Bitcoin mining is one of the many ways you can make a profit from Bitcoin. Early bitcoin miners have earned a fortune and many have also made profits doing so in recent times.
With the recent crypto meltdown where prices of cryptocurrencies are bearish, many crypto endeavors and firms have been affected. What effect it has on mining is a question to be answered.
In this post, we’ll look at the possibilities of mining Bitcoin today and if it is profitable. For the sake of beginners, let’s learn about Bitcoin mining.
What is Bitcoin Mining?
Bitcoin mining is the process of creating new bitcoins by solving complicated math problems that verify transactions in the currency. Bitcoin miners receive Bitcoin as a reward for ”blocks” of verified transactions, which are added to the blockchain.
Although Bitcoin mining is seen as a tough task due to its complex nature and high costs, it is still a way of earning from Bitcoin.
The word ”mining” used here is a metaphor for introducing or creating new bitcoin into the system. This is used since it requires work just as mining for gold or silver.
How Does Bitcoin Mining Work?
Whenever a Bitcoin is successfully mined, a block is added to the blockchain which makes the miner earn a Bitcoin at the end.
For this to happen, bitcoin miners have to compete to solve extremely complex math problems. Expensive computers and enormous amounts of electricity are required to perform this task.
The computer hardware used is GPU (graphics processing unit) and ASICs (application-specific integrated circuits) which can cost up to $10,000.
Bitcoin miners look to generate a 64-bit hexadecimal number using a key called ”nonce” for the target hash. The first miners whose nonce generates a hash that is less than or equal to the target hash are awarded credit for completing that block.
How Much Does a Bitcoin Miner Earn?
If a Bitcoin miner is able to successfully add a block to the blockchain, they will receive 6.25 bitcoin as a reward. The reward for BTC mining is reduced by half roughly every four years.
In 2009, when BTC was first mined, mining one block would earn you 50 BTC. This was halved to 25 BTC in 2012. By 2016, it was halved to 12.5 BTC then 6.25 BTC in 2020.
In November 2021, the price of BTC was about $66,000 per BTC, which means a miner would earn about $400,000 after completing a block.
What You Need for Bitcoin Mining
These are the basics you’ll need to start mining Bitcoin;
- Digital wallet– Transactions involving cryptos is impossible without wallets. It is where any BTC you earn after you’ve successfully mined will be stored. A digital wallet is an encrypted online account that allows you to store, transfer, and accept BTC or other cryptos.
- Mining software– This mining software can be downloaded and can run on Windows & Mac Computers. Once the software is connected to the necessary hardware, you’ll be able to mine.
- Computer hardware– This is the most expensive equipment you’ll need to mine. You’ll need a powerful computer that uses an enormous amount of electricity in order to successfully mine Bitcoin. This computer hardware can cost you up to $10, 000.
Is Bitcoin Mining Profitable in 2022?
Bitcoin mining is very expensive and energy consuming but rewarding when it is a success. The ongoing meltdown in the crypto industry has made Bitcoin mining a crypto endeavor not to venture into. You can’t go into Bitcoin mining at the moment because of the price fall.
The fall in the prices of cryptocurrencies has made many miners to dump their high-end equipment in the resale market. The slump in price of graphics cards has been driven by dumping of these high-end pieces of hardware in the resale market by the crypto community
As prices crashed, mining of cryptocurrencies has become unviable since the process itself is very expensive. The cost of mining is more expensive than the reward after completing a block successfully today. As of writing, the price of BTC is $19.71842 which is more than three times lesser than its all-time high.
There are questions raised about the future of Bitcoin and other cryptocurrencies. This is because their is a global economic meltdown and time will tell if BTC and other crypto assets would survive this time.
Why Bitcoin Mining is Risky Today
Bitcoin mining is a financial risk as one could go through all the effort of purchasing the expensive equipment for mining without a return on investment. The risks involved could be as a result of;
- Price volatility- Bitcoin’s price has varied widely since it was debuted in 2009. The volatility in price has made it difficult for miners not to know their reward would outweigh their investment in mining.
- Regulation– Bitcoin is not yet embraced by several governments of the world. The fact that they’re not run by the government make it a risky venture. There is always the risk that governments could outlaw the mining of Bitcoin or other cryptos.
Alternative to Bitcoin Mining in 2022
Buying and selling of Bitcoin is one of the most popular ways of earning in crypto. Since it is not advisable to mine to make profit in Bitcoin today, trading is a better option.
Although the bearish market has made many traders to count their losses, trading Bitcoin among other cryptos is still an option. Many crypto experts and enthusiasts like Binance CEO, Changpeng Zhao has advised to buy the dip.
There is little evidence for total demise of BTC. It has had confrontation with six bear markets (based on its 20%-plus corrections) in the past, each leading to a rally above the previous record high. It is therefore a risk to take to earn big for the averse risk-takers.
Also Read- Best Bitcoin Mining Software For 2022
You can use its web version or mobile app to get the best experience for your crypto trading as well as gift cards.