Satoshi Nakamoto’s invention, Bitcoin is a peer-to-peer digital cash system. Bitcoin is the world’s first cryptocurrency. It gained popularity in past few years. The early days of Bitcoin mining are called “Gold rush.” Are you willing to invest in cryptocurrency?
Bitcoin Mining Process
It is the process of verifying transactions. These verified transactions were added to a public ledger called Blockchain. Bitcoin mining also serves a very important purpose in maintaining the bitcoin blockchain secure. Miners can use software to solve mathematical problems and are issued a certain number of bitcoins in exchange. Bitcoin is a decentralized process.
- Confirms transaction in a trustful manner. Efforts are devoted to a block.
- Creates new Bitcoin in each block.
Bitcoin transaction data is permanently stored in files called Block. A group of these transactions is chosen from the list of all currently pending transactions. A new block is created on average every 10mins.
It is the number of created bitcoins, awarded to a miner who creates a block. The number was initially set to 50, and in 2016 it was 12.5
The next halving event is expected around mid-2020. Bitcoins can be created by achieving the block reward.
ASIC: Before and After
Way back in 2010, bitcoin mining was done using a personal computer. The traditional method was profitable because of following reasons:
The miners already owned their systems, so equipment costs were nil. They could also alter their computers’ settings to make it more efficient.
These were the days before professional bitcoin mining centers with massive computing power.
After ASICs, the game changed. Individuals were competing against large bitcoin mining centers. These centers had more computing power. Mining process became a lot more complicated. Profits were diminished by expenses like purchasing computing equipment, paying higher energy costs for running them.
Profitability in Today’s Environment
Equipment is more easily obtained and various efficiency machines are available. Miners should perform a cost/benefit analysis before making the fixed-cost purchases of the equipment.
- Power Cost: What is your electricity rate? Your equipment will be running for hours! So, it’s important that you keep a check on your electricity prices. Analyze your bill pattern. Which seasons cost you more?
- Efficiency: The efficiency of your system matters. How much power does your system consume (in Watts)?
Time: Time is money! How much time will you be spending on bitcoin mining?
Bitcoin value: You do not want prices to fluctuate more often. What is the value of Bitcoin?
There are several web-based mining profitability calculators you should try. Few examples of web-based calculators like vnbitcoin.org or mining-profit.org. These platforms will be useful for miners to analyze the cost-benefit equation of bitcoin mining. An individual can join a mining pool to compete against the mining centers. It is a group of miners who work together and share the rewards. This can increase the speed and reduce the difficulty in bitcoin mining helping you to gain some profits.
Conclusion: Bitcoin mining profitability
For an average learner, it is difficult to gain profits or recover the cost of mining, hardware, and electricity. Profitability is highly unlikely with beginners and given circumstances. The situation may improve in future. Use a web-based profitability calculator to analyze a cost-benefit. You can plug in different numbers and find do a detailed analysis. Are you willing to invest in the initial capital for the hardware? It is difficult to predict bitcoin values. As bitcoin prices and mining difficulty reduces, it indicates fewer miners and more ease in receiving bitcoins. When bitcoin prices and mining difficulty rises, expect the more miners competing for fewer bitcoins.
Tech-savvy and a passionate blogger. I have done software engineering from the University of Mumbai. Technology Specialist 2.0 in DOT NET. I also have my personal website http://glamourbytes.com/