In our recent bitcoin investing article, we talked about how to invest in bitcoin. In this post, I wanted to talk about bitcoin mining. Bitcoin is one of the buzzwords among the younger generation. It is a virtual currency introduced in 2009. In other words, it only exists online and has no physical representation. People who own bitcoin can use the digital currency to sell or buy items from individuals or companies that accept it as a form of payment.
Why Bitcoin Mining?
Since bitcoin has monetary value, many young individuals are interested in having this virtual coin. The fastest method to get bitcoin is buying it using traditional money or selling items to people in exchange for bitcoin.
But recently, bitcoin mining is gaining popularity as a method of getting the virtual coin. Others see bitcoin mining as one way of getting more profits.
Specialized computers conduct bitcoin mining. The miners are responsible for securing the network and processing each bitcoin transaction. To do this, miners must solve a computational problem that resulted in the chaining together blocks of transactions called a blockchain. After successfully solving the problem, they will receive rewards in the form of bitcoins.
Is Bitcoin Mining Profitable?
The most straightforward answer is yes. Bitcoin mining can be profitable, although there are variables to consider in making it a semi-passive income source. Many pioneers in bitcoin mining have earned a decent amount of bitcoins in their early days. For example, a miner who successfully mined one bitcoin block in 2010 and held it until this year would have about $450,000 worth of bitcoin in his cryptocurrency wallet.
Factors Affecting Profitability
At this point, people can earn bitcoins from bitcoin mining, but it is not yet a sound financial investment. However, some variables can affect their profitability.
- Cost of electricity
To make it profitable, people interested in bitcoin mining need free or cheap electricity. So, the cost of electricity impacts its profitability since they will be using specialized hardware to conduct mining.
For example, in some countries, the electricity cost is only $0.045 kWh. If someone runs Whatsminer M20S bitcoin miner for one month, he will earn $153.43 worth of bitcoin while consuming $107.78 of electricity. He will have about $45.66 monthly profit.
In the United States, the electricity cost is $0.12 kWh, and running the same bitcoin miner will result in a loss from the beginning. He will earn $153.43 worth of bitcoin while consuming $287.40 of electricity cost. He will incur a monthly loss of $133.97.
- Efficiency of hardware
Another critical variable to make bitcoin mining profitable is the efficiency of the specialized hardware to be used. The price of bitcoin miner hardware varies from one manufacturer to another. Efficient hardware must have a higher computing power so miners can mine more bitcoin. It also needs to be energy efficient, which means that it consumes less electricity to lower the monthly electricity cost.
Bitcoin mining can become a good source of bitcoins. However, its profitability depends on cheap electricity and efficient hardware. Unless people have these variables in place, purchasing bitcoins using real money could be the better option.