Summary: What do you think, Bitcoin mining is profitable or not? The short answer is, it depends on how much can you or willing to invest in mining.
Bitcoin has become popular in last few years because of a large value for it. Bitcoin is the official currency of the internet and anyone with a proper internet connection can own this cryptocurrency.
Bitcoin can further be explained as a digital currency (cryptocurrency), independent of any country or geographical entity and can be used by anyone who has a proper internet connection.
This money is not regulated by any governmental body and it also doesn’t have any central bank which could print it and regulate its flow, instead it is a virtual money that is available for all people who are eager to own some cryptocurrency.
This makes Bitcoin independent of monopoly from any sort of corporate. We are liable to pay a large chunk of the transfer amount which generally ranges from 2% to 10%, Bitcoin literally decreases this problem and reduces to the almost negligible amount.
While talking about the history of this cryptocurrency, we don’t need to go too far in time.
The term bitcoin was first used in the domain name as ‘Bitcoin.org’ on 18 August 2008, in November of the same year, a link was posted in cryptography mailing list entitled ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ authored by Satoshi Nakamoto.
He implemented the Bitcoin software as open source code and released it in January 2009. Satoshi Nakamoto was the first who mined the Bitcoin and its existence from a block known as Genesis Block.
The identity of Satoshi Nakamoto remains a mystery till the date.
Then you might be wondering how is Bitcoin mined? How is Bitcoin obtained? How you own it?
Let me explain you in a slow pace. Unlike other normal currencies, Bitcoin is not printed by central banks instead it is mined by solving problems generally, huge mathematical algorithms, using the internet just like the gold is mined.
Similar to mining of gold, Bitcoin mining is also cost and energy intensive.
Mining of Bitcoin is done by the use of specialized computers these days, back in 2009, it was pretty easy to mine a Bitcoin and own it but with the increase in the number of miners and value of the Bitcoin, its algorithm has been drastically changed to highly difficult mode.
Previously, the mining was easily done with normal CPUs as well, which with an increase in a number of miners needed graphics cards and then numbers of graphics cards, and now special chips are in the market in order to mine the Bitcoin from the internet.
These special chips are termed as Application Specific Integrated Circuit chips (ASIC chips), which are designed especially just to solve Bitcoin algorithms and to serve the owner with Bitcoin.
Mining of Bitcoin is pretty easier if you already have some advanced graphics cards or ASIC chips and the fee for electricity is low in your area, else mining may not be your cup of tea.
The combination of numbers of graphics cards can generate few dollars while it will be simultaneously drawing a large amount of power for better performance.
Though software for mining the Bitcoin is freely available on the internet, hardware, and firmware you might require for its better result are costly.
As the number of miners got increased, it was almost impossible for an individual to solve these algorithms as the Bitcoin network automatically changes the level of difficulty depending upon how fast it has been solved, so a culture has been recently developed and is known as pool mining.
In pool mining, numbers of miners work together to solve the algorithms and thereby to obtain the Bitcoin, the miners then divide the amount according to the work they contributed to solving the algorithm of Bitcoin.
After solving the algorithm, you gain a Bitcoin, but this Bitcoins do not exist physically like other currencies and thus is stored in a wallet.
This wallet stores each information you may require for a future transaction of that Bitcoin. Which means either to receive a Bitcoin or to spend it, you need to use your Bitcoin wallet.
A Bitcoin wallet is accessible with single or multiple wallet addresses, unique internet address to ensure the anonymity of transactions which keeps you safe and unknown so that you cannot be tracked down from the transactions you had made.
Before talking about mining in detail, you should know little about the blockchain. The blockchain is like a ledger which records all the databases regarding the transaction of the Bitcoin.
This ledger is implemented as a chain of blocks, each block containing a property of the previous block, which means every block today contains a fragment of very first ‘Genesis Block’.
The ledger doesn’t belong to any specific organization but is the property of every single person who is dealing with the Bitcoin, and every transaction of available Bitcoin is registered in this ledger.
Maintenance of this blockchain is performed by a network of nodes communicating with each other. Network nodes also validate the transaction of the Bitcoin and add a copy of this transaction to the ledger also distributes it to other nodes as well.
Thus, blockchain is a distributed database which helps in achieving independent verification of the chain ownership of each Bitcoin ownership, each node owns a copy of the blockchain making the transaction more secured.
Mining is spending powers of computers and special hardware to process the transactions, securing the networks and keeping everyone linked with other nodes.
So now you might think if the mining process is wasting energy. Spending energy to secure and operate a decentralized payment system cannot be taken as a waste.
Also, the new and efficient hardware is being constructed which consumes less energy and makes a higher profit for the users.
Mining is keeping records using the processing power of the computer. Miners keep the blockchain consistent and unalterable by grouping with newly broadcasted transaction into a block.
Each block contains an SHA-256 cryptographic hash of the previous block and thereby linking the block to previous one and giving it the blockchain’s name. A network of these nodes accepts this new Bitcoin only after providing proof of work.
If you think mining is not your cup of tea, you can also own it by exchanging on the physical money. If you are willing to invest on Bitcoin you can search thoroughly through the internet and find few online sellers who deal on these Bitcoins.
These sellers take money from you via a different method and provide you ownership of Bitcoin they possess. We would not recommend you this type of transaction as there are numbers of sites which are just to dig out the money from the users.
However, it would be an ease and worthy if you know some legit sites which can transact on Bitcoin, it’s buying, and selling.
You need to know: Best 3 Ways To Buy Bitcoin With PayPal
Why Bitcoin Has Value?
In terms of economics, if a maximum number of people is willing to pay for the limited supply of products, then the product is said to have the ‘economic value’ or simply ‘value’. Bitcoin’s value can be described in a similar manner.
