Cryptocurrency mining or bitcoin mining, to be precise, is quickly changing from a hobby for early miners to a game of survival-for-the-fittest. As more people gain interest in mining, the industry has become more popular, and that’s how the business has grown. However, it is a love-hate kind of reaction from both sides of new and older miners. The truth is mining is getting difficult each passing day, and anyone looking to make meaningful profits has to get proper hardware, stable internet connection, and a reliable source of electricity. Mining used to be quite profitable some years back but quickly became difficult as more people joined the industry, and the hash rate increased. Companies and individual miners have admitted to have recorded losses while others continue to reap profits. That is why it is becoming difficult to determine whether crypto mining is still profitable.
The answer to the question of whether cryptocurrency mining is a profitable business is a hard one to crack, but from what we know currently, the answer is no and yes or ‘its complicated”.
Ways to make profits in cryptocurrency mining
Asses Mining profitability
Currently, only miners with the right equipment can scoop rewards. Cryptocurrency mining has evolved significantly over the years, and for you to make substantial profits, you have to invest a good amount of money in hardware. It’s the same reason why miners are collaborating to solve complex mathematics and share the reward. Aside from equipment, as a beginner, you also need to take time and understand how things run particularly the volatility of prices.
One of the biggest reasons why making profits in bitcoin mining is a challenge currently is the fact that the block’s reward reduces every four years. Satoshi Nakamoto set the rewards of bitcoin to be slashed by half after every four years. This is to help ensure that the bitcoin supply lasts longer and also reduces the number of bitcoins mined every year. For miners, it’s not good news, because whether you put in more effort or not, you still get a slashed reward.
Another significant factor to consider when checking profitability is increased difficulty. Ten years ago, Cryptocurrency mining was easy and rewarding. Miners could quickly solve complex algorithms using typical computers. Today, the hash rate is high, and mining has become more complicated. Additionally, serious miners have created extensive ways to mine, making it difficult for small scale miners to compete. You may need to join a mining pool (a group of miners) to get a better shot at competing with the big miners. However, it’s not impossible to mine alone if you have the right tools. The current hardware GPUs and ASIC miners are more powerful but may take a toll on power bills. You need to keep up with the existing hardware and continually increase computing power in order to have stable profits.
Get the math right
For you to make profits in cryptocurrency mining, you need to do your maths right. In fact, researchers have found that most mining companies fail to make profits due to poor planning and management strategies. It all boils down to the hash rate as the whole concept of bitcoin mining only gets tougher when the hash increases. You will need to multiply the cost of energy times the energy used per hash times the average number of hashes per block mined. The network typically sets the average number of hashes mined per block. Next, you want to compare your cost to the average income made per block mined. You will likely notice that if there is more processing power on the network, there will be a higher average number of hashes mined per block. Therefore, in order to look forward to this, you must look forward to the growth rate of the network.
Find the right hardware.
One of the reasons why we have not seen big companies venturing into cryptocurrency mining is the lack of reliable mining equipment. GPUs and ASIC s are the current choices for proof of work tasks. ASIC mining is more profitable, but you can only mine one currency. Buying hardware to mine one currency may not be profitable for companies or individual investors. The complex hash rate only gets tougher to crack, and the whole process consumes lots of energy. So, even if companies had enough hardware to run the mining, they would still face the challenge of high energy costs—the more the hardware, the higher the consumption. Investing in expensive cryptocurrency mining equipment and not worrying about power consumption costs and other related costs should only make sense if you are sure that bitcoin prices will go up and that your profits will be more than your expenses.
Have the right staff
To run a cryptocurrency mining company, finding the right staff is mandatory. Getting the right people to do the job is the first step towards winning in cryptocurrency. Remember, mining is not a plug in and start mining activity. There are lots of considerations to make, like which currency to mine, how long it will take, the hashrate difficulty, and many more. You also need to hire experienced individuals who know the ins and outs of cryptocurrency mining.
Cryptocurrency can be a profitable venture if you have a clear idea of what you need and what you want. Choose your strategy wisely. It should balance your costs and ultimately give returns to your principle. Don’t go for standard hardware that will only consume power but yield peanuts. The right hardware should conserve energy and still remain productive throughout the mining period. Take time to learn the currencies and the industry as a whole. There is so much to learn about cryptocurrencies, and this information can be quite useful for anyone looking to venture into bitcoin or cryptocurrency mining. Lastly, to determine whether bitcoin mining is still profitable or not, use a web-based profitability calculator and run a cost-benefit analysis. It should give you a clear indication of where the prices are headed.