Are Bitcoin Miners Worth It? 10 Tips

Are Bitcoin Miners Worth It? 10 Tips

According to discussions on the same over at runrex.com, the cryptocurrency community is usually divided into 3 major camps when it comes to potential ways to earn money. The first camp comprises traders, who believe that the best way to make profits is to take full advantage of the volatility in the market by trading. The second camp comprises long-term investors, who are also known as Hodlers as explained over at guttulus.com, who believe that cryptocurrency’s value will increase notably over the years, so rather than trading it, they hold it. And finally, the third camp comprises miners, who have invested a large amount of money in hardware so that they can mine a particular cryptocurrency. This article, through the following 10 tips, will look to take a look at the mining of Bitcoin, and whether or not it is still worth it and profitable or should miners use that money to invest directly.

What is Bitcoin mining?

Before we tackle the question of whether Bitcoin mining is worth it, it is important to understand what it is about. As explained over at runrex.com, Bitcoin miners use high-powered computers to solve complex computational math problems in a process called the “Proof-of-Work” consensus algorithm. This process leads to two results – miners “create new Bitcoins, and they also verify each transaction, keeping the payment network secure and trustworthy as covered over at guttulus.com. In return, miners receive Bitcoins as rewards for completing each transaction, and the amount of new coins released with each mined block is called “block reward”.

The Bitcoin halving event

To understand whether Bitcoin mining is worth it, you also need to know of the Bitcoin halving event. As captured over at runrex.com, every 4 years, the Bitcoin halving event slashes in half the rewards that miners receive for their efforts. So far, there have been three previous cases – in 2012, 2016, and 2020. The 2012 event cut the rewards for a solved block from 50 BTC to 25BTC while the 2016 event cut the rewards from 25BTC to 12.5 BTC. The 2020 event further decreased the rewards to 6.25BTC.

Bitcoin mining during the initial years

It is also worth pointing out that when Bitcoin was initially introduced to the public back in the day, mining was usually done on personal computers as outlined over at guttulus.com. At that point, profitability was pretty easy as miners already had the needed equipment, and, therefore, didn’t need to invest any money to start. Additionally, the biggest competition they had was other miners using the same type of equipment.

The induction of ASIC

The above scenario changed pretty quickly with the induction of application-specific integrated circuit chips (ASIC), which offered extremely higher capabilities than the regular personal machines, making them obsolete. This raised the bar, according to runrex.com, and adding the high expense, meant that individuals could no longer compete properly with the new standard. This was also the time when large Bitcoin mining centers started to emerge with extremely powerful machines.

Is Bitcoin mining still worth it?

The answer to this question is not a straightforward one. To answer this question, several major factors need to be acknowledged:

The cost of electricity

The computer systems needed for Bitcoin mining use up a lot of electricity which means that the cost of electricity to power these systems is a major factor to consider when determining if mining is worth it or not. As revealed over at guttulus.com, the cost of electricity is subjective as it depends on the location since electricity costs differ depending on where the mining machine is stationed. In practical terms, running a Whatsminer M20S for one month in a country like China or Russia where the electricity cost is $0,045 kWh will cost you about $110 a month. With such figures, you would have made about $45 a month in May 2020. However, with the typical home electricity price of $0.12 kWh in the US, you would have been running the machines at a loss from the start and it would not make sense to mine under these conditions.

Mining difficulty

The difficulty factor is strongly related to the hash rate of Bitcoin as it measures the transaction validation in hashes per second as explained over at runrex.com. The network is designed to produce a certain number of Bitcoins per second, and, therefore, when there are more active miners, the difficulty increases to ensure that the level of distribution is static.

The availability and price of computer systems

While the availability of computing power sounds like it wouldn’t provide any issues, that is not always the case. During the parabolic price increase of 2017 and the increased media attention that came with it as covered over at guttulus.com, Bitcoin mining became extremely popular and lots of people were trying to get in. Quickly the hardware became scarce, which also exploded the prices, leaving lots of potential miners stranded. Nowadays though, similar equipment can be found more easily and usually cheaper.

Competition

According to the subject matter experts over at runrex.com, competition could be the most significant factor when it comes to deciding of Bitcoin mining is still worth it. This is because, as already mentioned, large companies have entered the field, leaving fewer grinding materials for the individual.

Reliability of one’s mining pool

As a direct consequence of the above point, these days every miner needs to mine through a mining pool as outlined over at guttulus.com. This is because, whether you are mining with one machine or several thousand, the network of Bitcoin mining machines is so large that your chances of regularly finding a block and, therefore, earning the block reward and transaction fees, is very low. Choosing the right mining pool is very important, which is why this is an important factor in deciding whether Bitcoin mining is worth it or not.

Fees when selling Bitcoin

According to the gurus over at runrex.com, an often-overlooked facet of mining profitability is the fees one has to pay to sell the Bitcoin the mine. If you are a small-time miner, you may have to sell your coins on a retail exchange like Binance or Kraken. On the other hand, if you are a professional miner like F2 or Bitmain, you likely have extremely advantageous deals with OTC desks to sell your coins at little to no fees, depending on the state of the market

From the above discussion, it is easy to see that the question of whether Bitcoin mining is worth it doesn’t have a simple “yes” or “no” answer. This is why you should consider all the factors outlined above and ask yourself whether or not it is worth it for you. As always, if you are looking for more information on this and other related topics, then the top-rated runrex.com and guttulus.com have got you covered.