However, if you ask the average person, it’s unlikely that they can tell you much about the crypto world, much less explain in detail what Bitcoin is.
That said, you may have a couple questions in mind: Is your lack of Bitcoin knowledge costing you money?
And is Bitcoin mining even profitable?
Despite being the leading cryptocurrency in the world, Bitcoin’s concept still eludes most people.
On the surface, the idea of a decentralized digital coin is a complex one that only the most tech savvy should be able to understand.
But when you break it down, it becomes a simple concept anyone can learn.
This means you have an opportunity to cash in on the gold — currently worth an ever-fluctuating $9,500 per Bitcoin — that others are leaving behind.
Keep reading to learn what Bitcoin mining is, how it works, and whether it can help you make a real profit.
What Is Bitcoin Mining?
When you’re mining for Bitcoin (also known as BTC), you’re basically setting up a computer that solves digital puzzles for you.
Every time you solve one of these puzzles, Bitcoin will pay you 12.5 Bitcoins that are worth huge amounts of money.
So what’s the theory behind all this mining that has Bitcoin paying out thousands of U.S. dollars per block?
Every time you create a block, you do two things to benefit the currency.
First, you help make transactions irreversible.
Every time one of these puzzles (called a “hash”) is solved, you have grouped together pending Bitcoin transactions into a confirmed “block.”
This helps verify the transaction and build the “blockchain,” which is a fully secure record of transaction data.
This fully locks the transaction in time, so scammers can’t take back their money from the recipient.
In essence, you’re helping secure the flow of the cryptocurrency by taking the place of banks, so Bitcoin remains decentralized.
And second, you are bringing new Bitcoins into existence.
The maximum amount of Bitcoins that can exist is 21 million (though 4 million of these will likely be lost forever).
This allows Bitcoin supply to remain low enough for its worth to remain high.
Currently, there are 3 million left that must be mined.
Once all Bitcoins are created, experts theorize that the scarcity will drive BTC prices up far above traditional currencies for good.
The best part of Bitcoin mining is, you don’t have to be a programmer to earn — all you need are the right materials and software — though some tech skills are useful when setting up.
Bitcoin encourages all people to join by not only providing the 12.5 BTC block reward, but also adding on any transaction fees associated with the transactions you sorted out.
You will earn fractions of Bitcoins as you go.
Now is a better time to mine than ever.
Due to the cap on the amount of Bitcoins that can exist, the total value of the block reward will divide in half to 6.25 BTC in 2020, and every four years after that.
How Does Bitcoin Mining Work?
Bitcoin mining comes with steep startup costs.
This is because your average PC is far from enough, especially to compete with large-scale Bitcoin miners.
A single, basic mining rig costs thousands of dollars, and that’s only the initial investment.
One Bitcoin can cost up to $6,000 in power costs to earn, depending on your electricity rates.
This is because you’ll want Bitcoin-specific mining hardware (most commonly, ASIC or GPU miners) with strong processing power and hashrates, a measure that determines how many hashes you can solve per day.
The faster your hardware is hashing and the more you spend on cooling it down, the higher your electricity costs.
Some digital expenses include purchases of your Bitcoin wallet, so you can store and use your Bitcoin and your Bitcoin mining software.
However, once you’ve gathered all your materials, you can start to mine thousands of dollars in Bitcoin without any thought.
This is why many individuals have come up with solutions to make this extremely passive income opportunity worth it.
Bitcoin Mining Pools
Mining pools are groups of Bitcoin miners that you can join to get guaranteed, shared block rewards.
While you do have to pay a pool fee, you will reliably earn based on the hash rate you bring to the table — the higher your hash rate, the more you earn.
This allows you to ensure you receive a consistent return on investment and reduces any unpredictability.
Chinese organizations currently run the biggest mining pools, largely thanks to an enormous amount of “mining farms” set up in the country.
However, the largest, BTC.com, is a public pool that anyone can join, regardless of your location.
Before joining a Bitcoin mining pool, we recommend doing some research.
