Is bitcoin mining profitable in 2021? Find out how you can be a successful miner.
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Who doesn’t want an easy way to earn money from the comfort of their homes? Bitcoin mining is one such venture, but to be a miner, you have to solve extremely complicated mathematical problems that verify and validate Bitcoin transactions.
The Bitcoin process is decentralized; that is, it is not regulated by any intermediaries like banks and the government. It is similar to a ledger that tracks and records transactions among users. The miners process these transactions and receive payment in Bitcoins.
Bitcoins are digital currencies that use a peer-to-peer computer network, a group of individuals, and most importantly, ASIC (application-specific integrated circuit) chip users. These ASICs are expensive and consume huge amounts of electricity. Due to this, Bitcoin miners, even if they are successful, end up paying more on electricity bills. With the advent of 2021, changes in technology and the building up of professional mine centers with extensive computing capacity, not to mention the decreasing price of the Bitcoin itself, raises the question of whether Bitcoin mining is still profitable.
Back in 2009, miners would carry out Bitcoin mining on their home computer systems. They would compete with other individuals owning personal computers to solve problems quickly and earn as much as possible.
With the emergence of ASICs, mining on personal computers was rendered inefficient. That’s because these new machines use high-powered microprocessors to determine and solve problems much faster than normal personal devices.
One such ASIC is the LT5 Litecoin Miner that has a hashing power of 2.45Gh/s at 3100W power consumption. It is known to be one of the profitable ASIC miners that also mines two of the top coins: LTC and Doge.
As ASICs entered the business, competition became fierce and challenging. Even profits were decreasing with time as individual miners had to buy high-powered equipment and pay costly energy bills to keep up with the game.
How Does Bitcoin Mining Work?
When you enter the cryptocurrency business as a miner, you need to have the technical skills and abilities, trading techniques, and high-powered computer technology to become successful.
Below are the definitions of some of the essential terms that are used in the Bitcoin mining process:
Hashrate is the measurement of computational power. The higher the power, the more solutions and eventually Bitcoins a miner are likely to receive.
However, with more miners joining the game, it also becomes more difficult to solve a puzzle. But if you have a high-powered machine, you’ll maintain the upper hand.
When a complicated puzzle is solved, a block of bitcoin currency is said to be successfully mined. When that happens, new bitcoins are created and the miners receive a reward for that one block.
This block reward used to be 50 Bitcoins, awarded to miners who solved the math problems first, legitimizing the currency. This reward is halved every four years or every 210,000 blocks. The current reward is 6.25 bitcoins per block and is expected to reach 0 by the year 2140. Since mid-May of 2021, Bitcoin hit the highest level, and the market value rose to 4.6 percent.
It is much like a ledger that is decentralized and records all approved and successful transactions called blocks and joins them together to form a blockchain. That is, when one block is successfully mined, it joins all the other blocks in the network to form a chain.
When Bitcoin users transfer the currency, the transaction is processed by a miner. This transaction fee has to be paid by the users. The miner verifies the process, and since it is decentralized, they get to keep a share of the transaction fees.
Private and Public Keys
When users transfer the currency to one another from their Bitcoin wallet, a confirmation is required from the owner that would authorize the transaction. The private and public keys work together to allow the user to digitally sign the transfer as proof of authorization.
These are digital wallets that store Bitcoins. They are of two types:
- Hot wallet: When you receive digital currency, it is stored here and can only be accessed or downloaded from the browser or a smartphone app. That is, an Internet connection is required.
- Cold Wallet: You can download the bitcoins and store them in this encrypted portable device and carry it around with you.
How Do I Get Bitcoin?
- Cryptocurrency Exchanges – In the US, Coinbase is the largest cryptocurrency exchange center that trades more than 30 cryptocurrencies. There are also several exchange centers available all over the world.
- Bitcoin ATMs – You can collect Bitcoins from ATMs near you that have been specially made for cryptocurrency exchanges.
- Purchase from Bitcoin users – Also known as peer-to-peer purchase, you can buy it from other Bitcoin users or owners.
- Bitcoin Mining – you can become a miner to earn more; however, it requires extensive technical knowledge and expensive computer systems, which may not be a viable option for some.
There are a few variables that affect profitability in the cryptocurrency business. First and foremost, you need to have extensive technical expertise along with a high-powered supercomputer. The latter is the troubling part of the process. High-powered computers are expensive, and running them 24/7 is even costlier due to high energy bills. Electricity bills differ from area to area, so before entering the venture, make sure you understand the cost of the investment.
Another variable is the shifting price of Bitcoin itself. Even if you have low-cost computers and cheap electricity, the fluctuating prices of Bitcoins may put you in a tight spot. So you need to mentally prepare yourself on that account. If you can take care of these variables and plan ahead of time, you can reap your rewards and become a pro!