How Do We Determine If Bitcoin Mining Still Profitable? - Part 1
For the growth of Bitcoin mining, it is necessary to access the profitability. We list the main reasons below that helps to see if mining will be done in years ahead
An intro to Bitcoin mining
The process of earning Bitcoin in exchange for running the verification process for the validation of Bitcoin transactions is called Bitcoin mining. Whereas these transactions provide security for the Bitcoin network that in turn compensates miners by giving them bitcoins is where miners can profit if the price of bitcoins exceeds the cost to mine. There have been recent changes in technology as well as the creation of professional mining centers where along with enormous computing power as well as the shifting price of Bitcoin itself is many individual miners asking themselves is Bitcoin mining still profitable?
While there are quite many factors determining whether Bitcoin mining is a profitable venture, these are mainly including the cost of electricity to power the computer system, the availability and price of the computer system with the difficulty in providing the services. The difficulty mentioned is measured in the hashes per second of the Bitcoin validation transaction. While the hash rate measures the rate of solving the problem, the difficulty changes as more miners enter because the network is designed to produce a certain level of bitcoins every ten minutes. The reality is that when more miners enter the market, the difficulty increases thereby ensuring that the level is static. Whereas the last factor for determining the profitability as such is the price of bitcoins as compared against standard hard currency.
The Components Of Bitcoin Mining
Mining was generally done on personal computers before the advent of new Bitcoin mining software even though the introduction of application-specific integrated circuit chips were offered up to 100x the capability of older personal machines where they render the use of personal computing to mine bitcoins inefficient and obsolete. This is where Bitcoin mining is still theoretically possible with older hardware as there is little question that it is not a profitable venture. This is mainly because of the way that mining is the setup: miners are thereby competing to solve hash problems as quickly as possible so those miners at a serious computational disadvantage essentially stand no chance of solving a problem first and being rewarded with Bitcoin. As the miners used the old machines the difficulty in mining bitcoins was roughly in line with the price of bitcoins. These new machines thereby came with issues related to both the high cost to obtain as well as run the new equipment and the lack of availability.
Profitability Before And After ASIC
It was popular when old-timers mining bitcoins using their personal computers were able to make a profit for several reasons whereby firstly miners already owned their systems so that equipment costs were effectively nil. They could change the settings on computers running more efficiently with less stress. Secondly by these were the days before professional bitcoin mining centers with massive computing power entered the game. It was possible for early miners with only having to compete with other individual miners on home computer systems. While the competition was on even footing the electricity costs varied based on geographic region, the difference was surely not enough to deter individuals from mining.
Thereby after ASIC came into play, the game changed further as individuals were now competing against powerful mining rigs that had more computing power. These mining profits were getting chipped away by expenses like purchasing new computing equipment, paying higher energy costs for running the new equipment as well as the continued difficulty in mining.
Difficulty Of Mining Bitcoin
The difficulty rate as discussed above is associated with mining Bitcoin which is variable where changes roughly every two weeks to maintain a stable production of verified blocks for the blockchain, the higher the difficulty rate the less likely that an individual miner is successfully able to solve the hash problem and earn Bitcoin. Whereas in recent years the mining difficulty rate has skyrocketed with Bitcoin was first launched when the difficulty was 1. Further on as of November 2019, it is more than 13 trillion providing an idea of just how many times more difficult it is to mine for Bitcoin now than it was a decade ago.
What More To Say On Bitcoin Mining?
The discussion doesn’t stop here. More factors are determining the profitability of Bitcoin mining. Here the post is continued with more discussion delving into the matter. So let’s move on and find those factors that determine if Bitcoin mining will be carried forward to the years to go on.