Is Mining Bitcoins A Profitable Venture Now?
Since the advent of the leading crypto currency, Bitcoin, many people wonder about the benefits and profitability of this digital currency. Although there are so many miners who gained tremendous profits from this technology and many are still making more than 10 grand a year. The Bitcoin’s success and ability to generate profit for investors and miners made it talk of the town very fast that it inspired other inventors to develop alternative currencies in order to make an addition in the fast-growing trend of digital wallets and currency. Today, there are hundreds of other alternates to Bitcoin, however, Bitcoin still remains the market leader.
How Profit Is Generated From Mining Bitcoin?
The best and easiest way to make long-term profits from Bitcoin is to simply invest your dollars into buying some bitcoins but the most economical way of making profits is to mine them yourself instead of buying them. Mining bitcoins is the process of record-keeping and validating transactions for the Bitcoin network which in return compensate the miners with bitcoins. This is how a miner earn bitcoins. But only earning bitcoins cannot be directly related to making profits because in order to make this venture profitable, the value of the earned bitcoins has to be worth more than the costs of mining them. Back in 2010 and 2011, early miners profited a lot by mining bitcoins on their home computers for the network as there was not a big number of miners competing, low costs of mining and there were no professional mining centers.
Newer Technologies Which Affected Profitability
Unlike the older times, Bitcoin mining is very hard to accomplish on a simple home computer as the establishment of big data mining centers have completely changed the process and took it to the next level. They made the processing faster with massive computing power. Today, a newbie miner needs to invest a lot of money in order to start mining as the first requirement is having a mining rig which costs great amount of money thus profitability is reduced. In addition, the introduction of mining software and application specific integrated circuit chips (ASIC) elevated the performance of mining but increased the overall costs and required a huge learning curve for operating for mid or small level miners.
Bitcoin Mining Profitability
Witnessing the technological progressions, many miners question the profitability of mining bitcoins today. There is no simple answer to this question, although there are factors on which the profitability of mining depends. And there are profitability calculators available to calculate the profitability of any mining setup by simply inputting the information including hash rate, difficulty, electricity costs and hardware costs. The profitability of mining depends on the following factors:
1. The Cost of the Electricity
Firstly, the electricity costs are to be considered as this is the biggest cost a miner has to incur. A mining rig or hardware consumes enormous amount of electricity to power the computer system and run the mining process. If you are in a country where electricity costs are low, your costs will be reduced and you will generate profits. But if majority of your profits are consumed by your electricity bill, you will not make anything in the end.
2. Mining Platform: Cloud Mining or Physical Mining
Profitability also depends on the mining system a miner plans to utilize. If a miner is investing in setting up a whole mining rig and buying all the related hardware then the profits will come late as the initial capital investment is big and sometimes the special mining hardware is not available easily and the import from other places become costly. However, if a miner uses the cloud mining technology, which lets you mine bitcoins from your home computer and all you need is a reliable cloud mining provider, this process reduces capital costs and low operating costs as the electricity consumption will lowered.
3. The Difficulty of Mining
As more miners enter the network to compete against each other in order to solve a puzzle for earning bitcoins, the difficulty increases. This network is designed to generate a limited number of bitcoins in a particular time duration. When there are more miners, the difficulty increases from moderate to very high which affects the profitability of each miner in the network.
4. Exchange rates
The final factor responsible for profitability is the value of bitcoins against standard currency or dollars.