Bitcoin is a cryptocurrency, which means it’s a decentralized digital asset based on an immutable ledger called a blockchain. Unlike fiat currency, the world’s most valuable digital asset is not regulated by central banks or government entities.
Instead, all transactions within Bitcoin’s network are monitored and validated by people spread all over the world. To validate the transaction and make it fraud-proof, miners get rewarded every time they help to solve the riddle inside a block in the network.
In this article, you will find out whether or not Bitcoin mining is still profitable. Furthermore, if you don’t want to buy Litecoin or Ethereum using a crypto exchange, you can still mine these and other cryptocurrencies at home, such as Dogecoin (DOGE), Ethereum Classic (ETC), Monero (XMR), ZCash (ZEC), RavenCoin (RVN) and Bytecoin (BCN). We will talk about this in this article.
Understanding the Basics of Bitcoin Mining
In layman’s terms, Bitcoin mining refers to the process required to put new bitcoins into circulation. Plus, it is also the factor that secures Bitcoin’s blockchain, which is the network that records all transactions involving the cryptocurrency by encryption.
Each “block” records the information of a transaction, and all blocks are connected in a chain, in chronological order. Miners work to verify the validity of the information of a new block, checking if each Bitcoin transaction to confirm it has happened as it should.
In exchange for their validation services, successful miners get rewarded with 6.25 bitcoins, plus a transaction fee, which varies from block to block.
However, it is crucial to note that validating transactions does not automatically mean winning cryptocurrencies, as it depends on the miner’s luck and speed. After validating a block, the miner needs to be the first among all the miners to find the solution of the riddle inside the block, in a process known as proof of work (PoW).
The Bitcoin reward is halved every 4 years, with the last change made in May 2020. In 2009- the year Bitcoin mining started- the reward for successful miners was 50 BTC – which is equivalent to $2,427,640 in August 2021.
What Do I Need to Mine Bitcoin? – A Brief Overview
Basically, Bitcoin mining is based on a competition of who solves a numerical sequence inside a block first. Hence, miners equipped with the best computers and a lot of processing power come out ahead, as they can make more attempts per second.
Also, cheap electricity is a fundamental aspect of crypto mining, as the mining equipment must be turned on 24/7. Hence, mining Bitcoin within a country with expensive energy costs may not generate sufficient profitability to cover electricity costs.
In this sense, colder weathers help prevent machines from overheating without the additional expense of cooling equipment. Hence, the biggest Bitcoin mining hubs are established in colder regions, such as Russia, the United States, and, until recently, in China.
Explaining the Hash Rate – Why is it So Difficult to Mine a Single Bitcoin?
The probability of a miner is the first to solve the mathematical equation inside a block is measured by the mining power in relation to the total network. Competitive Bitcoin miners must have a high hash rate, which is measured in terahashes per second (TH/s).
The higher the total network hash rate, the more secure the blockchain is, as more people are working to keep it safe. At the same time, however, the mining process becomes more competitive.
As recently as June 2021, the global hash rate suffered a major blow due to the recent ban on crypto mining in China. Considered the world’s biggest mining hub, China accounted for more than half of the global bitcoin production.
Consequently, the ban forced thousands of Chinese miners to either abandon their equipment or seek refuge in other countries, such as the United States, Canada, or Kazakhstan.
With many miners are still inactive, the network’s hash rate has dropped more than 50% under its peak. As a result, mining became less competitive and more profitable for miners around the world, especially mining hubs established in the United States, Switzerland, and Iceland.
Is it Worth Start to Mine Bitcoin in 2021? – A Realistic Overview
Even with Chinese dominance in Bitcoin mining falling globally, there is no advantage to start mining bitcoin in 2021.
Hence, if you’re not willing to invest millions of dollars in a professional mining operation, mining Bitcoin isn’t worth the costs and effort required in the process. However, there are still altcoin options that can be mined on a home computer.
In the early days of the industry (2009-2013), people could mine Bitcoin (BTC) using their home notebooks and desktops. However, the increasing difficulty of mining and the rise of mining ASICs made it impossible to profit from mining Bitcoin without a million-dollar infrastructure.