Have you ever wondered why millions of people around the world are associated with the process of Bitcoin mining? Well, there are some valid reasons behind the fact. Mining is crucial because it helps Bitcoin to keep the payment network safe and secure for investors and traders.
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Since the Bitcoin blockchain is developed on peer-to-peer network technology, every individual miner is using his/her computer and expertise to support the network. One of the basic tasks for miners is to keep the network secure by solving problems and adding blocks to the network. Whether you are a solo miner or a part of a pool, you will receive rewards for adding a block to the network.
Now the question is that is Bitcoin mining profitable? As a miner, you can get a reward for solving complex problems and adding a block to the network and a block is equivalent to 6.25 Bitcoins. However, making profits out of Bitcoin mining is not as simple as it looks from the outside, as some factors can impact the profitability of Bitcoin mining.
6 Facts That Can Influence Bitcoin Mining Profits
In this section of the article, we are going to highlight 6 factors that can influence your profit from Bitcoin mining. Let’s check them out-
To earn rewards by adding a block to the network, miners use expensive components. Application-specific integrated circuits or ASICs are one of the key components modern-day Bitcoin miners need for successful mining.
High Operating Costs
Apart from expensive computer hardware, high power cost is going to be a big factor that can influence the profitability of your Bitcoin mining. Your electricity supply provider will charge you per kilowatt-hour/kWh. This means, your profitability out of Bitcoin mining can go around USD 0.03-0.08 per kWh.
Bitcoin is the highest power consumer in the world of cryptocurrencies. The digital currency eats up 707 kWh of energy for a transaction. Bitcoin consumes 11 times more energy consumed by Ethereum. So, as a miner, you must focus on operating costs and check power consumption to ensure profitability.
Joining Mining Pools
Constantly rising difficulty in the process of mining has forced many miners to join mining pools. It is a joint effort, where a group of miners come together and use their mining machines to mine Bitcoin collectively. Once the pool of miners solves problems and adds blocks to the network successfully, profits are distributed among all involved parties.
Here the problem is that when you become a part of a pool, you will get a portion of the rewards and your share will depend on your contribution to the process of successful mining.
The mining difficulty rate is another key factor that can influence your Bitcoin mining profitability. An automatic system monitors and controls the mining difficulty rate for Bitcoin. The system is in place to determine whether new bitcoin blocks are introduced every 10 minutes.
The difficulty rate signifies how tough it is to find a hash or mine a Bitcoin. If the rate of difficulty is high, the chances of earning Bitcoins are less.
Bitcoin Price Fluctuation
Uncertainty, volatility, and market fluctuation are some of the major characteristics of virtual currencies and they can impact your profitability. If you are a Bitcoin miner, then a sudden fall in the value of Bitcoin can cost you a lot. Since you are spending your hard-earned real-life money to mine Bitcoin, price fluctuation can impact your profitability.
For example, if the value of a Bitcoin is USD 10,000, you may find it easier to bear the operation cost. But what if you find the value of a Bitcoin suddenly plunged to USD 5,000? So, we can say that the price fluctuation can hit your Bitcoin mining profitability hard.
Bitcoin mining is an expensive and risky process to work on and if you are a beginner, you must gain in-depth knowledge about crypto mining before making any decision. Even though Bitcoin is the top-ranked cryptocurrency in the world, the profitability of Bitcoin mining depends on many factors. To learn more about Bitcoin and earning opportunities associated with it, you can visit websites like P/E Ratio.