Considering mining Bitcoin? There is much more to it than having a simple program for it, and we are here to explain everything.
Bitcoin mining means using your computer’s computing power to run the verification process to validate different bitcoin transactions. This decentralized verification is what gives the Bitcoin Network its security. The miners receive Bitcoins in exchange as a reward for their work.
As we know, when the whole Bitcoin craze started, there were a lot of people that went into the mining business, with more or less success. But now, with different and better technology combined with the professional mining centers, as well as the ever-changing and not so stable price of bitcoin, comes a question: Is Mining still profitable?
Factors determining the worth of Mining
The most important factor that people look at when considering Bitcoin Mining is electricity costs. As miners use a lot of computer power to mine, they use a lot of electricity as well, and knowing exactly how much this is costing you can be a first step to determining whether the whole operation is worth it. The computer system’s price is also an important thing, as the computers needed to mine can be very costly. However, the difficulty of Mining is one of the most significant factors that we are interested in.
The system makes sure there will always be a certain amount of bitcoins created every minute by increasing Mining’s difficulty based on how many people are currently mining. This means that the more people try to mine the bitcoin, the harder it becomes for everyone.
The difficulty of mining Bitcoin
As mentioned above, the difficulty rates vary weekly. The difficulty rate maintains a stable production of the blockchain blocks ( this puts the Bitcoin in Circulation ).
This setup means that it has become almost impossible for a single minor to solve the digital problem and earn a bitcoin. To put the mining difficulty in perspective, all you need to know is that it started with difficulty 1. Now we are at 16 trillion. That means that the problem changed 16 trillion times.
Ever decreasing rewards
Perspective miners need to consider not just the difficulty to mine but also the state of the rewards. As Mining becomes proportionally more complicated, the tips become smaller and smaller. The Bitcoin Network cap is 21 million bitcoins, and as of now, over 18 million of bitcoins mined. The network halves the rewards every four years, and they do that to control the number of bitcoins circulating. This way, along with the mining difficulty, the system makes sure that there is no way Bitcoins can flood the market.
Is it worth it to mine in today’s environment?
Even though the above facts may scare even the hardened veterans of bitcoin mining, we believe that Mining can still be profitable for some people.
Prospective miners need to have a very detailed cost/benefit analysis to understand what they are getting themselves into. It is because there are initial investments required to be able to start and without the proper plan. The variables that every miner needs to pay attention to should be:
- What is your electricity rate? How much does it cost?
- How much power does your computer use?
- How much can you afford to mine, and how much do you plan on Mining daily?
- How quickly can you mine one bitcoin by mining the regular daily amount?
- What is the value of Bitcoin?
To help you with analyzing the above variables, you can find different profitability calculators online. One of them being CryptoCompare. These tools can also be used to measure your current system and create a better suiting system for your needs. To compete with the Mining centers, miners can join a mining pool where more individuals work together and share rewards. These mining pools have become more of a viable option due to the constant rewards decrease.
The truth is that it is not profitable to mine as it used to be. As reports indicate, the revenues from mining declined significantly. But that was the point from the start with Bitcoins. The only thing left for an individual miner is to run different analyses and see if it is worth the trouble. Most individual miners have become obsolete, so it is imperative to look for the best possible setup for you and possibly think about joining a good mining pool.