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It is deduced that the tips of bitcoin mining will further reduce as the difficulty increase. Reducing the percentage of profitability even more.
Bitcoin mining refers to verifying bitcoin transactions to ensure good and fair processes are taking place. It is a time-consuming and effortful process that requires the assistance of advanced gadgets. The transactions verified by miners result in a smooth bitcoin circulation, and hence bitcoin miners are rewarded with cryptocurrency tokens.
Miners find the process profitable if their rewards are worth more than the cost of mining itself. However, the value of bitcoins constantly fluctuates, and the price of technology required to mine increases. Therefore, people often question whether bitcoin mining is profitable or not?
Factors that determine whether Bitcoin Mining is Profitable
Several aspects of the process of mining play a role in determining profitability. They include:
- The price of electricity that is used to generate advanced gadgets.
- The cost required to access or get computer systems.
- The effort is necessary to provide mining services.
- The price of bitcoins, at a given time, compared to the standard currency.
The Present of Bitcoin Mining
As bitcoin mining is a competition, it does not profit those who mine using old hardware. It is a game of time; those who solve hash problems first are rewarded. As application-specific integrated chips (ASIC) offer a hundred billion times the power available in old hardware, miners who use old hardware cannot solve the problem first. Hence, they are not rewarded, and they do not profit from bitcoin mining.
However, even those who use ASIC find that their rewards are often less than the costs they pay for this advanced technology. Furthermore, the difficulties change every two weeks to ensure the maintenance of the blockchain ledger and the circulation of bitcoins. If the difficulty rate is high, a miner cannot solve a hash problem and does not get rewarded. The difficulty has only increased since the start of the process, making it less profitable with time.
At present, the process does provide valuable profits to miners. People use a web-based profitability calculator to find out whether mining bitcoins is profitable for them or not. They calculate the value of bitcoins in the future as well as the probable difficulty level.
The Future of Bitcoin Mining
To control the supply of bitcoins, the network will be closed at 21 million bitcoins. Around 18 million bitcoins have already been mined. Therefore, the rewards miners get are reduced. They are halved every four years, and this is called reward shifting.
The number of bitcoins a miner gets was reduced to 25 from 50 in 2012. It was then halved to 12.5 in 2016. Currently, miners get a reward of 6.25 bitcoins for every block of bitcoins they verify. Hence, it is deduced that the tips of bitcoin mining will further reduce as the difficulty increase. Reducing the percentage of profitability even more.
All in all, it is important to deduce the profitability and not just at present but also in the future before investing in advanced technology.