This is an opinion piece by Keaton Reckard, the community engineer at Hiveon, a mining ecosystem that includes an operating system for Bitcoin mining hardware.
Bitcoin mining refers to the process by which new bitcoins are brought into circulation. The mining process plays a crucial role in confirming new transactions and maintaining the Bitcoin blockchain ledger as an immutable record of transactions. Essentially, miners use ASIC hardware to solve complex computational problems, with the first to find the solution earning a bitcoin reward before the cycle restarts.
Although Bitcoin mining can be time-consuming, expensive, and produce inconsistent rewards depending on price volatility, it still appeals to investors who are drawn to the idea of earning Bitcoin as compensation for their efforts. For tech-savvy people and hobbyists, mining can be an intriguing opportunity for many different reasons.
Unlike traditional investment assets, such as standard bank deposits, real estate, or stocks, bitcoin can offer much higher returns. It is an environmentally conscious company that can avoid energy waste by using excess energy, such as natural gas that is burned during oil extraction, idle wind turbines, and excess energy from power plants. hydroelectric or nuclear.
Hiveon’s long-term predictions are that bitcoin’s value will increase after the halving (more on that below), so we’re hoarding coins now to multiply that money in the future. We also believe that in the future, an alternative global financial system based on blockchain technology like that of Bitcoin will be dominant, and network validators will be able to earn money by processing transactions.
But with the mining difficulty and hash rate continually reaching new heights And fees increasemany may wonder if the practice is still worth investing in.
Is Bitcoin Mining Worth It?
To determine if Bitcoin mining will be worth it for them, the equipment, potential miners should perform cost-benefit analyzes to determine their break-even points. Factors to consider include power costs, hardware costs and efficiency, time, and bitcoin market value. You can choose to consider the current price of BTC ($28,190 at the time of writing) or try to extrapolate where you think the price of BTC will be in the future.
Feeding costs
At the time of this writing, Bitcoin mining can be profitable for individuals who pay $0.10 or less per kilowatt hour (kWh) power.
Access to energy at this price can, however, vary considerably from region to region, with some regions offering significantly cheaper electricity than others. In terms of household electricity prices, several countries in the Middle East would make good homes for bitcoin miners, including Iran, Qatar, and Saudi Arabia. Meanwhile, prices in European countries like Denmark, Germany, and the United Kingdom would make bitcoin mining difficult.
Material costs
Acquiring ASIC equipment has become relatively easy, although the price of ASICs ranges from a few hundred dollars to five-figure sums. I recently found a used Antminer S19 for sale in the UK, listed for £2,700 (or around $3,343.38).
Market value
Bitcoin hit its highest price ever at $67,549 in November 2021. During this period, as the 2021 bull market peaked, bitcoin rewards for miners were understandably more valuable in fiat terms than they are at the time of this writing, with bitcoin price d around $27,600. However, with bitcoin transaction fees rising as a result of ongoing experimentation with block space, miners are taking advantage.
A profitability calculator can help potential miners assess the cost-benefit of mining Bitcoin. These calculators can 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 or not mining is worth it in 2023.
Mining is an essential aspect of Bitcoin’s decentralized transaction recording and validation process. Bitcoin mining serves an essential purpose by solving a problem called “double spending,” a problem inherent in any digital currency system. Double-spending is the digital equivalent of counterfeiting, which is controlled in the physical world by intermediaries like governments and banks.
For Bitcoin, this need to trust third parties has been superseded largely because of the computational effort put in by miners. Maintaining this freedom from intermediaries, in addition to collecting revenue, can be a motivation to contribute to the mining network for some.
Bitcoin Halving Cycles and What to Expect in 2024
THE next Bitcoin scheduled to halve in April 2024 will likely 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 as much bitcoin in their 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 issued.
The impact of the upcoming halving on the Bitcoin price remains uncertain. Some analysts predict the price will follow a similar pattern to previous halvings, rising after the event due to the limited supply of new coins. However, any price increase will ultimately depend on the demand for bitcoin and it should be noted that the market has matured considerably since the 2020 halving, and many well-established cryptocurrencies are now vying for users.
Anyone wondering if Bitcoin mining will be profitable in 2023 will probably also want to consider the impact of the upcoming Bitcoin halving in their calculation.
Difficult, but not impossible
Profitable bitcoin mining is a challenge, but it is not impossible. Bitcoin’s price is relatively low at the time of writing, but an Antminer S19 can operate profitably at a maximum energy cost of $0.10 per kWh. Although this excludes parts of the world like the UK, there are many places in the world where electricity is cheaper. Naturally, renewable energy sources (solar panels in particular) really help to improve profitability and as the world moves from oil and gas to renewable energy sources, it is hoped that the price of electricity will come down to new.
Access to cheap electricity, the rapidly changing nature of bitcoin, and upcoming events like the halving are just a few of the many factors to consider when asking, bitcoin mining is profitable?
This is a guest post by Keaton Reckard. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.