Beginners Guide to Bitcoin Mining – Is it Profitable?
Is bitcoin mining still profitable? In 2010, you could create a lot of bitcoins using your personal computer. Not anymore. The stakes are much higher now. Bitcoin mining is now a very competitive process that requires highly specialised machines to pull off. Your ordinary PC is just not equal for the task.
So, how does bitcoin mining work? Simply put, bitcoin mining is the process of verifying transactions on the bitcoin network. As you might already know, blockchain is basically a decentralised ledger outside the control of any central authority.
The ledger is distributed into millions of computers across the world and every transaction must be verified.
To do this, miners must do some number crunching to find a specific number. These are educated guesses which means making several attempts. A lot of energy is wasted in the process. A bitcoin mining machine actually handles this process. The first to find it gets a reward in bitcoin. Because of the huge interest, the computational power required to mine bitcoin has been increasing.
Consider you miner’s hash rate
Simply put, a mathematical problem being solved is called a hash. The rate at which it is solved is the hash rate. The more the miners joining the network, the more the hash rate required. Be sure to look up your miner’s hash rate before you buy. It indicates how well your miner will perform. The higher the better.
The difficulty increases with more miners joining the network hence more resources required. This is the rather tricky part to estimate. This will inevitably affect your profits and it is something you should factor in.
The reward for finding a valid block currently stands at 12.5 bitcoins. This number halves every four years. In 2009, the reward was 50 bitcoins. A total of 21 million bitcoins can ever be created and this supply will be exhausted around 2120.
Is bitcoin mining worth it?
So, is bitcoin mining worth it? A lot of factors go into bitcoin mining. Several bitcoin mining calculators are available for this exact purpose.
One major consideration is the power rates in your country. That is because the cost of electricity plays a huge factor in bitcoin mining. The reason why China dominates this sector come down precisely to this reason. Miners in countries like Russia and Canada also have an edge because of low tariffs.
To demonstrate this point, the cost of electricity starts to surpass the cost of acquiring an Antminer, a popular bitcoin mining hardware after two years of operation.
Hardware Cost and Efficiency
One other major cost is, of course, buying the actual mining machine. A good bitcoin mining equipment costs anything between $500 to $2000.
Power efficiency should be your major consideration before you make that purchase. Depending on where you are, it could be the single most important thing that determines your mining profitability.
You can estimate the amount of electricity your miner will consume from your monthly bill.
Mining pool fees
To mine more effectively, you will need to join a mining pool. This is a group of miners who have joined literally pooled their resources. This comes with fees which you need to put into consideration.
Of course, you have to consider the price of bitcoin in the market and make your profit calculations. As you will not start turning in a profit immediately, you will need to make some projections as well.
If you cannot afford a decent mining rig, for now, you can invest in cloud mining. This is where you actually buy computing power instead of actually bitcoin hardware. Those who invested in bitcoin mining 2017 reaped big because of the high bitcoin prices.
So to answer the question; is bitcoin mining profitable. The answer is yes if you are willing to put some significant investment. If you don’t have much money to spare, you can settle to buying and selling bitcoin instead.