Bitcoin mining is the process of earning bitcoins by running a verification process to check the validation of bitcoin transactions. These transactions serve as the security for the bitcoin network. Thus, the miners are compensated with the Bitcoin champion coins in exchange for security.
Miners can receive profit if the price of bitcoin rises after the mining process and is more than the cost of inputs. The recent advancements in technology and the development of professional mining centres have made bitcoin mining easy. However, the huge computing power and shifting prices of bitcoins have made many people wonder whether it will be profitable to mine in bitcoin?
Factors Determining Profitability
While there are many trading platforms like https://www.bitcointrader.site/ to trade bitcoins, mining needs some effort. Several factors play their role in determining whether bitcoin mining is profitable or not. The input costs include the cost of electricity that will power the whole computer system. Thus, it leads to another input variable i.e., the cost of electricity. The availability of the computer system and the difficulties in providing the services also count as variables of input.
The difficulty is measured through the hashes per second for the validation check. The hash rate determines the rate of solving a problem. The level of difficulty changes with the number of miners because the system produces a certain number of bitcoins every ten minutes. Thus, when there are more miners, the level of difficulty increases. The last factor and most important factor in determining if mining is profitable is the price of bitcoins.
Profitability Before and After ASIC
Back in 2009, in the old day mining of bitcoins was just done on the personal computer because of which miners were able to generate a lot of profit. The reason behind this huge profit was that the miners already owned a system so the cost of equipment was almost nil. The settings on the computer could easily be adjusted so that there was less stress on the miners and validation checks were done more effectively.
Furthermore, there were no professional bitcoin mining centres with massive computer power so early days miners just had to compete with other individual miners. The home computer system was enough for healthy competition between the miners. The difference between different individuals from mining was not much although the cost of electricity varied in different geographic regions.
However, when ASICs came into the mining game completely changed. Now individuals had to compete against mining rigs that had more powerful computer power. The mining profits started reducing because now the miners had to invest in more computer equipment and the cost of generating energy also increased. Thus, the increased mining cost became a hurdle in easy profits and the difficulty in mining increased.
Profitability in Today’s World
Although the above content depicts that bitcoin mining is really difficult and can incur loss to those who are mining on a small scale, still bitcoin mining can make sense. Bitcoin mining in today’s world can still be profitable for some individuals. The pieces of equipment used in bitcoin mining can be obtained more easily in today’s advanced world.
Although the ASICs equipment can cost from a few hundred dollars to $10,000, it can be obtained easily. Some hardware allows the user to alter the setting for lower energy requirements and it results in lowered overall costs. The professional miners should run a cost analysis to understand how much profit can be generated before they make the fix-cost purchases of the types of equipment.
It cannot be denied that mining has become difficult in the present times but, if you work your way with calculations and analysis then you can still generate good profit. However, you need expertise and high knowledge to do bitcoin mining, it’s not as simple as it may sound.