Cryptocurrency mining has become one of the most profitable activities of our time. The antiquity and popularity of digital currencies such as bitcoin has led many to turn to this issue. But the question is, is digital currency mining still a profitable business?
Fans of the cryptocurrency world should keep in mind that mining all digital currencies may not be very profitable for them. It is very important to make sure that the relevant currency is profitable and to know its preconditions before starting this activity. Join us if you want to know if cryptocurrency mining is still a profitable business.
Cryptocurrency mining history
The history of cryptocurrency mining dates back to the time when bitcoin was created. Bitcoin was the first digital currency to be used for the first time in 2009 and the concept of digital currency came to the fore.
Early miners could easily mine about 50 bitcoins every 10 minutes, and did not require advanced and powerful devices to do so. In fact, if in 2010 a miner could release a block and add it to the blockchain network, the number of bitcoins it could have today in 2021 would be worth about $ 2 million.
But now the conditions for bitcoin mining are different, and cryptocurrency mining like bitcoin requires advanced and powerful devices, with a staggering amount of energy that can mine only 6.25 bitcoins.
With these interpretations, is digital currency mining still a profitable business? To answer this question, we need to first get acquainted with the process of cryptocurrency mining.
What is cryptocurrency mining?
As we have said, before we can talk about the profitability or not of digital currency mining, we must first be familiar with the concept of mining. Cryptocurrency mining is an operation in which a device solves complex mathematical equations with its hardware power, thus confirming the transactions made in its cryptographic network and connecting the desired block to the blockchain.
To better understand the subject of bitcoin we should say every transaction made on the Bitcoin network is stored in a general ledger called Blockchain. The blockchain consists of several blocks that contain transactions and are interconnected. In other words, when a person sends bitcoin to another person, it means that he has made a transaction. The task of ensuring that this transfer is correct and that no fraud has taken place is the responsibility of those who carry out the mining operations. We call these people miner.
So when you send bitcoins to your friend, before your transaction is registered in the blockchain, the miners use the hardware power of their computers to perform complex mathematical operations to verify the accuracy of your transaction. Any computer that can solve the equation sooner and verify the correctness of the transaction will receive a bitcoin reward as a reward. This allows both the transaction to be successfully approved and connected to the blockchain, and the miners can earn money for themselves.
Is cryptocurrency mining profitable?
As you know, the total number of bitcoins is a fixed amount and we will not have any other bitcoins besides them. In fact, this number is equal to 21 million units, of which about 18 million and 757 thousand units have been mined so far, and the rest will be mined in the coming years. Another point is that over time, as more bitcoins are mined and the number of unmined bitcoins decreases, the number of bitcoins given to miners as a reward decreases. This phenomenon is called Bitcoin Halving. This usually raises the price of bitcoin after each halving.
Therefore, it should be said that the more time goes by, the harder it becomes to mine bitcoins. That’s why the question arises as to whether bitcoin mining is still profitable. This is because there may be a situation where the cost of cryptocurrency mining is more than the rewards and obtained income.
In addition, the more miners enter the field, the more difficult the Bitcoin network becomes. There is also a halving process every four years, which halves the miners’ rewards.
So in this situation, it is better for you to know the list of expenses and the amount of income of your desired cryptocurrencies.
In this regard, there are some sites that can predict the profitability of the activity for you according to the costs as well as the cryptocurrency you want.
But what factors determine the profitability of mining?
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Type of digital currency
The first determinant of profitability is the type of cryptocurrency you intend to mind. This is because the price of each digital currency is different and each has its own conditions. Your miner must also be in line with the same digital currency.
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Hash rate
Rate hash is a measure of the power of miner devices. In other words, a hash rate is the rate at which a miner speeds up exploring cryptocurrencies and receives a reward for adding blocks containing approved transactions to the blockchain. The higher the hash rate of your miner, the more successful you can be at cryptocurrencies mining.
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Cryptocurrencies mining Rewards
When a miner finds a solution, or in other words solves a block, a number of cryptocurrencies are generated and received as a reward. This number for bitcoins started in 2009 with 50 bitcoins. After 4 years, the first halving occurred and the bitcoin mining reward was halved (25 bitcoins). Now, the bonus of extracting each block has reached 6.25 bitcoins.
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Electricity cost
What is the cost of electricity consumed per kilowatt? Due to the high power consumption of minor devices, you must consider the price of electricity in order to calculate profitability.
The cost of electricity varies from country to country and is therefore an important factor in determining the profitability of cryptocurrency mining.
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Cryptocurrencies price
As you know, situation of cryptocurrencies market is fluctuating and its price cannot be accurately predicted. But what is clear is the impact of currency prices on the profitability of mining.