How Do We Determine If Bitcoin Mining Still Profitable? - Part 2

Shifting Rewards

With the Bitcoin network capped at 21million total Bitcoin, there has been a key stipulation of the entire ecosystem since it was founded as the limit is put in place to attempt to control for the supply of the cryptocurrency. Whereas currently almost18million Bitcoin has been mined with a way of controlling the introduction of new Bitcoin into circulation with the network protocol halving the number of Bitcoin rewarded to miners for completing a block about every four years. This is initially the number of Bitcoin that a miner received was 50 whereas in 2012 the number was halved and the reward became 25. In 2016, it halved again to 12.5 which is the current reward. Going forward, around 2020, the reward will halve once again with prospective miners being aware that the reward size decreases into the future with difficulty liable to increase.  

Profitability in Today’s Environment

As it still makes sense, Bitcoin mining is profitable for some individuals with equipment more easily obtained although competitive ASICs costing anywhere from a few hundred dollars up to about $ 10,000. While to stay competitive, there are some machines whim have adapted and for some hardware allows users to alter settings to lower energy requirements thus lowering overall costs. This is where prospective miners should perform a cost/benefit analysis understanding their breakeven price before making the fixed cost purchases on the equipment. The variables that are needed to make this calculation are: 

Cost of power: 

The electricity rates matter as keeping in mind the rates change depending on the season, the time of day, as well as other factors. This information is available on the electric bill measured in kWh.

Efficiency: 

The power consumed by your system measured in watts

Time: 

The anticipated length of time you will be spending mining

Bitcoin value: 

The value of Bitcoin in US dollars or other official currency

Together with these, there are several web-based profitability calculators such as the one provided by CryptoCompare where would-be miners can use to analyze the cost/benefit equation of bitcoin mining. These profitability calculators differ slightly as some are more complex than others. 

What Is The Use Of Analyzing Bitcoin Mining?

By running your analysis several times using different price levels for both the cost of power and value of bitcoins, the change in the level of difficulty is seen how that impacts the analysis. This is where it is determined at what price level bitcoin mining becomes profitable for you which is the breakeven price. While the price of Bitcoin is hovering around $ 9,000 the current reward of 112.5 BTC for a completed block is the miners that are rewarded around $ 112,500 for completing a hash. This is of course as the price of Bitcoin is highly variable with the reward figure likely to change.

When you decide to compete against the mining mega centers, individuals can join a mining pool, which is a group of miners who work together and share the rewards increasing the speed and reduce the difficulty in mining putting profitability in reach. With the case that difficulty and cost have increased more and more individual miners have opted to participate in a pool. Thereby the overall reward decreases because it is shared among multiple participants with the combined computing power means that mining pools stand a much greater chance of actually completing a hashing problem first and receiving a reward in the first place.

The ultimate answer to the question of whether Bitcoin mining is still profitable uses a web-based profitability calculator running a cost-benefit analysis and you can plug in different numbers to find your breakeven point after this mining is profitable. While determining that if you are willing to lay out the necessary initial capital for the hardware, estimate the future value of bitcoins as well as the level of difficulty. This is when Bitcoin prices and mining difficulty decline usually indicating fewer miners and more ease in receiving bitcoins. As the Bitcoin prices and mining difficulty rise, expect the opposite as more miners are competing for fewer bitcoins.

The Bottom-Line

These factors surely play a larger than the real role and help the investors to think beyond the horizon for a healthy and robust investment portfolio. While technology keeps evolving, there are quite a few reasons why many are after making quick money similar to gambling and gaming. We bring you more news in the later posts explaining the Bitcoin market in detail.