The Basics for Calculating Bitcoin Mining Profitability

0
3103
bitcoin mining cover
Want create site? Find Free WordPress Themes and plugins.

Ever since the invention of blockchain, cryptocurrency has been taking off both in profitability and popularity.

While new types of cryptocurrency pop up regularly now, Bitcoin stocks and Ethereum stocks have garnered the most recognition. Right now, dealing with blockchain stocks can seem like the wild wild west with little to no regulation to safely predict what kind of profit you stand to gain when you mine or buy blockchain. Thankfully by understanding a few basics of how cryptocurrency works as well as keeping up with blockchain news, you can determine how profitable Bitcoin mining may be for you.

Basics about how a blockchain operates

In order to understand how cryptocurrency works, you must first grasp the basics of how blockchain operates. Blockchain allows decentralized cryptocurrency like Bitcoin and Etherium to exist because of its inherent security. Bitcoin news gets a lot of attention because it is the first cryptocurrency to be created and remains the most used globally. Etherium news has been gaining traction lately, however, as Etherium stocks grow in value. So what is blockchain and how does it work?

Blockchain is a growing list of records called blocks which are linked and secured together in a chain using cryptography. Each block contains a hash pointer as a link to a previous block, a timestamp and transaction data. This formulation makes blockchain secure by design as it is inherently resistant to modification of its data. While blockchain can be used for a variety of highly secure functions such as transmitting medical records, blockchain’s most popular use is for cryptocurrency.

You can make money off the growing popularity of cryptocurrency two ways:

  1. buy blockchain 
  2. blockchain mining

For the more passive investor, simply go online and buy Bitcoin stocks and/or Ethereum stocks and keep an eye on Bitcoin news and Ethereum news respectively.

For those who want to really take an active role in the potential profitability of blockchain, mining is the way to go. In order to decide if mining Bitcoin or other cryptocurrency will be profitable, let’s go over how mining works.

How Does Cryptocurrency Mining Work?

Miners are users who use computing power to verify and secure Bitcoin or other cryptocurrency transactions and as compensation for this work receive some of the cryptocurrency mined.

Mining connects the blockchain and verifies transactions by verifying new blocks in the blockchain thus securing the network and preventing errors like double spending.

Miners put blocks through a process which applies a complex math formula, turns the numbers into a shorter, random-looking sequence of numbers called the blockchain’s hash. Each hash is unique and helps form the hashrate which is the amount of numbers a processor can come up with every second and is needed to solve a block.

Rising total hashrate can cut into your profits because of its impact on blocktime.

Blocktime is the time it takes for a blockchain transaction to be recorded and the hash created on a blockchain. It is a huge factor in determining Bitcoin profitability. Faster blocktime makes for more profitable mining of cryptocurrency. The more miners there are on a network, the lower your chances of mining a block and slower your blocktime, thus reducing the profitability. The volatility of blocktimes and hashrates makes it important for you to keep up with Bitcoin news or Etherium news (or whichever cryptocurrency you’re mining) so that you can gauge its profitability.

Now that you understand how cryptocurrency works and the vital role of blockchain, we can look at the specific factors which will roughly determine if Bitcoin mining is profitable for you.

We will discuss profitability in terms of a Return on Investment, or ROI. Your ROI date is the date by which the money you have spent on mining (the investment) will be paid for by your cryptocurrency earnings (the return). Once you have gotten past the ROI date, you can determine your gross profit by subtracting your reoccurring monthly costs from the amount of Bitcoin (or other cryptocurrency) mined each month.

There are several costs that factor into your ROI date and monthly costs when mining bitcoin.

First is the cost of your rig, or the processor used to mine cryptocurrency.

If you are mining Bitcoin, this will be an ASIC Miner but other processing systems can be used depending on the form of cryptocurrency you are mining. Your goal is to mine Bitcoin at its current value as efficiently as possible. This means buying up to date equipment is vital since newer generation ASIC minus use less power per kWh. However, you can potentially reduce your overall investment cost if you get such a tremendous deal on an older model that it offsets the cost differential.

Another one-time cost that determines your ROI date is any equipment or gear used in conjunction with your rig such as shelving, cables, racks, etc..

While each of these items cost significantly less than an ASIC processor, they do all add up and unlike the processor, they have no real resale value.

After your rig, the second biggest cost, and one which is reoccurring, is the cost of electricity.

This website will help you calculate your power bill based on where you live and what kind of processor you’re using. Other reoccurring costs include internet access fees and money spent to lease a data center or building for running your processors. Because mining rigs create a lot of heat and noise, they may require you to rent a dedicated space to use them if you lack a well ventilated garage or basement.

The last factor for calculating Bitcoin or other cryptocurrency mining profitability is the value of the cryptocurrency over the life of the miner.

All markets are known for ups and downs, but Bitcoin stocks and Etherium stocks tend to be especially volatile. This is why keeping up with Bitcoin news and/or Etherium news is vital to determining the value of your investment in blockchain stocks.

Did you find apk for android? You can find new Free Android Games and apps.

LEAVE A REPLY

Please enter your comment!
Please enter your name here