Bitcoin mining is one of the ways you can earn bitcoins. Miners get the reward of adding a block of Bitcoin to the blockchain by solving math problems.
Today, Bitcoin mining is more expensive and difficult makes than before which has made miners ask if Bitcoin mining is still profitable.
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What is Bitcoin Mining?
Bitcoin mining is the process of earning Bitcoins in exchange for running the verification process to validate Bitcoin transactions.
These transactions provide security for the Bitcoin network, which in turn compensates miners by giving them bitcoins.
For you to mine successfully, you’ll need a powerful computer (GPU, ASICs), mining software and a wallet to store your earned coins. It is also important to join a mining pool which helps to reduce the risk of losing all your investments although the reward would be shared.
How is Bitcoin Mining Profitable?
When Bitcoin was launched in 2009, miners were able to use their personal computers to mine and make profits.
Miners could use their personal computers which make equipment costs effectively nil. Miners could change the settings of their computers to run more efficiently with less stress.
Early miners made profits as they only have to compete with other individual miners on home computer systems. The competition wasn’t much before the introduction of powerful computers in mining rigs.
When computers such as ASICs came into play, the game changed. Individual miners now compete against powerful mining rigs that had more computing power.
This reduces the mining profits as expenses like purchasing new computing equipment, electricity (power) and the continued difficulty of mining come to play.
Also Read: How To Start Bitcoin Mining
Is Bitcoin Mining Still Profitable?
Bitcoin miners have asked the question if Bitcoin is still profitable with the recent development in mining and the value of Bitcoin. To state if Bitcoin mining is still profitable, are here the factors to consider;
- Cost of Power- The rate of electricity used in mining Bitcoin determines if mining would be profitable. You’ll need electricity for running computations on mining systems as well as to cool and prevent them from overheating.
- Price of Bitcoin reward- The price of the reward of mining Bitcoins has been halved many times since it was launched. In roughly every year, it has halved from 50 to 6.25 as of November 2021. The price of Bitcoin as at the time of reward determines if it will be profitable after the investment.
- Difficulty levels of mining- The difficulty rate with mining Bitcoin is variable and changes roughly every 2 weeks to maintain a stable production of verified blocks for the blockchain. The higher the difficulty rate, the less likely it is that an individual miner can successfully solve the hash problem and earn bitcoins. This is to show how difficult it is to mine now than a decade ago.
- Cost of Equipment- To mine successfully these days, you no longer need a PC. A powerful computer such as ASIC is what you need to mine which can cost up to $10, 000. This will determine if your mining activity will be profitable or not in the long run.
Bitcoin mining has many profits for individual miners in the early days of Bitcoin. This has changed with the increase in difficulty levels of Bitcoin’s algorithm, cost of equipment, and so on.
Individual miners who are still interested should perform a cost analysis before committing into mining. A clear study of the business venture is required just as you must learn about a crypto investment before putting your money into it.
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