Bitcoin has proven to be one of the most profitable investments in the previous ten years. Since it began trading in July of 2010, it has returned almost 9,000,000 percent. The possibility of owning some Bitcoin and being a part of the digital revolution has piqued everyone’s interest.
What is Bitcoin Mining?
Simply explained, Bitcoin mining is the process of creating new Bitcoins from previously encrypted blocks. The blocks are encrypted with SHA-256, which miners compete to crack. The block reward is given to the first miner that provides a solution. At the moment, the payout each block is around 6.25 BTC.
It wasn’t always like this. The block reward in the first four years of BTC mining was 50 BTC. Bitcoin, which was written in the C++ programming language, was designed to have its block reward halved every four years. As a result, BTC suffered a halving event after four years (in 2012), reducing the block reward from 50 BTC to 25 BTC. BTC has experienced three block reward halvings since its start. The most recent halving took place in May 2020, when the BTC block reward was reduced from 12.5 to 6.25 BTC.
So How Does Bitcoin Mining Occur?
Bitcoin mining can be done in one of two ways: solo or with the help of a mining pool.
In this type of BTC mining, a single entity (person or organization) bears the whole cost of purchasing mining rigs as well as the associated electricity bills. Governments and billion-dollar enterprises, such as investment funds, banks, and private companies, are the most common examples of such institutions. It will occasionally be billionaires like Elon Musk.
Cloud/Corporate Mining (Mining through a pool)
Tiny-scale miners, i.e., miners who cannot afford the electricity bills and/or the cost of mining rigs, combine their small computational powers to form one large pool in this type of mining. When a pool of this type successfully mines a block, the rewards are evenly distributed among the pool members based on the amount of computational power (i.e. hashing power) contributed.
F2Pool, Antpool, and Poolin are examples of such mining pools. These are also the world’s largest Bitcoin mining pools. Because buying BTC on exchanges is the most convenient option, we’ll take a step-by-step approach to mining BTC.
So How Do You Actually Mine Bitcoin?
Step 1: Buy Bitcoin Mining Equipment
As previously stated, Bitcoin miners primarily use GPUs or ASICs. In the cryptocurrency world, they’re known as mining rigs. Kryptex, one of the leading mining GPUs vendors, has the greatest prices. They will also assist you in selecting the ideal mining rig depending on a variety of variables. Profitability, energy usage, hash power, and, of course, pricing are all factors to consider. The number of GPUs required is determined by your financial resources.
Step 2: Download Bitcoin Mining Software
Mining rigs are useless without an operating system, just as a computer is without one. There are various mining software programs available on the internet that will complete the job. The finest mining software in 2021, according to The Balance, is CGMiner, BFGMiner, Easyminer, and Awesome Miner, in ascending order of excellence.
We must now divide the stages into two groups: those who want to mine independently and those who want to join a mining pool.
For Individual Mining:
Step 3: Fire Up your Mining Rig and Begin Mining
You can join to the blockchain network using the mining program. After then, the GPUs take over and offer the necessary processing power.
NB: Individual mining can be quite disadvantageous because you’re up against mining pools with millions of hashing power (H/s) together.
Step 3: Find and join a good Bitcoin mining pool if you’re using mining pools.
Hundreds, if not thousands, of miners participate in BTC mining pools. Antpool, the largest Bitcoin mining pool, with a total of 24.63 EH/s. This is a huge sum of money. When you join one of these pools, you will be paid proportionally to the amount of H/s your mining equipment contributes. In this scenario, the pool operator, Antpool, charges a percentage fee for their services, resulting in a return that is significantly less than intended. The regularity and frequency of obtaining block rewards are two advantages of using mining pools.
4th Step: Begin Mining
You’re now ready to begin mining once you’ve been familiar with the pool you’ve picked. All that is required is for the mining rig to be connected to a power source, connected to the network, and mining to commence. From this point on, the mining software you use will take care of everything.
NB: You must have a Bitcoin wallet in order to get Bitcoin block rewards.
Here are the steps to quickly establish a Bitcoin wallet if you don’t already have one.
Step 1: Go to the Blockchain website and create a wallet account.
Step 2: Enter your information (email and password) and then click “Create Wallet.”
Step 3: Go to your inbox and confirm your email address.
Step four: Congratulate yourself! You now have a Bitcoin wallet in your possession.
What are Bitcoin Mining’s Limitations and Benefits?
Bitcoin mining is quite profitable, but it does have some drawbacks.
