When people first become interested in Bitcoin, one of the first ideas they have about it is how they can start making money from it. And the low-hanging fruit is often mining equipment.
There was once a time where Bitcoin mining was an incredibly profitable endeavour. In Bitcoin’s infancy, you could mine with any old computer, your mining program humming away in the background, cranking out hundreds of Bitcoins a day.
But is Bitcoin mining profitable in 2014? Will it be profitable in 2015 and beyond?
The answer has to do with a few different factors.
Difficulty
Bitcoins are created at a set rate. And the mining reward is designed in a winner-take-all format. So if you’re mining with a clunky old laptop, you’ll be hard pressed to make any profit.
When larger mining rigs first started popping up, they were profitable for a time, but as more miners hit the market, the difficulty began to increase at a much higher rate than before.
The difficulty is the amount of computing power you need in order to complete a block to receive the mining reward. And the higher the difficulty, the harder it is to get that reward.
In fact, even those with some of the largest Bitcoin mining rigs have trouble making a profit on their own, which is why they end up adding their mining power to a mining pool like GHash.IO.
But that’s a double-edged sword, since you’ll have to share your mining rewards with the other members of the pool.
In order to generate enough bitcoins through mining alone, you’ll need a big mining rig. And those in themselves are expensive. But there’s more to it than just buying the rig.
Electricity
Of course, a Bitcoin mining rig uses electricity. If you happen to live in a place where you don’t have to pay for electricity, you’re more fortunate than many. But for most of us, electricity is a factor to consider.
The amount of electricity used by Bitcoin mining rigs can be significant. It’s enough to heat up some miners’ homes during winter, and often requires cooling as well which drinks up even more electricity.
Any calculations you do should consider how much you have to pay in electricity.
Shipping Date
When you order a Bitcoin miner, chances are it won’t ship immediately.
In fact, many Bitcoin mining companies are notorious for taking a long period of time to ship their products. Some have even been accused of taking pre-order money to build miners, use them for a few months, and then ship them when they’ve squeezed more profit out of them. But that’s a story for another article.
Whether it’s a result of connivance or because it just takes a while to build these things, you need to be wary of the shipping date when ordering a mining rig.
How To Calculate Bitcoin Mining Profitability
Let’s take the hardware Butterfly Labs is selling on its site, The Monarch.
It boasts a 700 GH/s, a respectable rate. It uses 490 watts of power, for $2,196.
Taking those numbers, we can calculate roughly how long it will take you to break even from that $2196 investment, using this handy Bitcoin mining profitability calculator.
Running those numbers, we discover that, based on the price of energy at ten cents per kWh (standard price here in Toronto. Your mileage may vary), given the current difficulty of Bitcoin mining, and the current price, you will never see a return on your investment.
In fact, after a year of doing this, you’ll actually be losing around $0.50 a day due to the cost of mining and the increase in difficulty!
Is Bitcoin Mining Hopeless?
These numbers certainly do make things look dire. There are, though, a few assumptions we made when doing these calculations.
First is the assumption that the price of Bitcoin will stay at its current rate. Bitcoin has experienced a rollercoaster ride in price fluctuation since its inception, and there’s no reason to believe it will stop any time soon.
Even if Bitcoin increases in price to $1000 USD though, there would still be no way to make a profit with Butterfly’s Monarch while paying for electricity. A price of $1500 would see a return in 251 days, but that’s quite the gamble.
Another variable is the difficulty. Historically, Bitcoin mining difficulty has increased, but as it gets so astronomically high that the miners can’t possibly make a profit, they may just give up. This would bring the difficulty back down, leaving room for someone else to get into the market.
Overall though, Bitcoin mining is a tough area to get into. If you’re looking for a way to make a profit in the Bitcoin world, Bitcoin mining isn’t currently the wisest choice.
Is Bitcoin Mining Profitable In 2014?
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