Is Bitcoin Mining Still Worth It? Understand in 5 points

pamella97 (21)in #cryptocurrency • 2 years ago

Activity is responsible for blockchain security and miners can be rewarded with Bitcoins.

Do you know what mining Bitcoins is and what it is for? The Bitcoin is a cryptocurrency decentralized. This means that, unlike the real or dollar, it is not regulated by any central bank or government agency. The monitoring and validation of the transactions of today's biggest virtual currency are done by people around the world: the miners .

Mining has recently become an easier and more profitable activity after China expelled miners from its territory. But is it worth it to start mining Bitcoin? Is it profitable? The InvestNews explains in 5 points which is mining Bitcoin , how it works and what it takes to make it.

1 – What is Bitcoin mining?

Bitcoin mining is the process of making new Bitcoins into circulation . In addition, it is also what keeps the blockchain secure , the network that records transactions with the cryptocurrency through encryption.

In the blockchain, 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 the transaction with the cryptocurrency happened the way it should.

2 – How much does a Bitcoin miner earn?

In exchange for the validation services, the miner is rewarded with a transaction fee , which varies from block to block, and is eligible to receive 6.25 Bitcoins (which, at the current price, is around R$170,700).

In other words, validating transactions does not automatically mean winning cryptocurrencies – to receive the reward, luck and speed are required . It works like this: after validating the block, the miner needs to be the first among all the miners to arrive at the solution of a numerical problem, in a process known as proof of work.

The Bitcoin reward is halved every 4 years, with the last change made in May 2020. In 2009, the year mining started, the reward was 50 Bitcoins.

3 – What is needed to mine Bitcoin?
As the activity is basically a competition of who solves a numerical sequence first, computers with high processing speed come out ahead , capable of making more attempts per second.

Also, cheap energy is desirable, as the machines must be turned on 24 hours a day. In a country with expensive energy, the gains from mining may not be enough to cover electricity costs.

Finally, cold climates help prevent machines from overheating without the additional expense of cooling equipment – it is not by chance that the biggest Bitcoin mining hubs are in the global north, in countries like Russia, the United States and, until recently, in China.

4- Difficulty in mining Bitcoin: the Hashrate

The probability of a miner being the first to discover the solution to the problem is measured by the mining power in relation to the total network.

To be competitive in the industry, you need to have a high hashrate (or “mining rate” in free translation), measured in terahashes per second (TH/s).

The higher the total network hashrate, the greater the security of the blockchain , as more people are working to keep it inviolable. At the same time, however, the mining process becomes more competitive .

As recently as June, the system saw a drastic drop in hashrate due to the ban on cryptocurrency mining in China , then the biggest hub of activity in the world, accounting for more than half of global Bitcoin production. The ban forced miners to get rid of machines or seek refuge in places like Texas or Kazakhstan.

With many miners still orphaned, the network's hashrate has dropped more than 50% of its peak in May. As a result, mining became less competitive and more profitable.

However, Ray Nasser, miner and cryptocurrency specialist at Inversa Publications, says that the event did not make mining a simple task, as the number of miners working on validation is still large. For the same reason, the blockchain has become insecure, he says.

5- Is it worth it to start mining Bitcoin now?

Ray is emphatic that it is not advantageous to start mining Bitcoin from home , especially with the high price of electricity. According to him, the costs – both with the import of machines specialized in mining (called rigs) and in electricity – do not compensate for the profitability of the activity. “seven or eight years ago maybe, but the market has changed a lot since then, and nowadays it's becoming an institutional thing”.

Is Bitcoin Mining Still Worth It? Understand in 5 points

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