booking and rental of venues, and transportation and accommodation costs where overseas travel is applicable. BitClub Network is not a company that has people on payroll to speak on its behalf, but rather a community of like-minded enthusiasts and individuals who set and decide how they would like to build upon the mining business.
The second reason, which is not as immediately apparent, is that it serves as incentive for existing members to speak about bitcoin to their friends and peers. By providing a referral commission for every new member who joins, community members are more likely to want to spread the word about bitcoin and bitcoin mining to another person. This effectively helps to create awareness about bitcoin around the world, and especially more so to reach parts of the globe where bitcoin has never been heard of. So, while referral commissions may directly benefit members, they also indirectly help to spur the dissemination of the bitcoin idea to a wider audience. This may inadvertently help to drive the value of bitcoin higher in some small way for the benefit of all other investors not associated with BitClub Network, but more importantly, it helps to promote bitcoin towards wider adoption and hopefully to mainstream use one day.
Also, as this is a crowdfunded arrangement, increasing the membership base helps the community as a whole to continually build higher hashrates, thus helping BitClub Network to remain relevant in the field of bitcoin mining, and achieve higher positions in ranking in worldwide hashrate distribution. This is the bigger picture that most critics and bitcoin users miss and do not see.
How do I know that BitClub Network is legitimate and not a scam?
It is easy for anyone to check if a mining operation is indeed legitimate or not. Any group who is involved in actual large-scale mining is presented on the hashrate distribution chart at www.blockchain.info. The chart is publicly available and accessible at any time, and shows the mining hashrate distribution in real time as it refreshes itself every 10 minutes. Any group who suddenly quits mining will quickly disappear from this chart. BitClub Network have consistently maintained top 10 position in the world in mining hashrate on average. Mining hashrate distribution changes depending on when it is checked, and BitClub Network has been known to be between 5th and 12th in the world. In comparison to corporations who are audited annually or even quarterly, having your performance gauged and published once every 10 minutes in real time makes mining a very transparent operation.
BitClub Network is also listed as one of the world’s largest mining pools on established news sites as given here.
Members are also allowed to visit and inspect the mining base in Iceland at any time upon receiving an authorisation letter which takes about 10 days upon application. Authorisation is required as the mining base is operated at a secure decommissioned NATO facility space shared with some Fortune 500 Companies, i.e. at the Verne Global Data Centre in Iceland as shown below.
With mining difficulty constantly increasing, how can BitClub Network remain relevant and profitable?
BitClub Network understands that the only way to remain relevant and profitable is through sustainable mining practice, which includes continually increasing hashrate and keeping up with upgrades over time. Most people mistakenly assume that the continuous increase in mining difficulty leads to a drop in bitcoin mined. This is not necessarily the case. While the halving that takes place every 4 years will result in less new bitcoin released into circulation (and that is beyond the control of any miner), miners who can maintain and increase their hashrate to be higher in proportion to other miners across the world can effectively take a larger portion of those new bitcoin released into circulation. As mining difficulty increases over the years, some miners will inevitably fall out of the race due to the inability to keep up with the global growing hashrates. New miners may also come into the picture in smaller proportions. A miner who can retain a larger hashrate in comparison to those of other individual mining companies or sites will stand to gain more, or at the very least maintain its position without falling out.
The overall combined hashrate at BitClub Network is based on the total number of mining hardware that the members own, and these machines are managed by on-site technicians from the manufacturer themselves. BitMain guarantees the hashrate and not just the equipment, which means that if there is any drop in hashrate performance caused by malfunction in equipment, the manufacturer will quickly deploy additional resources to keep the hashrate up. It is important to note that most miners do not experience such benefits, especially individuals who mine from home.
With a continuous expanding member base, BitClub Network is set out to increase their combined hashrate to keep up with growing demands as mining difficulty increases, and strives to be Top 5 by 2018.
Do I need to periodically re-inject capital or funds?
Each contract has a period of 1,000 days (almost 3 years) of mining, and a percentage of bitcoin mined that will be instantly available for you to withdraw through your back office directly to your bitcoin wallet. However, the contract account also automatically sets aside a percentage of your mining profits towards repurchasing of partial shares. Each pool will automatically repurchase a partial share when it reaches 2.5% of the total share cost of that pool. This keeps your contract running perpetually past your initial 1,000-day period. The amount which is set aside is also used to pay for the purchase of new upgraded machines once they become available (as mentioned earlier). This percentage is controlled by you, which can be set between 0% to 100%. Setting the percentage to 0% (i.e. no repurchase) means you will be receiving the entire earnings for the day, but this also means you will not be building partial shares that will eventually extend your mining contract beyond the 1,000 days. This may be hard to understand at first, but it is no doubt a well thought-out plan to keep the mining operation sustainable and hassle-free for the community members. In fact, it has often been attributed to be one of BitClub Network’s most important feature that has kept its operation a success and still running to this day after more than 3 years.
Is there a money back guarantee?
There is no money back guarantee as payments made are used to immediately secure a mining hardware from the manufacturer or open market. As these machines are sourced from a third party, they cannot be returned and are outside the control of BitClub Network. However, when a Founder Pool contract is purchased, you will own your own mining hardware which will be individually numbered. In the event that you would like to discontinue from mining, a request can be forwarded and the mining hardware will be detached from the grid and sent to you. You can then choose to mine from home, or sell your mining hardware off on the second hand market. So far, there has not been any known cases of members discontinuing from mining or requesting for their hardware back. It would be more prudent to leave your hardware as it is to continuously mine for you and withdraw your bitcoin earnings in the future since no new injection of capital is required. Maintenance and malfunctions are handled by technicians so that you do not need to worry about downtime and other technical issues.
The price of bitcoin has gone up by so much. Is it still worthwhile to mine?
The price of each mining contract is a fixed amount in US dollars, and is independent of the current price of bitcoin. In fact, with bitcoin prices climbing higher these days, it may be even be more worthwhile to place that same amount into mining than buying as these tables show. Your mining profits will also be consistent daily averaged out over a short period, give or take a small percentage depending on the hashrate for the day, subject to the effects caused by increases in mining difficulty over time. The objective is to mine and accumulate as many bitcoins as you can, and hold them for the medium- to long-term, eventually converting them back to currencies if treated as an investment, or have your mined bitcoins withdrawn at any time to a debit card and used them in your daily transactions. Remember that most goods and services are still priced in US dollars, and as the price of bitcoin climbs, you will just use less bitcoins in the purchase of these goods and services.
All good so far! How can I start mining bitcoin with BitClub Network?
The first step is to join as member for US$99. Upon joining as member, you can then purchase a mining share. There are three mining pool shares available, each costing US$500 (Pool 1), US$1,000 (Pool 2) and US$2,000 (Pool 3). The profits from each pool correspond to their initial cost in proportion to one another, i.e. a bigger pool pays a higher daily earnings compared to a smaller pool. There is also what is known as a Founder Pool which mines from all three pools at the price of US$3,500 (the combination of all three pools). The Founder Pool is usually the one secured by most members, as aside from owning your own mining hardware, you will also be invited to participate in BitClub Network’s new projects and ventures along the way. Currently, all Founder Pool members are given a certain number of clubcoins and token shares of their CoinPay project, and these will be given out to all new members until the set allocation is depleted. As BitClub Network progress along, new projects will be made available to Founder Pool members.
To begin mining with BitClub Network, kindly refer to the details in the next section on Join A Bitcoin Mining Pool.