Is it worth mining Bitcoin?
Mining Bitcoins can be a highly profitable venture, but can also leave you upside down in expensive equipment and loans if not careful. Bitcoin mining is the process of validating Bitcoin transaction and adding them to the bitcoin blockchain. Mining Bitcoins is a highly technical procedure, but there are hundreds of how to videos on the internet and these videos can be understood by anyone with basic computer knowledge.
Calculating the profitability of Bitcoin mining is difficult to figure out as it relies on multiple factors:
Equipment costs –
In the early days anyone could mine bitcoin from their personal computer at home without the need for expensive hardware. Things have changed since then. Bitcoin mining has become a highly competitive venture and only those with top of the line equipment has the computing power necessary to correctly identify the computing puzzle and earn Bitcoin. The costs of Bitcoin mining equipment can be staggering, ranging anywhere from $2,500 – to $100,000 depending on the type of equipment. It is important to determine the initial costs of your mining operation to identify how long it will take you before your mining operation turns profitable.
Electricity costs –
The number one profit eater of bitcoin mining is electricity costs. On average bitcoin mining consumes 42 Twh per year, which is enough to power 4.6 million homes. Calculating the cost of mining 1 Bitcoin is difficult, as the amount of energy required to mine a block fluctuates. Bitcoin is designed to increase the difficulty of mining as more blocks are being mined. This was designed by Bitcoin’s creator to prevent the supply of Bitcoin from being inflated. So as more people use the system, more energy is required to produce Bitcoins and as energy costs vary from state to state and nation to nation, you can see why calculating the costs of bitcoin is difficult. On average it can cost anywhere between 2,000 and 4,500 dollars.
It is also important to understand that mining the Bitcoin block and receiving the mining reward is not guaranteed.
To get the right to mine a Bitcoin block, miners must solve a complex computational problem and the fastest miner to solve the problem gets to mine the block and receive the Bitcoin. Although, there are ways to calculate the likelihood of correctly guessing the answer to the problem and earning the mining reward, but this is based off electricity usage and varies as the difficulty changes.
Taxes are another variable to take into account.
Just like earning money, mining Bitcoin is deemed as a taxable event in nearly every country in the world. Tax rates fluctuate from country to country and must be taken into account to determine if it’s worth doing.
Time and effort.
Besides upkeep to your equipment, Bitcoin mining is an automated process, but setting up a mining node requires a lot of time and effort on your part. Before you begin mining Bitcoin be sure to do your research and see if it’s something you’re willing to commit a large chunk of your time to.
There’s no easy way to determine if Bitcoin is worth mining, but doing research and your due diligence will provide you with the information to make an informed decision. Just keep in mind if you decided to start mining Bitcoin it will require a large amount of time and capital and it may take years for you to profit from this venture.
Check out this cool tool you can use to determine how much you can make from mining Bitcoin.