If you’ve ever wondered where do Bitcoins actually come from, and how can one make a profit from Bitcoin, today’s article will try to explain in layman’s terms “the secrets of the trade” so to speak, so keep on reading. To begin with, unlike fiat currencies, as in “our traditional money”, including the US dollar, the Euro and the Pound Sterling, Bitcoin is a completely decentralized currency, and instead of being printed at the whim of central banks, Bitcoin must be mined by regular folk over the internet out of the system. In this regard, Bitcoin was designed to be like gold, i.e. a scarce and limited resource, which is pretty hard to get. If you have encountered Bitcoin mining calculators, try to read this first.
Bitcoin Mining 101
A Bitcoin miner is basically anyone with a computer or a specially designed rig, that runs a Bitcoin mining-software on it. But why is it called Bitcoin mining? Well, as I already explained you, Bitcoin was designed to be pretty similar to gold, i.e. a scarce and finite natural resource, hence Bitcoins are hard to “get”, and their number is finite by design. There’s a fix amount of Bitcoin, set by its creator at 21 million, and until now, over 12 million of them were mined. Just like with gold-mining, to extract Bitcoin from “the interwebz” via your PC or specially designed gear, will require time, effort and an investment in both “hardware” (your mining rig of choice) and energy. As you know, all these things cost money. So, just like with real world mining, mining Bitcoin is not easy (at least not anymore). A Bitcoin miner is required to solve sophisticated math-problems, and in exchange for that, new Bitcoins are created and given to him. Another reason for which miners are rewarded with Bitcoin for their hard work is that their mining-rigs are also used to verify transactions, thus to secure the Bitcoin network. Each time a miner verifies a Bitcoin transaction, he gets a fee out of the respective transaction, i.e. Bitcoin mining pays twice: first when you generate new Bitcoin and second when you verify transactions. However, the more miners are joining the “game”, the difficulty of solving the math problems, also known as mining, increases. That’s how the Bitcoin network was designed by this illusive guy Satoshi, the inventor of Bitcoin: regardless of how many miners are “digging” for Bitcoin at one given time, the number of new Bitcoin that were mind each time is a constant, hence the difficulty issue arises with more and more miners joining in for the “kill”. Just to give you an example on how difficult Bitcoin mining has become over the years, back in 2009 when Bitcoin first appeared, you could have mined 200 Bitcoin using your home-computer in a year. Presently, to mine just one Bitcoin using your personal PC would take maybe 100 years or more. Real life entrepreneurs know that it doesn’t make sense to start a business without first analyzing its profitability, and the same can be argued for Bitcoin mining. Enter the Bitcoin Profitability Calculator (I am using caps for dramatic effect).
What is a Bitcoin Profitability Calculator
A Bitcoin profitability calculator is a software tool that will help you (via crunching numbers) to basically understand how long it would take for your Bitcoin-mining “business” to break a profit . Because after all is said and done, the name of the game is profit, there’s no other way around it. When it comes to Bitcoin mining profitability, there are a number of factors that come into play. Even if Bitcoin mining is a very lucrative business in theory, it’s also highly competitive. However, it is still possible to run a profitable Bitcoin mining-endeavor (it’s called a farm in the inner-circle) provided you manage to balance the many variables that will determine whether your Bitcoin mining business will be profitable. Keep reading as I’ll break these factors one by one.
As with almost any other business, to mine Bitcoin you’ll have to buy gear, i.e. mining hardware, and just like with any other real-life business, quality gear will cost you dearly. The upfront cost for a high quality Bitcoin mining rig is usually the heftiest bill one would have to pay for any new Bitcoin mining farm. When buying Bitcoin mining rigs, pay attention to these essential parameters: Th/s (terahashes per second) and W/GH (gigahashes per second). These metrics measure hash rate, and the higher these numbers are, the more powerful the Bitcoin mining rig is.
Together with hash power, you’ll have to contemplate your hardware efficiency, as Bitcoin mining rigs will eat up a huge amount of electricity in the process. To break a profit, you’ll have to choose smart, i.e. a top-notch mining rig that’s also power-efficient. A mining rig’s efficiency is determined by a metric called W/GH. The lower the W/GH, the more profitable your mining operation will be, provided the hash-power is kosher too.
The electricity bill can make or break your Bitcoin mining business. The lower the electricity price, the more profitable Bitcoin mining is. Keep in mind that if you start your Bitcoin mining farm in a state/country where electricity is dirt cheap (like China or Venezuela), you’ll have a big advantage over others. The same goes for colder climates, as you may not require cooling equipment (which costs money and consumes energy) for your Bitcoin mining gear.
Bitcoin Price, Block Reward, Network Hash Power and Bitcoin Mining Difficulty
All these factors are essential when it comes to calculating your chances of success via a Bitcoin Profitability Calculator. Basically, using such a device would require you to input the price of Bitcoin (which is highly volatile), electricity costs and your hardware information. When all is said and done, using a Bitcoin Profitability Calculator will provide you with an educated guess ( it’s called a guess because you cannot predict Bitcoin price for example) on your chances to running a potentially lucrative Bitcoin mining business.
Keep in mind that Bitcoin mining difficulty and price are changing every day, and these two factors alone would have a dramatic effect on one’s expected income, i.e. you should regard these profitability calculators as a mere guides, not as “laws set in stone. And if you’re asking if Bitcoin mining is still profitable “in the current year”, well, the answer depends on how much are you willing to spend. You can try use some online calculator to see if it works for you. try 99Bitcoins calculator, or Cryptorival