With the unprecedented toll that pandemic had on currencies of the world, there was Bitcoin that had faith in the people during the testing times. There has always been a surge in Bitcoin investors since 2015. There are companies like Immediate edge that deal with crypto payments. The value of a single coin was $300, and then it kept on rising till $20,000(as of December 2017). The value, however, plummeted by $8000 by November 2019. Other cryptocurrencies like Litecoin and Ethereum too witnessed changes in their respective values.
So, here’s the question – Is Bitcoin Mining profitable in 2021? If yes, then How? But first of all, we need to start from the term itself to dig deeper into the question – What is Bitcoin Mining, and how is it done?
What is Bitcoin Mining
There is no doubt cryptocurrencies have gained so much popularity over the years. They become exorbitantly expensive over time. But it is hard to ignore that they can yield sporadically high gains sometimes, weighing heavy in your bank! In the early 2000s, Bitcoin trading was much more accessible and was not subject to much fluxes in the cryptocurrency system. Today, multiple mechanisms shape the destiny of the investments made in Bitcoin. Thus, just like all cryptocurrencies, Bitcoin has become more detailed and complex over the years.
To start with, Bitcoin Mining means earning bitcoins by way of exchanging the verification process. This process helps validate bitcoin transactions. These transactions ensure the Bitcoin network’s stability and reward the miners with the bitcoins as a result. If the price of bitcoins rises above the expense of mining, miners will benefit.
Bitcoins mining, a crucial part of blockchain ledgers up-grading, also covers putting together new bitcoins into circulation. This process takes place through highly advanced machinery that solves complex numerical problems.
Investors come back to one question through the changes in technology involved and the shift in different computing mechanisms – Is Bitcoin Mining still profitable?
Here are various points that you can have in mind while going for Bitcoin mining:
- You will gain cryptocurrencies without putting some capital down by mining.
- The bitcoin miner to answer the numerical problem first receives a reward. A person’s likelihood to solve the problem first is proportional to their share of the network’s overall mining capacity.
- You would require GPU (graphics processing unit) or an ASIC (application-specific integrated circuit) for setting up an efficient mining rig.
How can you mine Bitcoins?
By ensuring that all the bitcoins transactions are legitimate, Miners act as auditors and get paid. Satoshi Nakamoto, the inventor of Bitcoin, devised this convention to maintain honesty and truthfulness among the miners. Hence, miners help to avoid the “double-spending crisis” by checking transactions.
This crisis is a very anticipated scenario in the case of digital currencies. It means that the holder can spend the same bitcoin twice. Inadvertently, it is not the case with physical currency as once you have spent, you cannot spend the same amount twice. If you go to the market and buy a packet of Cheetos for ten bucks, then you can not pay those ten bucks again. You can exchange counterfeit currency, though, but it still would not justify the concept.
In cryptocurrency, it is still possible as the currency holder can duplicate it and trade it with other merchants while keeping the original one.
That is why Bitcoin Mining took place. If you exchange two bitcoins, one original and the other being a copy, then the Bitcoin Miner will identify that the same bitcoin is spent twice, and you might get in trouble. It is the responsibility of a Bitcoin miner – checking transactions so that the users do not go unchecked with double-spending.
Thus, this process of checking transactions earns miners bitcoins. But not everyone is entitled to bitcoins. After checking transactions worth 1MB (1 megabyte), you become eligible to earn bitcoin.
How much are 1MB worth of transactions?
1MB can wholly include one transaction or a thousand of a similar nature. It just depends on the data involved in these transactions. Here are the criteria for miners to earn bitcoin:
- Verifying transactions worth 1MB.
- Become the first miner to give the right or the closest answer to a numeric problem.
The second criterion involves mainly guesswork. There is a complex calculation involved. You would think that miners solve complex mathematical problems, but that isn’t the case. They’re competing with other miners to generate a 64-digit hexadecimal number or a “hash.” This value of this hash is either equal to or less than the aim hash.