Mining pool owners with bad intentions have the power to raise pool fees as desired to earn more money and can even steal higher shares of block rewards by providing limited transparency.
In this sense, mining pools can centralize the power on pool owners — as ironic as it is when dealing with decentralized coin.
Cloud mining is another major solution that is reducing startup costs — and allowing some miners to profit even further.
The term refers to Bitcoin miners renting other miners’ rigs for dedicated periods of time.
By cloud mining, you don’t need to worry about your power consumption.
You’re also able to mine Bitcoin on a rig of your choice without spending $10,000 in hardware costs for top-tier technology.
Genesis Mining is one of the most popular cloud mining companies around, and a starter pack costs just over $150 to test the waters for 18 months.
Is Bitcoin Mining Profitable?
If you know anything about Bitcoin, you likely know how volatile the price is.
Most financial experts consider the cryptocurrencies incredibly risky — even if they’re proponents.
Because of this, it’s easy to wonder if Bitcoin mining is profitable and if it’s worth the investment at all.
While we can’t speak for the future stability of Bitcoin prices, we can say that mining profitability is still fairly high right now.
While mining difficulty — which Bitcoin increases as hash rates increase — is at its max, this ensures that rewards never decrease unexpectedly.
Plus, as we mentioned before, plenty of solutions exist to break into mining, even if you’re joining late in the game.
To accurately determine your personal mining profit potential, many Bitcoin miners choose to use profitability calculators like this one to compare their expected earnings to their expenses and hash rate.
Because of the headache that large investments can cause, we recommend using these tools to make predictions and consider whether the profit is worth it for you before making any purchases.
If the investment is worth it, you may make easy money fairly soon.
Frequently Asked Questions
Understanding Bitcoin mining opens up not only a new avenue to earn, but also an entirely new currency to earn with.
To help you decide whether Bitcoin mining is profitable enough for your investment, we’ve answered a few common questions:
1. What can I do with the Bitcoins I earn?
There are three primary things that you can do with your bitcoin:
- Save it: Miners who truly believe in Bitcoin as an effective currency will choose to invest it for the future when all Bitcoins are in existence and the currency becomes widely accepted. This is how Bitcoin millionaires have come to be.
- Spend it: More and more businesses are accepting Bitcoin as a form of payment. Two of the biggest are Overstock.com and Microsoft.
- Sell it: Some miners wait until the relative cost of Bitcoins spikes then cash out in their country’s traditional currency.
2. How many Bitcoins can I expect to earn?
There’s no exact average for Bitcoin mining, since everyone’s hardware and mining times are different.
However, the average amount of Bitcoins mined per day across all miners is 1,800.
This means you’ll likely be mining a small fraction every day (around 0.001 to 0.004), which still does give you a decent profit, depending on your costs and current BTC prices.
3. Are there alternatives to Bitcoin that I can mine?
Bitcoin already has the most players in the game, compared to other cryptocurrencies, so many miners are gravitating elsewhere.
These other cryptocurrencies are called “altcoins.”
While the worth of altcoins don’t spike as high as Bitcoin, popular options like Ethereum and Litecoin provide good returns and have inspired their own mining operations.
As you would before joining a mining pool, make sure to research the altcoins you invest in.
Cryptocurrency mining can be a big investment that you can easily lose.
Small-time coins may give you the most opportunities to become an altcoin millionaire, but they’ll also lead to the greatest risk.
Other unpopular altcoins may be scams, since the world of cryptocurrencies isn’t highly regulated or well understood by most.
Start Mining for the Modern Gold
As this article may have shown you, the ever-elusive Bitcoin is actually one of the easiest ways to earn.
It’s all about how much you’re willing to spend on an initial investment and how much you’re willing to deal with the volatility of Bitcoin.
We hope this article has helped you learn everything you need to know about Bitcoin mining, and inspired you to get started or consider altcoins.
Just looking for an easy earning opportunity that you can pursue in one day?
Check out this article for a handful of ideas with no startup costs.