Bitcoin mining is the process of creating new bitcoin from your computer by “finding” new blocks. Miners use powerful computers, known as ASICs (application specific integrated circuit), to help secure the bitcoin network and to update the bitcoin ledger. Currently the first miner to find a new block is rewarded with 12.5 BTC. That reward is halved roughly every four years and will drop to 6.25 BTC approximately on May 22, 2020.
Anyone can participate in updating bitcoins ledger and become a miner. All that’s required is a computer powerful enough to solve the cryptographic problem created to “hide” blocks. If your computer is the first to solve the problem, you get the BTC reward.
Sounds like an easy way to get some free money, right?
That used to be the case, but not any longer.
Bitcoin mining was designed so that the more power there is directed at finding a solution to the block problems, the harder those problems become. In essence, the network increases difficulty to ensure that a block is only found, on average, every 10 minutes. That keeps inflation in check, but now that so many miners exist it also means the difficulty has gotten extremely high.
As you can see from the chart below, the difficulty remained very low until late in 2015. It really began to grow in 2017 and has been nearly parabolic since.
When bitcoin was created in 2009 mining was done with the central processing unit (CPU) in a personal computer. The difficulty was quite low at that time, but soon people began looking for more powerful ways to mine, so that they could find more bitcoin.
By 2011 many miners had shifted to using the graphics processing unit in their computer to mine bitcoin. That was more efficient because one GPU has the mining power of 30 CPUs (on average).
The next shift in bitcoin mining came in 2013, when the ASIC miner was introduced. ASIC stands for application specific integrated circuit, and as the name suggests the units are built specifically to mine bitcoin, or to solve the cryptographic problems used by the bitcoin network.
Today the standard for mining bitcoin is the ASIC rig.
Can you make money mining Bitcoin?
Yes you can, but the correct question should be whether it is possible to become profitable mining bitcoin.
Anyone can purchase an ASIC unit and mine using it. You can even join mining pools, where you add your mining power to that of others, and for each block found by the pool the mining reward is split between the active miners in that pool. You’ll get small amounts of bitcoin regularly this way.
The truth is that profitability in bitcoin mining depends on a lot of factors. There are calculators that help you determine your potential profitability. Here’s what you can expect if you’re mining with an Antminer S9 ASIC unit, which is considered one of the better mining rigs:
As you can see the expected outcome is a small loss of $2 a week, or a bit over $100 a year.
Here are the factors you’ll need to take into account when calculating bitcoin mining profitability:
- Hash Rate – This refers to the performance of your mining hardware. It’s a measure of how many guesses per second are being made. Hash rate is measured in MH/s (mega hash per second), TH/s (terra hash per second), GH/s (giga hash per second), and PH/s (peta hash per second).
- Bitcoin Reward – The reward for finding a block halves roughly every four years. It began at 50 and is 12.5 as of 2018. The next halving is expected to occur in May 2020.
- Mining Difficulty – How difficult it is to find the next bitcoin block. This is based on how much mining power, or hash rate, is in the network.
- Electricity Cost – ASIC mining units use a lot of electricity, and that cost will affect your potential profitability. You can find your electricity cost (in $/kWh) on your electricity bill.
- Power Consumption – The greater the power consumption, the more electricity you’ll be using.
- Pool Fees – Unless you have a mining farm, you’ll almost certainly be using a mining pool, and they come with fees that can range from 0% up to 3% or more.
- Bitcoin’s Price – Always changing.
The most elusive of these is the last – bitcoin’s price. We never know if it will go up or down at any given time, but if you believe that it will go substantially higher in the long run, you’ll always be profitably mining. That’s because your bitcoin will be worth so much more in the future. So even if you have a small loss now, all you need is an increase in the price of Bitcoin and you’re profitable again.
If current profitability is your biggest concern you can use a site like WhattoMine.com to see the current profitability of mining for dozens of altcoins. In many cases you can even use the GPU in your computer to mine these altcoins.