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Bitcoins / Breaking News / Mining

Miners Will Continue To Make Profit

Black And White Shot of Miner

One major threat to cryptocurrencies like Bitcoin is that the system could break down if the custodians of the transactions pack up and leave the party. We are, of course, referring to the miners who run the network on which the blockchain technology is built and functions.

Bitcoin skeptics have pointed out that this will happen one day, sooner or later. This is because mining operations require high-power computational resources, including the latest graphics cards and processors. Purchasing these resources and running the operations has a cost that must be paid by the miners.

Mining Competition to Find the Next Hashtag

The Bitcoin mining platform was designed to run in a fashion similar to how companies and businesses operate in the real world. Bitcoin developers ensured that as the number of mining operations increased on the network, the cost of running the operation for each operator would also rise proportionally.

The network operators get a fixed amount of fees for mining new Bitcoins and authenticating transactions between addresses that are already holding mined Bitcoins. If the value of Bitcoin rises, the return for the mining operators would increase. As their profits would increase, it would attract more miners to connect their computers to the network to get profits as well.

When the number of mining operators rises, the algorithm required to find the next block on the chain also becomes more complex to offset the higher computational power dedicated to finding the solution. This ensures that the time it takes to find the next block always remains close to 10 minutes.

When a lot of network operators join the blockchain or the price of Bitcoin falls to a low level, it reduces the rewards and profits for all the miners connected to the system. Theoretically, this should cause some of the network miners to stop their operations.

Chart Showing Cost to Mine Bitcoin in Different Countries

Self-Correcting Market

The developers made this as a self-regulating economy. When some of the miners quit the network, it reduces the computational requirements for finding the next blockchain, thus reducing prices for every operator.

One thing that should be considered is that miners may choose to stay in the mining operation even when they are getting less and less Bitcoin for finding each new block chain if the price of BitCoin was above a certain level and kept rising. If the price of BitCoin stays high enough, miners can recover their costs of operating the processing system even if they get a fraction of a BitCoin.

Then there is also the transactional fee to consider that miners get paid for ensuring the security and consensus of the Blockchain. If the value of BitCoin remains above a certain level, miners will continue to make profit even when the value is no longer rising.

Low Bitcoin Values

The price of Bitcoin has declined or stayed stable around the $9,000 to $11,000 figure in the past two months. This is bound to put a lot of pressure. We do not know the exact number of network operators connect to the Bitcoin platform but if the prices stay at the current level, we may soon start hearing about mining operations starting to go out of business or switching to an alternative currency.

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Mark Lyford has been involved in Bitcoin and Blockchain technology for over 5 yrs.Mark is an established Bitcoin trader and evangelist.He's been an online entrepreneur for over 20 years and prides himself on helping people and giving real world no BS advice.Mark is also known as an international speaker and bestselling author.