Factors Determining the Profit from Bitcoin Mining
Making a profit from Bitcoin Mining has become a costly and painstaking task. With massive competition and ever-increasing mining difficulty, it is getting harder to enter the market. Without any doubt, the interests in Cryptocurrencies have skyrocketed since 2016, as the total Crypto market capitalization went over $700 billion before taking a hit.
Bitcoin mining has a lot of appeal from investors that are interested in getting a reward for their work. In the early days, making a profit from Bitcoin mining was easy, primarily due to the absence of ASIC miners. BTC mining was once nothing more than a hobby done by Crypto enthusiasts. The only thing you would require is a simple desktop or computer to start mining. However, things have changed a lot in the past five years, questioning the profitability of Bitcoin mining.
Making a Profit from Bitcoin Mining
Several factors determine profitability. In 2009, Bitcoin miners used standard CPUs to confirm transactions on the Blockchain. The mining difficulty was low, and the block reward was 50 Bitcoins. Fast forward to 2019, mining the same amount of BTCs a month, would require a setup cost of over $50,000. Ouch!
The power cost is a significant factor in determining your profitability. In countries where electricity cost is high, Bitcoin mining remains unfeasible. Electricity rates also change depending on the season, and measuring it can be frustrating at some time. Having access to cheap electricity is the first and foremost consideration you should pay before starting Bitcoin mining.
Back in 2010, people make use of their standard CPUs to mine Bitcoin. However, with the advent of new Bitcoin mining software and hardware in 2013, this activity quickly became obsolete. Now you need to invest in expensive ASIC mining hardware to enter the industry. There are various mining hardware available in the market, and Asicminervalue has comprehensive documentation for all of them.
The efficiency describes how much power your ASIC miner consumes in watts to generate one Bitcoin. Calculating efficiency is one of the complex factors in Bitcoin Mining, and varies continuously depending on the mining difficulty.
Hashrate is the measure of computational power hardware can perform. The higher the power, the greater are the rewards. As at the time of this post, the collective Hashrate of Bitcoin network was 80 Exahash. The number signifies the amount of tremendous investment into hardware and electricity costs. Hashrate is crucial to determine profit from Bitcoin mining and also signals the increasing or decreasing interest in the activity.
With Hashrate increasing over the past years, it would seem that block would be found by miners quickly. However, the Bitcoin difficulty prevents this from happening. The Bitcoin protocol is designed in a way that adjusts to changing Hashrate for ensuring that every block is generated roughly every ten minutes. Hence, if the Hashrate increases, so do the difficulty and vice versa.
Bitcoin mining these days are done by taking advantage of mining pools unless you have an enormous amount of Hash power under your control. Back in 2009, Bitcoin mining was easy, and any individual could have find blocks using standard CPUs. However, as the competition and interest in Bitcoin mining grew, miners started to join their power in a pool for solving a block. Mining pools today are dedicated web apps that allow miners to connect their hardware together. The mining pool charges fees for using their service. Once the pool finds a block, the miners receive payments according to their hash rate contribution.
Ultimately, the value of a single Bitcoin decides your profitability. If the price is increasing while the difficulty remains constant, likely, your profits will also climb.
To conclude whether Bitcoin mining is still worth the investment, it is crucial to take into account the factors that affect profitability. It is also essential to use online Bitcoin mining calculators and make a comprehensive plan before you start. You can use different numbers during the calculation to find your break-even and determine if the profits are something you would go for. We also have a detailed guide about Bitcoin mining, in case you wish to read further.