There are several factors that determine whether bitcoin mining will be profitable. Fluctuating bitcoin prices, increasing bitcoin mining difficulty are just some of the variables that you need to consider. Bitcoin mining calculators exist specifically for this purpose- to help you calculate whether your bitcoin mining venture might be profitable.
Bitcoin mining basically means verifying transactions on the bitcoin network. Bitcoin miners are therefore very integral as they secure the network against attacks.
Because this is a decentralised network, bitcoin mining involves running complex calculations to find a specific number. This means a lot of trial and error and of course a lot of computing power and therefore high electricity costs. There is a reward for every successfully mined block. This is exactly what miners are after.
Because of the astronomical rise in value in bitcoin prices over the years, bitcoin mining has become very competitive.
Bitcoin mining profitability largely depends on the factors below. A good bitcoin mining calculator will take these factors into account.
Hardware Costs
This is the actual cost of acquiring a bitcoin miner. The Antminer S9 is one of the most advanced and most popular bitcoin miner right now and costs about $2200.
Hardware efficiency and hash power are some of the most important factors you should consider before buying a bitcoin miner. A good miner should have a high hash rate and use power efficiently. This measurement is given in W/GH.
Cost of Electricity
The cost of electricity is the most important factor that will determine whether you will make a profit from bitcoin mining or not. Miners in countries that have cheap electricity like China have an advantage.
From calculations, the total cost of electricity often starts to overtake the cost of acquiring bitcoin mining hardware in the second year. A good bitcoin mining calculator like Nicehash calculator will have an input for electricity rates in your locality.
If you live in Washington State and using an Antminer S9, you can make $36.12 per month according to the Nicehash calculator. The cost of electricity is estimated at 0.12 USD/kWh.
Efficiency
As stated above, the efficiency of your bitcoin miner should be a very important consideration. The Antminer S9 is two and a half times more efficient than the Antminer S7, its predecessor.
Hash power
Hash power is simply the computing power needed to validate blocks. The hash rate is the rate at which algorithmic problems needed to verify transactions are solved.
Mining difficulty is set such that a block can be mined every ten minutes on average. The hashpower needed to mine bitcoins goes up as more miners join in. This means you have to progressively add new hardware to continue earning the same bitcoins.
Bitcoin Price
Bitcoin prices are high volatile. Huge downward swings can put your bitcoin mining venture into jeopardy. The prevailing value of bitcoin in the market will determine whether the rewards are enough to cover the bitcoin mining costs.
Conclusion
Factors like the bitcoin price at a given time in the future are very difficult to predict. Nevertheless, it is something you should project.
Generally, a good bitcoin calculator should help your bitcoin mining profitability by factoring in electricity and hardware costs. It should also give you a better idea of what the bitcoin mining difficulty is now and in the future. Even so, things like bitcoin prices are difficult to predict.