In return for running the verification process to verify bitcoin transactions, bitcoin mining is the process of receiving bitcoin. These transactions provide the Bitcoin network with protection, which in turn compensates miners by providing them with Bitcoins. If the price of Bitcoins exceeds the cost to mine, miners will benefit. Many individual miners are asking themselves, with recent technological developments and the emergence of professional mining centres with enormous computing capacity, as well as the changing price of bitcoin itself, is bitcoin mining still profitable?
There are several variables that decide whether a viable venture is bitcoin mining. These include energy costs for powering the computer system (electricity costs), computer system availability and rates, and difficulties in delivering services. Difficulty is calculated in the Bitcoin validation transaction’s hashes per second. The hash rate tests the problem solving rate. The difficulty varies when more miners join since the network is programmed to create a certain amount of bitcoins every 10 minutes. The difficulty increases as more miners enter the market to ensure that the level is unchanged. Bitcoin prices are the last factor in deciding profitability relative to ordinary, hard currency.
Remember to always to store your bitcoin on a cryptocurrency hardware wallet for maximum protection.
Bitcoin Mining Components
Mining was usually performed on personal computers prior to the introduction of modern bitcoin mining tools in 2013. But the advent of application-specific integrated circuit chips (ASIC) produced up to 100 billion times the capacity of older personal computers, making impractical and redundant the use of personal computing to mine bitcoins. Although bitcoin mining with older hardware is still technically feasible, there is little doubt that it is not a profitable venture. This is because of the way mining is set up: miners compete as quickly as possible to solve hash issues, so those miners with a serious computational disadvantage are ultimately not likely to solve a problem first and be rewarded with bitcoin. The complexity of mining bitcoins was approximately in line with the cost of bitcoins when miners used the old machines. But there were problems with these new machines due to both the high cost of purchasing and operating the new equipment and the lack of availability.
Profitability before and after ASIC
For many reasons, old timers (say, way back in 2009) mining bitcoins using only their personal computers were able to make a profit. First, these miners owned their systems already, so the cost of equipment was essentially zero. To run more effectively with less tension, they may change the settings on their computers. Second, these were the days before the game was launched by experienced bitcoin mining centres with huge computing resources. On home computer systems, early miners only had to compete with other individual miners. The rivalry was on an equal footing. Even though the cost of electricity differed depending on the geographical area, the difference was not sufficient to discourage individuals from mining.
The game changed after ASICs came into action. Individuals were now competing with heavy mining equipment that had more computing power. Mining profits were chipped away by expenditures such as the procurement of new computer equipment, the charging of higher energy prices for the maintenance of the new equipment, and the continuing mining challenge.
Bitcoin Mining Difficulty
The difficulty rate associated with mining bitcoin is variable and changes approximately every two weeks to maintain a steady production of validated blocks for the blockchain, as discussed above (and, in turn, bitcoins introduced into circulation). The higher the rate of difficulty, the less likely an individual miner is to be able to solve the hash issue successfully and gain bitcoin. The level of mining difficulties has skyrocketed in recent years. The challenge was when bitcoin was first introduced. It’s more than 16 trillion as of May 2020. This gives an indication of how much more complicated it is to mine for bitcoin now than it was a decade ago.
The Bitcoin network will be limited to a total of 21 million Bitcoins. Since it was created, this has been a central stipulation of the entire ecosystem, and the cap is set in place to try and regulate the cryptocurrency’s supply. More than 18 million Bitcoins have been mined at present. The network protocol halves the amount of bitcoin rewarded to miners for successfully completing a block roughly every four years as a way of monitoring the introduction of new bitcoin into circulation.5 Originally, the amount of bitcoin a miner earned was 50. In 2012, this amount was halved and 25 became the award. It halved to 12.5 again in 2016. The reward halved again in May 2020, to 6.25, the new reward. Prospective miners should be aware that, even as complexity is likely to increase, the reward size will decrease in the future.
Profit in the present environment
For some people, Bitcoin mining will still make sense and be profitable. Equipment is obtained more quickly, but competitive ASICs cost up to about $10,000 anywhere from a few hundred dollars. Some computers have evolved in an attempt to remain competitive. Some hardware, for instance, enables users to adjust settings to reduce energy requirements, thus reducing overall costs. Prior to making the fixed-cost purchases of the equipment, prospective miners should conduct a cost/benefit analysis to consider their breakeven price. To make this estimate, the variables needed are:
Power cost: What is the electricity rate for you? Bear in mind that prices vary based on the season, the time of day, and other variables. This details can be found on your energy bill, measured in kWh.
- Efficiency: How much energy is absorbed by your machine, measured in watts?
- Time: what is the estimated amount of time you are going to spend on mining?
- Bitcoin value: What is the U.S. dollar or other official currency value of a bitcoin?