Bitcoin isn’t just the world’s first decentralized cryptocurrency, it’s also the most valuable with the highest market capitalization. Bitcoin investments are slowly becoming a bit more popular because, over time, it has become the world’s best-performing asset, with amazing returns on investment (ROI). Simply put, Bitcoin is the best cryptocurrency to buy and has been that way for a while now. For a lot of people, Bitcoin investment is simply pumping some money into the network and being patient enough for its value to rise. When it has risen to a minimum desired point, they sell and then cash out. For some others, however, just buying into Bitcoin and watching price alerts daily isn’t enough. They want to be an integral part of production. They want to become miners.
What Is Bitcoin Mining?
Bitcoin Mining is simply the process by which new Bitcoins are added to the network and how transactions are validated. This process, apart from adding new Bitcoins to the blockchain, also ensures the security and overall integrity of the network.
As simple as it sounds, Bitcoin mining is somewhat tedious and requires a lot of special effort. Mining can only be done with specialized equipment and also requires specialized knowledge.
Back in Bitcoin’s earlier days, you could mine with your PC. However, Mining Difficulty has slowly made that impossible. As the network grows, anyone would agree that if the simplest of computers could mine Bitcoins, it would be seriously devalued. To ensure that block creation speed is somewhat fixed, mining difficulty is adjusted as time goes on. This is why today, mining is not a child’s play.
Why Is Mining Expensive?
Bitcoin mining is expensive because of two major reasons. Firstly, since you can no longer use your regular PC to mine, you need special application-specific integrated circuit (ASIC) devices to handle your mining. The problem here is that these devices are expensive. For example, the Antminer S9 with hash power up to 14.0 TH/s costs at least $3,000.
Secondly, if you can afford the hardware, you then have to worry about energy costs. Bitcoin mining, apart from the specialized hardware, consumes a significant amount of energy. The consumption is sometimes so heavy that it is by far a larger deterrent than the cost of the ASIC equipment.
Current estimates suggest that Bitcoin mining consumes almost 75 terawatt-hours per year. Firstly, this is enough energy to power at least 11 million households. Secondly, this number is not static and could very well increase as the year goes on. This is the major reason why Bitcoin mining is expensive.
Bitcoin Mining Options
There are ways people get around these issues. For example, there are services that sort of rent out their ASIC equipment and let you pay a monthly fee. In other rare cases, some other services give you this equipment temporarily and also cover some or all of your energy costs. The catch here is that they have to get a percentage of all Bitcoins mined using their equipment.
Another option is cloud mining. Basically, a company that owns Bitcoin mining hardware and hosts it at some location, will allow you to rent this hardware by hash power. The company then pays you a percentage of Bitcoins mined, based on the hash power you’re paying for. The problem with cloud mining is that a lot of them have proven to be scams as it is almost impossible to always certify that these companies have the equipment they claim to.
So, How Much Does It Cost To Mine Bitcoin In 2020?
There is no straight answer to this question. The cost of the mining hardware is fixed and so it’s easy to buy based on what you can afford and how much power you want. However, assuming you have the equipment required, you still have to worry about energy.
If you understand all of the explanations above, you will see that different equipment will consume power at different rates, depending on how long you run them. Also, you have to worry about energy costs in different states. Some states, such as Oklahoma and Idaho, have cheaper electricity rates than places like Connecticut or Massachusetts. Depending on where you are, you need to consider how much you’re willing to spend.
Generally, Bitcoin mining can be very lucrative. If you choose to start now, make sure you factor the upcoming halving, where miners’ rewards will be cut in half, from the current 12.5 BTC to 6.25 BTC.
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