Is Bitcoin Mining Still Profitable?

12 Min Read
Last Updated July 23rd 2021

Is Bitcoin mining still profitable? It's the real question for anyone interested in Bitcoin Mining.  

Bitcoin mining is difficult and expensive. Is it only the large Bitcoin mining centres making money from Bitcoin mining because they can afford the advanced technology needed to mine Bitcoin?

As Bitcoin price reached new highs this year, even the average Joe wants to know how to mine Bitcoin at home and how much it costs to set up and run a Bitcoin mining rig, and so the question we ask is Bitcoin mining profitable in 2021?

Bitcoin mining isn't simple, far from it, but is Bitcoin Mining still profitable? We set out to find the answer for you. In conclusion, you will know if Bitcoin mining is still profitable and if not, why not?

Contents

What is Bitcoin Mining?

Like any form of mining, Bitcoin is a process that brings more Bitcoin into circulation.

Bitcoin mining is essential for maintaining and developing the blockchain ledger, a digital ledger of all cryptocurrency transactions.

There is no centralized storage for cryptocurrencies. To avoid fraud and duplication, the Bitcoin miner plays a vital role in managing crypto transactions by verifying and validating every Bitcoin transaction.

Is Bitcoin mining still profitable now as it was when Bitcoin first became visible as a potential currency alternative to fiat currencies?

But what are the benefits of mining Bitcoin?

The simple answer is that Bitcoin miners get paid in Bitcoin, but there are no guarantees of rewards so, why do they do it, and what is a Bitcoin miner?

What Is a Bitcoin Miner?

The Bitcoin miner verifies and validates Bitcoin transactions.

Think about fiat currency and how it's not possible to spend the same dollar twice. You hand your dollar over, and that's it.

Well, with digital currency, the potential for duplication is enormous. Without the Bitcoin miners, there is no way of verifying and validating each Bitcoin transaction.

Bitcoin miners submit the verified and validated blocks of data to the blockchain, and they make a profit if they are successful and the price of Bitcoin is higher than mining costs.

Can I Mine Bitcoin from Home?

In the beginning, it was possible to mine Bitcoin from home because there were few transactions and fewer Bitcoin miners. Running costs were acceptable, and returns were generous.

But now, many professional Bitcoin mining centres exist with massive computing power.

Add to that the expanding price of Bitcoin, public awareness and more and more Bitcoin transactions.

It takes a significant amount of electricity to run a Bitcoin mining machine, making it increasingly challenging for independent Bitcoin miners. So, is Bitcoin mining still profitable for individual Bitcoin miners?

The price of a computer system with enough power to run a Bitcoin mining rig is prohibitive for the single Bitcoin miner. Bitcoin machines are now highly sophisticated to cope with the challenges of Bitcoin mining.

Mining Bitcoin from home is unlikely to be a profitable venture.

How Does Bitcoin Mining Work?

Bitcoin miners verify blocks of Bitcoin transactions and send them to the blockchain.

The Bitcoin validation difficulty is measured in hashes per second.

Hashing is taking an input string of data of any length and giving an output of a fixed length, and the process requires a complex hashing algorithm. As more Bitcoin miners get involved, the difficulty increases. That is why, now, it is becoming more challenging to make money from Bitcoin mining.

Profitability is also determined by a comparison between the Bitcoin price and fiat currency.

Read More: How Does Bitcoin Mining Work?

The Components of Bitcoin Mining

Before 2013, you could set up a Bitcoin mining rig on your personal computer. But the introduction of Bitcoin mining software put a stop to that.

To mine Bitcoin now, you need ASIC (application-specific integrated circuit chips) technology. ASIC has up to 100 billion times the capacity of personal computers. Whilst you could still try to mine Bitcoin, there is no doubt it would not be a profitable exercise.

Thousands of Bitcoin miners are trying to solve the same hash problems, and if they want to make a profit, they need to get ahead of other Bitcoin miners and solve the problem first.

The top-performing Bitcoin miners have the superior computational machine power to outwit older machines. Lack of speed equals no profits, but you still have the running costs.

If you aren't the first to solve the hash problem, you walk away with nothing. So is Bitcoin mining still profitable for the individual Bitcoin miner? In truth, it's unlikely.

Profitability Before and After ASIC

Back in 2009, mining Bitcoin was easier and profitable for miners using their home computers. The expenses were fewer because Bitcoin miners owned their machines, and they could easily change computer settings for more efficient running.

There were no professional Bitcoin mining centres out-performing the home-based Bitcoin mining rigs. It was a level playing field for Bitcoin miners back then.

But when ASIC technology emerged, it was a game-changer.

Individual Bitcoin miners could not compete with the mighty powerful mining rigs.

Now the independent Bitcoin miner had to consider their future.

They could invest in expensive equipment with increasing electricity costs or give up and leave Bitcoin mining to the big boys. Every Bitcoin miner back then was faced with the question, 'is Bitcoin mining still profitable?'

And, for many, it was time to give up. 

The Difficulty of Mining Bitcoin

Without question, the difficulty of mining Bitcoin is increasing.

