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Bitcoin Mining: What is it and is it Profitable?

The short answer would be “It depends upon how much you’re willing to spend”. Each person asking himself this will get a slightly different answer since Bitcoin Mining profitability depends on many different factors. In order to find out Bitcoin mining profitability for different factors “mining profitability calculators” were invented.

Coinmarkets: These calculators take into account the different parameters such as electricity cost, the cost of your hardware and other variables and give you an estimate of your projected profit. Before I give you a short example of how this is calculated let’s make sure you are familiar with the different variables:

Bitcoin Mining terms you should get to know

Hash Rate – A Hash is the mathematical problem the miner’s computer needs to solve. The Hash Rate is the rate at which these problems are being solved. The more miners that join the Bitcoin network, the higher the network Hash Rate is.

The Hash Rate can also refer to your miner’s performance. Today Bitcoin miners (those super powerful computers talked about in the video) come with different Hash Rates. Miners’ performance is measured in MH/s (Mega hash per second), GH/s (Giga hash per second), TH/s (Terra hash per second) and even PH/s (Peta hash per second).

Bitcoins per Block – Whenever a mathematical problem is solved, a continuous amount of Bitcoins are manufactured. The amount of Bitcoins produced per block begins at 50 and it is halved every 210,000 blocks (about four years). The existing variety of Bitcoins honored per stop is 12.5. The final block halving happened in July 2016 and another one will maintain 2020.

Bitcoin Difficulty – Since the Bitcoin network was created to produce a continuous amount of Bitcoins every ten minutes, the issue of resolving the mathematical problems must upsurge in order to modify to the network’s Hash Rate increase. Essentially which means that the greater miners that sign up for, the harder it reaches actually mine Bitcoins.

Electricity Rate – To be able to mine you’ll need to become listed on a mining pool. A mining pool is several miners that sign up for together to be able to mine better. The system that brings them collectively is named a mining pool and it deducts some kind of a charge in order to keep up its operations. After the pool manages to mine Bitcoins the gains are divided between your pool people depending on how much work each miner did (i.e. their miner’s hash rate).

Power consumption – Each miner consumes a different amount of energy. Make sure to find out the exact power consumption of your miner before calculating profitability. This can be found easily with a quick search on the Internet or through this list. Power consumption is measured in Watts.

Pool fees – In order to mine, you’ll need to join a mining pool. A mining pool is a group of miners that join together in order to mine more effectively. The platform that brings them together is called a mining pool and it deducts some sort of a fee in order to maintain its operations. Once the pool manages to mine Bitcoins the profits are divided among the pool members depending on how much work each miner has done (i.e. their miner’s hash rate).

Time Frame – When calculating if Bitcoin mining is profitable you’ll have to define a period frame to relate to. Since the more time you mine, the more Bitcoins you’ll earn.

Profitability decline per year – This is probably the most important and elusive variable of them all. The idea is that since no one can actually predict the rate of miners joining the network no one can also predict how difficult it will be to mine in 6 weeks, 6 months or 6 years from now. This is one of the two reasons no one will ever be able to answer you once and for all “is Bitcoin mining profitable?” The second reason is the conversion rate. In the case below, you can insert an annual profitability decline factor that will help you estimate the growing difficulty.

Conversion rate – Since no one knows what the BTC/USD exchange rate will be in the future it’s hard to predict if Bitcoin mining will be profitable. If you’re into mining in order to accumulate Bitcoins only then this doesn’t need to bother you. But if you are planning to convert these Bitcoins in the future to any other currency this factor will have a major impact on course.

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