This is an opinion editorial by Keaton Rickard, Community Engineer at Haven. A mining ecosystem that includes an operating system for bitcoin mining hardware.
Bitcoin mining refers to the process through which new bitcoins are put into circulation. The mining process plays an important role in verifying new transactions and maintaining the bitcoin blockchain ledger as an immutable record of transactions. In essence, miners use ASIC hardware to solve complex computational problems, with the first one to find the solution earning the bitcoin reward before the cycle restarts.
Although bitcoin mining can be time-consuming, expensive and can yield inconsistent rewards depending on price fluctuations, investors have been drawn to the idea of earning bitcoin as compensation for their efforts. Mining can be an interesting pursuit for tech-savvy individuals and hobbyists for a number of different reasons.
Unlike traditional investment assets, such as a standard bank deposit, real estate property or stocks, bitcoin can provide much higher returns. It is an eco-conscious business that can prevent energy waste by using excess energy, such as natural gas that is burned during oil extraction, idle wind turbines and surplus energy from hydroelectric or nuclear power plants.
Hiwon has long-term predictions that the value of bitcoin will skyrocket after the halving (more on that below), so we’re hoarding coins now to see that money multiply in the future. We also believe that, in the future, an alternative global financial system based on blockchain technology such as bitcoin will be dominant, and network validators will be able to make money from processing transactions.
But with the difficulty of mining and the hash rate constantly hitting new highs and fees rising, many may be wondering if the practice is still worth investing in.
Is mining bitcoin worth it?
To determine whether bitcoin mining will be “worth it” for their equipment, potential miners should perform a cost-benefit analysis to determine their break-even points. Factors to consider include electricity cost, hardware cost and efficiency, timing, and the market price of bitcoin. You can choose to factor in the current BTC price ($28,190 at the time of writing) or try to extrapolate to where you believe the BTC price will be in the future.
cost of electricity
At the time of this writing, bitcoin mining can be profitable for individuals who pay $0.10 or less per kilowatt hour (kWh) of electricity.
However, access to energy at this price can vary significantly across regions, with some regions offering significantly cheaper electricity than others. In terms of domestic electricity prices, several Middle Eastern countries would make good homes for bitcoin miners, including Iran, Qatar, and Saudi Arabia. Meanwhile, prices in European countries such as Denmark, Germany and the UK will make bitcoin mining a difficult proposition.
ASIC equipment has become relatively easy to obtain, although ASICs range in price from a few hundred dollars to five-digit amounts. I recently found a used Antminer S19 for sale in the UK, listed at £2,700 (or about $3,343.38).
Bitcoin achieved its highest price in November 2021 at $67,549. During this period, as the bull market reached its peak in 2021, with the price of bitcoin, bitcoin rewards to miners were inherently more valuable than at the time of this writing. Around $27,600. Although bitcoin transaction fees are rising as a result of ongoing experiments with block space, miners are benefiting.
The profitability calculator can help potential miners evaluate the cost-benefit ratio of bitcoin mining. These calculators may vary in complexity and may provide slightly different results.
What are the ‘other’ reasons for bitcoin mining?
But for some bitcoin miners, a simple cost-benefit analysis may not be the only factor in deciding whether mining is “worth it” in 2023.
Mining is an essential aspect of bitcoin’s decentralized transaction recording and verification process. Bitcoin mining serves an important purpose by solving a problem known as “double spending”, which is a problem inherent to any digital currency system. Double spending is the digital equivalent of counterfeiting, controlled in the physical world by intermediaries such as governments and banks.
For bitcoin, the need to trust third parties has largely been replaced by computational effort provided by miners. Freedom from intermediaries, in addition to collecting revenue, may be a motivation for some to contribute to the mining network.
Bitcoin Halving Cycle and What to Expect in 2024
The next expected bitcoin halving in April 2024 will have a significant impact on mining dynamics.
A bitcoin halving is an event in which the reward for mining new blocks is reduced by 50%, resulting in miners receiving half their bitcoins as a reward for solving a block. Scheduled to occur every 210,000 blocks, bitcoin halvings continue until the maximum supply of 21 million bitcoins has been released.
The effect of the next halving on the price of bitcoin remains uncertain. Some analysts predict that the price will follow a similar pattern to previous halvings, with the limited supply of new coins increasing post-event. However, any price increase will ultimately depend on demand for bitcoin and it should be noted that the market has matured significantly since 2020, with several well-established cryptocurrencies now competing for users.
Anyone considering whether bitcoin mining will be profitable in 2023 will want to factor the impact of the next bitcoin into their calculus as well.
difficult but not impossible
Profitable bitcoin mining is a challenge, but it is not impossible. The price of bitcoin is relatively low at the time of writing, yet an Antminer S19 can run profitably at a maximum electricity cost of $0.10 per kWh. While this rules out regions of the world such as the UK, there are many global locations where electricity is cheap. Naturally, renewable sources of energy (especially solar panels) really help improve profitability and as the world transitions from oil and gas to renewable sources of energy, it is expected that electricity The price will fall once again.
Access to cheap electricity, the fast-paced nature of bitcoin and upcoming events such as the halving are just a few of the many factors to consider when you ask, is bitcoin mining profitable?
This is a guest post by Keaton Rickard. The opinions expressed are solely his own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.
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