Is Bitcoin Mining Business Still Profitable?
This is the question on the mind of prospective miners that are not sure whether to try Bitcoin mining or not. However, it is important to understand the entire Bitcoin mining concept before we can make a conclusion on whether it is still profitable or not.
What is Bitcoin Mining?
- Bitcoin mining involves solving concept mathematical calculations and puzzles with an aim of discovering new blocks to be added on an existing blockchain network. In this case, the miner validates bitcoin transactions by running the verication and in the process gets some reward in form of Bitcoins.
- The Bitcoin network security gets its security from the additional blocks and in turn releases some bitcoins as a form of compensation for miners.
- The cost of mining should be lower than the price of Bitcoins for miners to get profit from the entire exercise. However, there have been doubts in recent years when it comes to profitability of Bitcoin mining due to technological changes. The enormous computing power of modern professional mining centers has made the mining process harder.
Factors that determine the profitability of Bitcoin mining
Bitcoin mining is still one of the major methods of earning Bitcoins but its profitability is determined by quite a number of factors. The profitability of Bitcoin mining is determined by;
- The difficulty in providing mining services.
- Availability of a high spec computer system.
- The computer system price.
- The cost of electricity for powering the computer system.
- The price of Bitcoins against hard or standard currency.
The hash rate of Bitcoin validation transaction is normally used to measure the difficulty of a transaction process. For every ten minutes, a Bitcoin network is supposed to release a specified number of Bitcoins. Therefore, the entry of more miners tends to increase the difficulty of the mining process. The only way to keep the level of Bitcoins static when there are many miners in the market is for the process to be more difficult.
What are the components of Bitcoin mining?
The new Bitcoin mining software was introduced in early 2013 and this completely changed the Bitcoin mining process. Previously, it was possible for one to mine Bitcoins on their personal computers but that is no longer the case. Therefore, the use of personal computing has become irrelevant with the introduction of faster computing technologies such as the Application Specific Integrated Circuit chips (ASIC).
The new mining technology has more superior capability when compared to the use personal computers that have become obsolete. However, the new technology is very expensive when it comes to buying the cost of running the new equipment. In addition, the new technology is not easily available for most people. A combination of these factors can make it difficult for one to earn Bitcoin from mining.
Mining profitability before the new computing system
Before 2013, mining was done on personal computers and miners used to make a lot of profit due to a number of reasons. To begin with, the equipment cost was almost zero as the miners already owned their personal computers. In addition, the miners could easily increase the efficiency of their computers by personally changing the settings. You can visit https://www.abitgreedy.com/bitcoin-mining/ for more information about Bitcoin mining profitability.
Second, there was less competition as miners could only compete with fellow individual miners with personal computers. This was possible before the introduction of professional Bitcoin mining centers that made some miners to have superior computing power than others.
The level playing ground that miners used to enjoy is no longer available after the introduction of high spec computer systems. Before the introduction of (ASIC), there was nothing significant enough to prevent anyone from mining despite the fact that there were some differences in electricity costs in different geographical locations.
Massive changes were experienced in Bitcoin mining after the introduction of ASICs. It is now difficult for individuals that use personal computing to compete with professional bitcoin mining centers due to their extra computing power. Consequently, there has been a reduction in mining profits due to difficulty in mining, high energy costs of running ASICs, as well as the high price for buying the new computing equipment.
Mining profitability in the current environment
Individuals that can afford the new equipment still find Bitcoin mining to be profitable in today’s environment. The availability of efficiency machines has improved in the recent past as most people can easily access the new mining equipment.
Also, it is now possible for miners to lower the overall cost of mining by lowering the settings on certain machines. However, prospective miners should only consider buying the new mining machine after performing a cost and benefit analysis to determine its profitability.
When making a fixed-cost purchase, it is important to understand the equipment’s break-even price. Some of the variables to consider when calculating the break-even price include;
- Bitcoin value
- The length of mining time
- The efficiency of the mining machine
- The cost of power
There are quite a number of profitability calculators that are available online that can be of great help to miners when it comes to calculating the mining profitability. Prospective miners can use the calculators in the analysis of the cost benefit equation associated with Bitcoin mining.
It is advisable to use different price levels for Bitcoin value and cost of power when running your analysis in order to get a wide range of estimates. The break even price is the price at which Bitcoin mining becomes profitable.
The other strategy for making profits in the current environment is by joining a mining pool in order to deal with competition from mining mega centers. Mining pools increase the chances of profitability, reduce the difficulty in mining, and increase the mining speed. Individuals in a mining pool share the mining rewards.
The Bottom Line
You only need a web-based profitability calculator to determine whether Bitcoin mining is still profitable or not. It is much easier to receive Bitcoin when there are fewer miners. A decline in mining difficulty and Bitcoin prices is a clear indication that there is small number of miners.
However, the presence of many miners leads to less profitability as the miners compete for a small number of Bitcoins. Increased competition leads to increased mining difficulty and Bitcoin price. Therefore, Bitcoin mining is still profitable for individuals that get their calculations right. We hope this article was useful for you.