When it comes to Bitcoin mining, most people are concerned about its profitability. The Bitcoin ecosystem has become more crowded towards the end of 2020. Since new people are entering the Bitcoin space due to the steady rise in the value of Bitcoin, they are wondering whether Bitcoin mining is still profitable.
However, the majority of the people are choosing the easier path and investing directly in Bitcoin through a crypto exchange like novinite.com. But if you are planning to mine Bitcoin, consider the following important factors before you decide.
Is Bitcoin Mining Still A Lucrative Prospect?
The profitability of Bitcoin mining mainly depends on these factors:
- Mining Hardware,
- Efficiency and Time,
- Energy Cost,
- Shifting Rewards,
- Bitcoin Price.
First and foremost, the hardware device you need for Bitcoin mining has a significant impact on your profitability. Before 2013, CPU mining was profitable because high processing devices like ASICs were not available.
Now, CPU mining is becoming obsolete because it cannot compete with high computing devices. However, these high computing devices come with higher costs. So, you need to consider the availability and cost of the mining hardware you need.
Efficiency and Time
The time required in ASIC mining is less than GPU mining and far less than CPU mining. So, the efficiency of ASIC is more than GPU and CPU devices. The cost will increase if your mining system requires more time and is not efficient.
The optimal condition to be profitable in Bitcoin mining is; your mining hardware should take less time and be more efficient in solving the computational problems.
Another important factor to consider is the energy cost. If the cost of electricity is high in your geographical region, it may not be profitable to mine Bitcoins. Usually, high computing devices consume a lot of electricity, which may significantly increase your energy consumption cost. So, it’s crucial to consider the energy cost before you make a proper decision.
Do you know what shifting rewards are? Inherently, the reward of mining Bitcoin gets halved every four years. The current reward for mining Bitcoin is 6.25 BTC, which was 12.5 BTC before the third Bitcoin halving event in May 2020. It was 25 BTC before 2012, and miners were getting 50 BTC initially.
The reward is expected to become zero towards the year 2140. The shifting reward due to the halving event also reduces the number of Bitcoins a miner gets for successfully mining one block. So, it’s one of the important considerations for the profitability of Bitcoin mining.
Finally, one of the important factors that you should consider while deciding on Bitcoin mining is the price of Bitcoin. Bitcoin is trading nearly $34,000 on 20 Jan 2021, while writing this article. So, the profitability depends on the price of Bitcoin. If the price increases in the coming years, you will be profitable, and if it goes down, you may lose your investments.
Know, Who are Miners and Why are They Important to Bitcoin’s Design?
Strong Why Joining a Mining Pool Can Be Beneficial?
Since I have mentioned different factors that decide the profitability of Bitcoin mining, what should you do? You alone cannot change Bitcoin’s price; you also don’t have control over the shifting rewards.
The only thing that you can manage is to improve your efficiency and computing capacity by joining a mining pool. A mining pool is a collaborative mining process where a group of crypto miners by combining their resources to strengthen their computing capacity. It can improve their chances of solving the blocks efficiently, and they will distribute the rewards proportionately.
I hope you have got some idea of different factors that influence the profitability of Bitcoin mining. So, estimate the expenses and the rewards considering different factors and decide whether it’s profitable for you. If you think it can give you a good ROI, you can consider it a good income source.