The past decade came with many questions about the future of cryptocurrency and bitcoin. Indeed, many have seen how much potential is embedded in this new digital currency, and consequently, it is becoming mainstream faster than we anticipated. However, there are still many reflections, debates, questions, and future planning to do to spur the technology's adoption. One such discussion would be the profitability of bitcoin mining.
For those unfamiliar with the concept, bitcoin mining refers to adding new transactions to the distributed ledger by solving complex mathematical equations. In turn, bitcoin miners are rewarded in cryptocurrency. In case you've ever performed a bitcoin transaction, miners were responsible for adding that new immutable "block" to the ledger.
However, it has been well over a decade since the emergence of bitcoin and many other cryptocurrencies. The blockchain space has grown magnanimously, and bitcoin mining has stiffened. Besides that, many factors, including energy consumed, cost, and "halving," have continued to impinge on mining bitcoins' profitability. Some of those factors are discussed in this article.
Mining costs: This is arguably the most crucial aspect of the debate; to determine profitability, bitcoins earned must exceed the equipment required. Although mining was once easy to perform on personal computers and from home, the scope of mining has now expanded. It now requires the latest tech equipment, especially the ASIC (Application-specific integrated circuit) chips. Now the majority of miners on the bitcoin network work as companies.
Unfortunately for individuals interested in using inadequate GPUs (Graphics processing units) or little less outdated hardware, mining transactions will simply be inefficient and more expensive than the rewards could cover. One effort that might still help independent persons interested in mining would be to join artificial intelligence-based ecosystems where multiple individuals can exploit a central GPU and still earn from mining bitcoin.
Electricity and power: Computing power aside, bitcoin mining consumes a lot of electricity and power. According to a report, bitcoin consumes an estimated 7 gigawatts of electricity (roughly 0.21% of the world’s electricity supply). This amount is equal to the electricity consumed in the whole of Switzerland and is more than in many other countries. Unsurprisingly, these figures will continue to increase exponentially as the mainstream adoption of bitcoin continues.
Bitcoin halving: Every four years, the reward for adding a new transaction to the distributed ledger is halved in a process described as halving. This creates an artificial scarcity of bitcoin and has been historically responsible for significant bitcoin bullish runs. However, in all fairness, halving is terrible news for miners. From the initial 50 to today's 6.25, mining reward will continue to reduce in the future. Unless there's immediately a corresponding price increase, profitability becomes threatened, especially for individuals.
We see mining transform from a personal computer affair to one of the world's most extensive operations. Although profitability might be on edge for a good number of reasons, it is merely a necessity for the new look of mining and, ultimately, bitcoin adoption.