The challenges of mining Bitcoin are variable and constantly changing every two weeks. These changes are necessary to maintain production stability for the verified blocks sent to the blockchain.

With increasing difficulty comes less chance of successfully solving the hash problem.

The level of difficulty has become ridiculous.

At first, with the launch of Bitcoin, the estimated difficulty level was 1. According to Coindesk, in April 2021, the current Bitcoin's mining difficulty is 23.1 trillion.

No, that's not a typo, from 1 to 23.1 trillion. 

How is Bitcoin mining still profitable with crazy figures like this?

Check Out: 15 Reasons Why You Should Invest in Bitcoin Today

Shifting Rewards of Bitcoin Mining

When the Bitcoin network was founded, the stipulation was that Bitcoin is capped at 21 million. The intention was to control the supply of Bitcoin.

As of February 2021, 18.638 million Bitcoins have been mined, leaving 2.362 million Bitcoins yet to come into circulation.

Once all Bitcoins have been mined, Bitcoin miners will still be needed – and rewarded – to process transactions with fees.

Few people know that the Bitcoin Network protocol halves the number of Bitcoin rewards to Bitcoin miners every four years.

Initially, the reward for successfully completing a block was 50 Bitcoin. In 2012, this was reduced to 25, and in 2016 it halved again to 12.5.

In May 2020, the reward dropped to 6.25, and in 2024, it will split again.

So, there are fewer rewards but increasing difficulties for Bitcoin miners. How is Bitcoin mining still profitable if the price keeps halving? 

Mining Bitcoin can only be potentially profitable if the Bitcoin price keeps rising. Last month (April 2021), the Bitcoin price hit $64k. But, over time, as more Bitcoin miners become involved, it will become harder to solve the hash problems.

Bitcoin Mining Profitability in Today's Environment

It's easier now to buy high-tech Bitcoin mining equipment.

The cost of ASICs varies from anywhere between a few hundred dollars and up to $10,000. Some modern hardware allows for setting changes to reduce the enormous energy requirements to reduce running costs.

Prospective Bitcoin miners know the fixed price of setting up a Bitcoin mining rig. But, it's advisable to do a cost per benefit analysis to understand their breakeven price.

There are variables to consider:

  1.  The cost of power - electricity rates are variable according to season, so know your electricity rate. You can find out your current kWh rate by checking your electricity bill, and you could contact your electricity provider to ask if there is a more favourable fixed contract price for increased energy usage
  2. How efficient is your system? -  know precisely how much power your system consumes, measured in watts. An inefficient system will prove to be an unprofitable venture into mining bitcoin
  3. The Bitcoin value – what is the current value of Bitcoin? Bear in mind the substantial price fluctuations of Bitcoin. Today $41k, last month $64k. Can you weather those big dips with the decreasing rewards and the increasing difficulty
  4. Time - how much time do you have to mine Bitcoin?

It may seem like a big task to find out if it is possible to profit from Bitcoin mining with your system.

You can find online Bitcoin mining profitability calculators such as CryptoCompare. The calculator analyses your data and tells you if it is still profitable to mine Bitcoin.

Don't trust the first check. Run your data through at different price levels, varying Bitcoin price and electricity prices. Increase the difficulty levels a few times.

To determine is Bitcoin mining still profitable, find out what price level it becomes profitable for you to mine Bitcoin.

If you were successful at mining Bitcoin today, your reward would be around $256,000. A few weeks ago, your reward would have been $400,000. The price of Bitcoin will continue to rise and fall.

Should you decide against starting your own Bitcoin mining business, there are safer and potentially more lucrative alternatives. You could consider joining a Bitcoin mining pool.

You would be joining forces with a group of Bitcoin miners to share the costs and the rewards. The primary benefit of joining a Bitcoin mining pool is the increased speed and reduction in difficulty levels. Yes, the rewards may be less, but the combined power of the mining pool equals a greater chance of being the first to complete a hashing problem.

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Recap of is Bitcoin Mining Still Profitable

It may be more challenging now to become a profitable Bitcoin miner.

With decreasing rewards and increasing difficulty, Bitcoin mining is not for the fainthearted.  Purchasing a Bitcoin mining rig with advanced technology can be prohibitively expensive

The only way to know for sure is to run your data through a Bitcoin mining calculator and then weigh up the pros and cons of whether to become an independent Bitcoin miner, with all its subsequent costs and stress. Or you can join a Bitcoin mining pool and share the costs and potential rewards and reduce the stress of Bitcoin mining.

It's worth understanding that when the difficulty of mining Bitcoin is increasing, it means that more miners are competing for fewer bitcoins. The more miners, the less Bitcoin and the harder it is.

When mining Bitcoin becomes more straightforward, fewer miners are competing for Bitcoins, so it's easier to receive Bitcoins.

Please note that the above information is not providing advice on tax, investment, or financial services. We provide the above information without consideration for risk tolerance and a specific investor's financial circumstances.

Investing in Bitcoin or Bitcoin mining may not be suitable for everyone. It does involve risk and the possibility of a loss of capital.

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