But here’s the pitfall: It is a game of guessing, but the cumulative amount of potential guesses on any of these problems in the trillions, it isn’t easy. Miners would require competent apparatus and technology to answer the solution first. Thus, a miner would need a massive hash rate to mine successfully that you will ascertain in megahashes/gigahashes/terahashes per second.
What is a Hash Rate?
Hashrate is a metric for a miner’s processing capacity. The more the hash rate, the better it is.
In other words, the more miners mining bitcoin in the hopes of a payout, the more complex the puzzle becomes to solve. It’sIt’s a technological arms race with the most processing power (hash rate) to mine the most bitcoin. More computing power of machinery means finding the results faster – which is beneficial for the miner.
Hashrate was first calculated in hash per second (H/s) in 2009, but due to mining’s exponential development, H/s was soon prefixed with the following SI units:
- Kilohash – KH/s (thousands of hashes/second)
- Megahash – MH/s (millions of hashes/second)
- Gigahash – GH/s (billions of hashes/second)
- Terahash – TH/s (trillions of hashes/second)
- Petahash – PH/s (quadrillions of hashes/second)
Is Bitcoin mining profitable in 2021?
Bitcoin mining does make sense and can be lucrative, considering 2021. While competitive ASICs cost anywhere from a few hundred dollars to about $10,000, equipment is more readily obtained. Many robots have evolved to remain competitive. For example, any hardware helps consumers change configurations to reduce energy consumption, lowering total costs. Before purchasing fixed-cost equipment, prospective miners should conduct a cost-benefit study to determine their breakeven price.
Here are some variables that are required for ascertaining the revenue of a bitcoin miner:
- Electricity cost: The cheaper the electricity, the better it is. However, the rates may change from time to time. You can see these details on your kWh-based electric bill.
- Power consumption and efficiency: How much electricity, measured in watts, does your machine consume?
- Time: When it comes to time, how much time do you think you’ll waste mining?
- Bitcoin value: how much is a bitcoin worth in US dollars or other official currencies?
Would-be miners can calculate bitcoin mining’s cost/benefit equation using many web-based feasibility calculators, such as the one given by CryptoCompare. Profitability calculators vary somewhat in complexity, with some being more sophisticated than others.
Run the calculations many times for varying price ratios for both the cost of electricity and the value of bitcoins. Adjust the complexity level and see if it affects the study. Determine your breakeven price or the price at which bitcoin mining becomes profitable for you. Bitcoin’sBitcoin’s price is now trading near $8,000 as of May 2020. Miners are paid about $50,000 for completing a hash, based on the current payout of 6.25 BTC for a completed block. Of course, since bitcoin’s price is so volatile, this payout calculation is subject to shift.
To determine profitability, use a cost-benefit study using a web-based profitability calculator. By switching to different percentages, you can define your breakeven point (after which mining is profitable). Break-Even Point is a situation where you do not earn profits, but you do not incur losses. Determine if you can invest the requisite initial resources in hardware, as well as the potential worth of bitcoins and the difficulty level. When both bitcoin values and mining complexity fall, it generally means that there are fewer miners and that getting bitcoins is easier. Expect more miners to compete for fewer bitcoins as bitcoin rates and mining complexity increase.
Bitcoin is the most sought-after digital currency despite a high amount of risk and cost. But by improvising with the technology and other metrics, you can earn profit & become a Bitcoin Miner. Thus, with the right apparatus and determination, Bitcoin mining is profitable this year, i.e., 2021 and maybe beyond. When ASIC mining hardware advancement reaches the point of diminishing returns, the situation can improve. It, combined with low-cost, potentially long-term power solutions that retail consumers would tap in any way, might make Bitcoin mining lucrative for small individual miners all over the world once again. Numerous apps are launching each day that involve bitcoin trading. Thus, even a commoner can now relish the benefits of bitcoins is no longer limited to the rich alone.