Mining bitcoins is the process through which new bitcoins are created and entered into circulation and in turn, the verification process and validation of bitcoin transactions. It is a way of earning bitcoins without having to put down money for it, but it is still very tough to do, and it is quite expensive, as well. So, is it worth it? Let’s break it down!
Mining Is Becoming Tough
Mining for bitcoins is only profitable if the effort and finances you are putting in, are lesser than the price of bitcoin. After the famous boom of bitcoin price, it was a no-brainer to keep mining and earning bitcoins, however, since then, the price has gone down, and it raises the question if investing that kind of effort in bitcoin is a good idea. In addition to the price, there are other factors, as well, that determine whether bitcoin is worth mining.
1) Availability of a computer system and the price of a computer system is a big determinant. Early on, mining on bitcoins was done on personal computers; however, the introduction of ASIC (application-specific integrated circuit) chips brought a big difference. They offered the chance to up the ability of your computer by 100 billion times as compared to the ability of personal computers. Buying such machines can be very expensive, especially for people that mine on an individual level.
2) The cost of electricity is another big determinant. This is because mining bitcoins need a powerful machine that has to be kept running for long durations of time.
3) The difficulty in providing the services is another reason which has now made it a lot harder to mine. The way of measuring difficulty is by hashes per second of every bitcoin validation transaction. It measures the rate of solving problems and the difficulty changes and gets more as the number of miners increases. This is down to the fact that the system is designed only to address a certain level of miners every ten minutes, and due to the existence of professional mining centers, this number has increased.
There are other factors, too, but mining is becoming increasingly difficult, as compared to the early time like the late 2000s or the early 2010s. Back then, the costs were very less or almost minimal, but now it has become very tough. So, the question that miners often ask is whether it is still worth mining or not. It is down to preferences; some do it because they like to do it; others do it as a hobby, as well. Some continue doing it on their PCs, it is slow, but it is still positive progress.
Hope for Mining?
There is still hope for miners, though. This is because the price of bitcoin is surging, once again. Whether it is only going to be a surge or if it is going to be a genuine rise, is something that only time will determine. The indicators seem good though, and on the 18th of November, 2020, bitcoin surpassed the $18,000 mark, which is the highest it has reached since the burst in 2018.
There are many reasons to be optimistic, though. Bitcoin is being considered a safe investment. The pandemic has led to people thinking more digital. Whenever people consider going digital, the market for cryptocurrencies seems like a great investment. Bitcoin leads the way, and PayPal’s recent move to authorize the use of bitcoins on its platform has been a big indicator of this. Such moves are great for the future of bitcoin but also tend to become headaches for miners, and they get back to scratching their heads and thinking whether or not mining is still worth the trouble.
To Keep Mining or Not?
There are many reasons to keep mining. If you are an optimistic person, then you would want to read too much into the economists predicting tenfold increases in bitcoin prices by the end of 2021. Either way, you could use one of the many web-based profitability calculators and run a cost-benefit analysis to help you make a decision. This will help you to enter numbers based on your own personalized experience of mining and find what the break-even point is, and after crunching the numbers, you can decide. Don’t forget when both bitcoin prices and mining difficulty is on the decline, it indicates fewer miners and more ease in receiving bitcoins, and vice versa, when the bitcoin price is on the rise and mining difficulty increases, as well.