Bitcoin Mining sounds lucrative and all crypto enthusiasts want to know is:
“Can I mine Bitcoin and is Bitcoin mining profitable?”
The answer to this question is pretty much counterintuitive.
The short answer is yes and the long answer is probably not. You can mine bitcoin if you can invest in operating huge mining farms and you live in a country wherein energy is abundant and cheap. But bitcoin mining operations are moving from single miners to mining companies. The mining pool has moved from computers solving math problems to large mining farms run by companies. This article will walk you through what is bitcoin mining, what kind of hardware equipment is required to do mining and how much returns can you expect from the mining.
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Mining is a process of incorporating a new block transaction into the chain of Blockchain. Miners put their time and money into validating each transaction and all the participants of the Blockchain network have access to this transaction record via distributed ledger technology. Mining is also highly effective in stopping any double-spending problems. Getting a block reward of bitcoin transactions is the purpose of mining for investors.
Undeniably, miners are an integral part of the crypto currency sector because they validate all the transactions that take place via bitcoin. Ensuring the legitimacy and authenticity of the transactions. Due to the presence of miners, fraudulent transactions are almost impossible in the Bitcoin community.
Every time a new block is created, miners are incentivized for the time and money they’ve put in. After the next bitcoin halving that took place in May 2020, the reward for the miners reduced dramatically. Eventually, many bitcoin miners may prefer holding their bitcoins instead of selling them as they aren’t receiving expected returns.
How to Select Hardware for Crypto Mining
Keeping in mind the complexity involved in mining bitcoin, it is imperative to invest in appropriate hardware so that you can earn maximum returns. Some specific characteristics should be kept in mind while choosing the equipment that will address your requirement and one of them is a hash rate.
Hash rate is the number of calculations that your hardware can perform each second. Undeniably, the hash rate is a substantial parameter. Higher the hash rate, the greater will be your chances of solving the mathematical problem.
What is most enticing to the miners is a specified output of the hash function. As far as hash function is concerned, the output is almost unpredictable but the same input results in the same output.
So, to find a specific out you must have to try a variety of random inputs.
Apart from that, mining is a highly competitive industry, so miners can’t receive a reward without dealing with these random inputs. Hence, hardware with a high hash rate is imperative for successful mining.
The internationally recognized unit for the calculations of hash rates are;
- Megahashes per second (MH/sec)
- Gigahashes per second (GH/sec)
- Terahashes per second (TH/sec).
Hardware that has the hash rate in the range of 336 MH/sec to 14,000,000 MH/sec.
Bitcoin mining is a high-yield investment therefore, there must be some cost associated with it. The more hash power your hardware has, the greater the amount of electricity it requires. Before purchasing your hardware, the electricity consumption by your desired hardware should be taken into account. It is not wiser to pay the hefty cost of electricity to mine bitcoin because the reward has reduced dramatically.
You can optimize the use of energy resources by calculating the number of hashes received for each unit watt of electricity consumed by hardware. These calculations can be easily done with an aid of hash rate and energy consumption numbers.
All you need to do is to simply divide the hash rate by the number of watts of electricity consumed.
To keep that in perspective, let’s suppose your hardware hash rate is 4,500 MH/sec and it requires 32 watts of electricity to work properly. In this scenario, you’ll be receiving 140,625 MH/sec. per watt. You can leverage an online electricity price calculator or just simply check your electricity bill to figure out how much you should have to pay in this regard.
Hardware Required for Mining
In the early days of Bitcoin, too many crypto enthusiasts were tempted to mine Bitcoin because it was very lucrative. Indeed, a decentralized, self-governing network seems a revolutionary idea where ordinary users act as a mediator to validate the transactions. Back then, the Bitcoin value was nowhere comparable to its price today.
The next progression in hardware for mining was high-end bitcoin graphic cards. These give miners higher Bitcoin Mining power. These graphics cards consume relatively low electricity per unit work and they are 50 to 100 times more efficient than the traditional mining hardware.
Herein the dedicative mining comes into play. They’ve skyrocketed Bitcoin mining capabilities which paved the way for the construction of the first mining farm and laid down the foundation of the Bitcoin mining industry.
These days Bitcoin mining is a lucrative investment opportunity more for retail investors than single miners. Mining farms help many peoples to achieve financial freedom in life. These mining farms are constructed with plenty of different mining hardware, graphic cards and coolers.
Mining hardware requires a behemoth amount of energy to run effectively. Cheap electricity makes Chinese mining rings highly sustainable and profitable.
Is Bitcoin Mining Profitable?
Bitcoin mining has transformed into a highly lucrative business model. From the consortium of bitcoin network participants who mine Bitcoin with an aid of their CPUs computational power.
And grown into a larger scale bitcoin farming sector. Bitcoin’s price escalation makes it more enticing to both large-scale corporations and the general public.
Generally speaking, anyone who is willing to invest in a specialized kind of high-powered hardware machinery can make some profit from mining. Most small miners pay more money on electricity bills than they earned via mining.
Therefore, Bitcoin mining can only turn profitable if you can afford to invest hefty capital in assembling and operating mining farms and have access to cheap energy.
Apart from that, an average home miner is more prone to trivial problems like hardware failure, power scarcity, network connectivity issues, and cost ineffectiveness. However, the situation will become comparatively better in the future. ASIC mining software is still in a rudimentary stage but it has garnered industry and mass acclaim.
Meanwhile, cheap energy sources like solar, wind, and geothermal energy significantly reduces the cost of running massive mining farms. These developments collectively may not only boost the profitability of individual home miners, but also enhance the overall decentralization of the network.
Making the Bitcoin network less prone to legislative risks and making it more feasible for massive adoption.
Read our previous article on how to buy bitcoin.