What is Bitcoin mining
Bitcoin mining is a process of verifying transactions or payments from one user to another on a decentralized network.
During the process, data from the Bitcoin transaction is added to the public ledger. The public ledger is also called blockchain. Blockchain is used by nodes to separate valid Bitcoin transactions from those transactions that are essentially trying to use coins that have already been used for different transactions.
Bitcoin Mining is also a channel for introducing new coins. For their efforts, miners charge fees and they receive block rewards. Block pay consists of transaction fees and grants for newly created coins. This method ensures the conversion of new coins and incentives to miners.
So to start mining, you need to have access to the internet and convenient hardware. The goal is to compile the latest transactions in blocks and trialse to solve complex computing operations. When the miner is solving the math problem, he adds the data to the public ledger or block chain and receives the bonus award.
So is Bitcoin mining profitable?
There are original installation costs to be considered. In order to compete with other miners, some of them have already created major arrays for mine; You need serious equipment, including very expensive graphics cards. In addition, mining a single coin will use a lot of power, thus high electricity bills.
Looking down into the mining process, we can discover three major impacts on the Bitcoin mining profitability:
Block rewards and difficulties. Currently, the block amount is halved every 210.000 block or approximately every four years. The original block reward was in 2009 50 Bitcoins. Today there are 12,5 Bitcoins. If you want to track down exactly when these halves will occur, you can hear Bitcoin Clock, which updates this information in real time.
Bitcoin networks have difficulty measuring. It is a measure of how difficult it is to find a hash under a given goal. A hash is data that was derived through a complex mathematical calculation. Difficulty alters each 2016 block, which means that Bitcoin mining becomes harder and harder.
So as the block reward drops and the mining problems rise, one can only hope that the price of Bitcoin will be high enough to compensate for the reward and mining problems. So, if you manage to remind a coin and raise the bonus, there is a risk that Bitcoin's price will fall and it will also bring your reward.
Processing Power. The processing power of your equipment is called a hash rate or rate to solve complex calculations. The higher the speed, the more solutions a miner has a chance to find and thus earn more rewards. However, higher speeds usually mean higher operating costs. If you own high-powered equipment, you will be able to earn something from mining. Otherwise, with more solid equipment, you will spend more money than earning money. So before you start mining, you need to calculate your operating costs as electricity and equipment costs.
Risk exposures. Your mining will be exposed to risk of increase in difficulty, price cuts, burned equipment parts, electricity cuts, etc. There is a possibility of a sudden increase in mining problems, as the hashrat unexpectedly rises as a result of the entrance to the big new mining pool.
Increased difficulty means you will need more time and more electricity for mine, therefore your expenses will grow. The big volatility in the Bitcoin Prize can also affect your profits. If the price breaks, potential income also drops. Your equipment will not last forever. From time to time you will need to replace your burned parts. In addition, there is always new and better hardware that comes to mining. When ordering such equipment, please pay attention to shipping costs. Many other things may be wrong in the mining process, such as electricity cuts and network interruptions.
Due to the fact that it gets harder and harder every day to give enough hash rate personally to remind a coin and make money, mining pools were developed. Mining pool accepts miners from all over the world and pool their hash rate together, giving them higher hash rates for mining. Once a block of bitcoins are mined, the coins are divided among the members of this pool - minus a small fee that goes to pool service.
Web Based Profitability Calculators
There are several web-based profitability calculators that miners can use to predict the cost-benefit equation for bitcoin mining. Profitability calculators differ slightly, and some are more complex than others. One of the most popular calculators available on the CryptoCompare website.
The CryptoCompare calculator calculates the following (as stated on their website): mining is calculated from a network hash rate on 18.633.837.452 GH / s and uses a BTC-USD exchange rate on 1 BTC = $ 8,386.94. These numbers vary based on the total network hash rate and on the conversion rate for BTC to USD. The bonus is set for 12,5 BTC, and future block reward reductions are not taken into account. The average blocking time used in the calculation is 600 seconds. The electricity price used to generate these measurements is $ 0,12 per. KWh. Network hash rate varies over time, this is only an estimate based on current values.
After the introduction of Bitcoin mining was considered a gold stroke. But today mining has become a large scale industry. Easy money is gone. Mostly for the average home miners who will be hard at winning the original cost of mining and subsequent costs for electricity. Things can turn around after mining hardware becomes widely available and loses its value. In combination with access to cheap electricity and increase in Bitcoin, Bitcoin mining can once again be profitable for individual miners.