There are various methods to conduct Bitcoin, Ethereum or other Cryptocurrencies mining.
Everyone can use his own computer to conduct mining, however, it is very difficult to mine any bitcoin using a personal computer nowadays due to its slower processing power.
Another approach is to purchase an ASIC computer that is specified for mining. Unfortunately, it requires huge electricity supply to operate the mining machines, hence results high electricity costs. Besides, it may require a cool environment for the machine to be operated as high processing power usually generates more heat. The cost to provide a cool environment such as air-conditioning cost may be high especially for hot areas.
Joining Mining Companies
The third approach is to join a mining company, of which each participant is only required to purchase a mini-mining computer. When one of the participating machines can successfully mine some bitcoins, it will be evenly distributed across other machines. Therefore, you only need to maintain your own computer and provide a little amount of “management fees” to the mining company, yet you do not need not share the maintenance costs of all other computers. However, the issue of high electricity cost and the need of a cool environment still exist.
Individual Contracting with Mining Companies
Last but not the least, you can enter a contract with a mining company, of which the company will hold all the mining computers. You will need to pay the maintenance fee for these machines and in return you will earn a portion of the bitcoin that the company mines. This is usually a lifetime contract, hence you cannot terminate it even you suffer a lost. On the other hand, the contract is tradable, hence you can sell it to any third parties.
The number of bitcoins that can be mined will be adjusted based on the difficulties in calculation to produce 1 bitcoin per 10 mins. The faster the computation of the mining machines, the more difficult for computation. Besides, if more people engage in the mining process, the hashrate of the mining machines will also increase resulting a higher difficulty level, and hence the number of bitcoins that can be mined will decrease.
Theoretically, if more people is aware of bitcoin mining and engage in it, the number of bitcoins that can be mined will be reduced. Therefore, even the price of Bitcoin increase, the number of bitcoins that you can earn from the contract engaged with the mining company may be reduced.
You may encounter lost if if you signed the contract with the mining company especially if the price of bitcoin fall drastically while you still need to pay the maintenance fee. Despite some may argue that if the price of the contract increase, one may still be able to make a profit. However, if the price of bitcoin decrease, will the price of a derived contract still increase and will there be any liquidity issues?