Bitcoin’s excessive electricity use is the key issue. The majority of electricity is produced by burning fossil fuels. According to the World Nuclear Association (WNA), fossil fuels account for 64.5 percent of global electricity consumption. This is due to the fact that they are inexpensive to construct and provide electricity for lengthy periods of time.
Environmentalists have expressed worry about the environmental impact of using fossil fuels. Despite the financial benefits of fossil fuel-based power, the WNA claims that it emits enormous volumes of carbon dioxide (CO2), which has a harmful impact on the climate.
Bitcoin mining is both simple and difficult. Mining rigs are very expensive, in addition to consuming a lot of electricity. The market’s supply of these equipment has been squeezed due to high demand. As a result, manufacturers took advantage of the situation to raise the pricing of these mining machines. Tom’s Rigs examines the varied mining performances, daily earnings, and pricing of several BTC mining hardware, which range from $290 to $2,600.
In the end, the less expensive the miner, the less profitable it is.
The biggest benefit of mining BTC is the substantial monetary compensation you will receive once you have the valuable digital currency in your wallet. 1 bitcoin currently costs $46,087, and many analysts predict a $100,000 bitcoin by the end of 2021, which is only three months away. Mining Bitcoin is lucrative as of September 14, 2021. The price of BTC rises in tandem with the difficulty of mining, incentivizing miners to keep mining.
Satoshi designed Bitcoin with only 33 halvings in mind when he created it. However, mining BTC is expected to become unprofitable by 2040. The payout each block will be insufficient, and the BTC price will be too low to encourage miners to keep mining.
As a result, the block rewards are the most significant, and possibly the only, benefit of BTC mining.
So, How Much Can You Earn from BTC mining?
To begin with, it is true that mining Bitcoin is profitable. The bottom line is this. While lone Bitcoin miners may find it difficult to make a living, individuals who join a Bitcoin mining pool are more likely to profit handsomely.
BTC mining profitability is determined by a number of factors, including low-cost electricity, efficient hardware, dependable mining pools, and the amount of fees charged when selling BTC. We’ll do a broad calculation to estimate BTC mining profitability using a Bitcoin Profitability Calculator for the sake of having a figure to go with.
AvalonMiner 1246, a high-end ASIC miner, can have a hash power of 90.0 TH/s. The miner uses 3420 Watts each day on average. Given the average cost of electricity in the United States of $0.1042 per kilowatt-hour, one ASIC miner would generate a daily profit of $6.61. Mr Naples, if you have 46 of these, you will make $304.06 every day.
That was a broad calculation based on the AvalonMiner 1246’s general parameters. The figures will vary depending on the miner you buy, the cost of electricity in your state or nation, and the current BTC price at the time of mining.
The State of Bitcoin’s Adoption and Its Impact on BTC Mining
BTC has gained a lot of backing from major corporations such as Tesla throughout the year of 2021. Governments have also begun to take an interest in Bitcoin. El Salvador recently made Bitcoin legal tender in their economy. As a result, local retailers around the country can now take Bitcoin as payment.
Ukraine began looking into the potential of making BTC legal tender a week later. This is all happening while MicroStrategy makes a new buy of 5,050 BTC valued $242 million.
Bulgaria also has around 215,000 bitcoins, according to Ecoinometrics. El Salvador and Ukraine are close behind. With the current state of affairs, Bulgaria may be the next country to make Bitcoin official tender.
MicroStrategy has a Bitcoin reserve of over 100,000 BTC. The most recent purchase increased the company’s BTC holdings to an all-time high of 114 000 BTC, worth over $3.2 billion.
How Does Bitcoin Adoption Affect Bitcoin Mining?
With such a high rate of acceptance in just one year, it is safe to assume that Bitcoin mining will be more profitable than ever. BTC demand soared in less than a week after over 6 million Salvadorans were exposed to it. When BTC is officially legalized in Ukraine, demand will soar to new heights.
The rate of BTC production, on the other hand, has remained unchanged. Only 900 new Bitcoins are added to the market every day. Since the halving in May 2020, this has been the number. Because demand far outnumbers supply, the price of BTC must climb to keep up.
Bitcoin adoption is clearly beneficial to Bitcoin mining. The increased fees will benefit miners due to the increased volume of transactions on the network. Simultaneously, they will be able to sell BTC at absurdly high prices.
In the next five years, analysts at Wallet Investor believe that BTC will be worth $194,150. Given the present rate of adoption, however, this forecast is modest. Bolder forecasts, like as that of Blockchain Leaks’ Chico Crypto, see BTC at $100,000 by the end of 2021.