Simply, Bitcoin has value because it is limited and its demand is higher. It is limited because as per protocol there are only 21 million of Bitcoin circulating on the internet.
Its demand is higher because it allows us to handle the real money (fiat currencies) in a different way than in old traditional system.
In a traditional system, all the monetary transactions should have to perform based on the centralized banking system.
Suppose, if you want to invest or transfer your money then you should have to depend on the central banking system and is affected by their policy and it is somewhat time-consuming too.
But in case of Bitcoin, it is totally different. Bitcoin works on the decentralized system. Unlike centralized system, the rate of Bitcoin depends upon the number of growing users which means the investor can play important role in it.
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Another reason of Bitcoin having valuable is due to its nature similar to actual money. Bitcoin is actually a virtual currency like the mobile balance, credit card balance etc. But still, it is durable and portable as like real money.
Also, Bitcoin has some contrast from the actual money which makes it valuable. Unlike actual money, Bitcoin does not rely on physical things like gold and silver. Also, Bitcoin is based on market-based centralization rather than coercive centralization.
Bitcoin has a decentralized system with the centralized core, which is one of the most crucial reason for Bitcoin to have value.
Like real money, Bitcoin is reliable and trustworthy too. Its blockchain system controls the malicious users to make double spending. It provides a cryptographic signature to prove the ownership of the account.
You can use only one Bitcoin address for one single transaction. These are the reason for Bitcoin to be trustworthy and its trustworthiness is another reason to have its value.
Its peer to peer (P2P) system allows users to interact directly with other users. Bitcoin can be sent and receive anywhere at any time.
It is not restricted by public holidays, physical borders and bureaucracy. The system is fair and transparent in nature. So, these are the reason for Bitcoin to have value.
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Bitcoin Mining is still profitable?
Well, if you ask some Bitcoin miners that, is Bitcoin mining still profitable, then you will get different opinions from them. The major thing that determines the profitability is your investment for mining.
How much you can invest in mining affects your profitability.
Along with that, there are many other factors that need to be considered to determine the profitability of Bitcoin mining.
Cost of electricity to run the hardware for mining, Bitcoin value, cost of hardware for mining, the efficiency of the mining, difficulty in mining, pool fees, time for mining are the factors that need to be considered to get profit from Bitcoin mining.
There are different Bitcoin mining profitability determining calculators available on the internet which consider various of the above factors to determine the amount of profit.
Now, let’s see that is Bitcoin mining still profitable or not by discussing every factor in brief.
- Cost of electricity
While mining for Bitcoin, the hardware in operation consumes lot amount of electricity. Now, the rate of electricity for a different amount of consumption affects the profit.
The rate of electricity varies from one nation to another nation. It also varies from one place to another place within the same country.
Hence, after observing the rate of electricity on the electricity bill you can visualize how much of your investment goes to electricity.
- Bitcoin value
Bitcoin’s value determines the frequency of miners mining the Bitcoin and its demand rate. If there are low frequencies of miners then the difficulty in mining is somewhat reduced and if the demand of Bitcoin is higher, then Bitcoin’s value will be high.
- Cost of hardware for mining
Cost of hardware for mining is determined by its hash rate/ power. Hash rate is the measure of miner’s performance.
It is the rate at which mathematical problem of mining can be solved. Greater the hash power of the hardware greater will be the price. Antminer R4, Avalon 6, Antminer S7, Antminer S9 and Dragonmint 16T are some of the best miners available in the market.
Dragonmint 16T is the latest among them with the hash power of 16 TH/s (Terra hash per second) and the price is $2729.
It is the most expensive and most efficient hardware among any other till date. Antminer R4 is the cheapest among above, with the price of $1000 and hash rate of 8.6 TH/s.
- The efficiency of mining
The efficiency of Bitcoin mining depends on the performance of hardware. The hardware having greater hash rate has better performance and hence results in greater efficiency in the mining process.
Difficulty in mining: The difficulty in mining depends on the level of competition among the miners.
For example, if one of the miners is using Dragonmint 16T hardware to mine while another one uses Antminer R4, then it is obvious that latter one person will face more difficulty in mining the Bitcoin.
- Pool Fees
A miner needs to join the group of the miners for mining known as ‘pool’. While joining the platform, the fee is deducted from the miner’s account to maintain the working environment along with other miners.
Once the group of miners is able to get the profit, then profit will be divided to the miners based on their performance i.e. hash rate. So, the miner having higher hash rate hardware will get a greater amount of profit.
- Time of mining
The time spent for mining also affect the profitability. The more time the miner spent on mining, it will be able to extract more Bitcoin and hence there will be an increase in profit.
Graphics cards are also available for small-scale Bitcoin mining. Different Graphics cards a.k.a Graphics Processing Unit (GPU) is available in the market such as Nvidia GeForce GTX 1070, AMD Radeon RX580, Nvidia GeForce GTX 1060, AMD Radeon RX Vega 56 etc.
The price of this GPU is generally less than $1000. GPU needs to be fit to the motherboard with adequate cooling.
After Graphic cards being installed in your computer system then you can run different GPU mining software such as cgMiner, BFGMiner on your computer. Generally, Desktop PC is preferred rather than a laptop for GPU mining.
So, you can start either with small-scale Bitcoin mining using graphics cards if you have a limited budget. But, if you want to earn Bitcoin in a grand manner then mining using hardware is the only option.
If you have efficient mining system, low electricity cost then you still have the chance to get profit from Bitcoin mining. You can also increase your Bitcoin if you have better strategies for mining.
It also depends on you and your strategies for mining. You have understood Bitcoin mining and make profit is very hard but it is still profitable in 2018. Partially, it depends upon mining system and on your strategy.
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