Bitcoin Mining: How It Was and How it is Now
Mining Bitcoin is a process of solving problems generated by a Bitcoin network in order to prove all transaction which have been providing for the whole system since it was created. Let’s try to understand what it looked like some time ago and what it looks like now. We are going to discover whether it is still possible today, to invest your money into Bitcoin mining and make a profit.
Good Old Days of Bitcoin Mining
A few years ago, this type of business was extremely popular among Bitcoin fans, geeks and programmers. This was obvious, Bitcoin was an increasingly growing new way of payment on the Internet and offline. Mining was a simple process for everyone who had a personal computer and a good Internet connection. The scheme was pretty simple. You download a special client and an online wallet on your personal computer. Then you start the process itself. Your computer’s processor calculates difficult algorithms and complicated formulas made by the system.
The only reason for this calculation is for proving transactions. In other words, when you buy something in Bitcoins, for example in a grocery store, your money is sent from your wallet directly to the shop’s address. This transaction must be proved. The system needs to be assured that this transaction is neither fake nor a mistake. In order to prove this fact, a computer needs to analyse all the transactions which were made with your Bitcoins until they were rewarded some time ago. After the computing of these purchases and transfers in Bitcoins, which are called as a block, this block sends to the system as a new part of a block-chain. It makes all the deals done and your transaction gets approves eventually. As a reward for these calculations, the computer of a person who made them gets Bitcoins for doing this job. Firstly, it was 50 Bitcoins but later the reward fell down to 25 Bitcoins.
The Beginning of the Gold Bitcoin Rush
The more popular Bitcoin was becoming the higher its price went up. It was rapidly growing and created a huge demand on mining. Hundreds of people started mining in order to take a slice of the pie. At first, it seemed to be extremely profitable and easy at the same time. These two factors made their deal. The more people mined the higher the hashrate or capacity of computers needed. Clever miners started to use GPUs or Graphic Processing Units to increase their speeds. Video or Game cards were used for Bitcoin mining and consequently pushed the hashrate up again. The arms race had started. Since that time, Bitcoin mining is not an easy deal for everyone.
Over the next few years, the mining technology is only going to get faster and faster. Producers have invented particular, specified chips which were to use only for mining. This specification made them extremely powerful and efficient. Though the profits rose for companies which purchased these ASICs (Application Specific Integrated Circuit), the hashrates were growing quicker than ever before. After some period of time, Bitcoin mining became a particularly expensive and complicated business for big companies. These companies had to have lower prices for electricity and power, lower rent for rooms and stores for their equipment. Moreover, they needed to have good relationships with suppliers who deliver the latest equipment as it is produced. We know that if your equipment takes a month to be delivered then even in this case it can be already outdated.
That’s how the Bitcoin mining industry has been rapidly changed over a relatively short period of time. In fact, we could see the increase and promising growth of Bitcoin self-mining, then a technological progress and eventually enlargement and consolidation of the business. Though it’s very expensive and almost impossible to earn money without a big investment, how much does it actually cost? What amount of investment do we need to start our own mining company? That’s the question we’re going to answer next.
Costs and Expenses of Bitcoin Mining
So, what amount of money do you need to start in this business? Let’s calculate all you need to do it. First, you need to acquire the latest ASICs. It should be the latest one so it costs more. Have you purchased the best one? Hopefully you don’t forget about the coolers. Right, this equipment is also necessary for your business because ASICs not only consume a lot of energy they also produce a lot of heat. If you run them for a while without a good cooling system, they might be overheat and be damaged. Coolers must be in a mining room every time ASICs are working. Therefore, you also need to acquire a good and less power hungry coolers. Of course, a single cooler doesn’t cost a lot but there should be a good amount of them therefore it’s going to cost a large amount of money to buy them. Then you need to pay for the fastest delivery because any delay may kill your Bitcoin business. Then, don’t forget about expenses such as the renting of a location for all your equipment and salaries for personnel who may work there. If you’re not good with mining rigs and equipment, you’ll have to pay someone who is. Staff also takes money out of you budget. Finally, probably the costliest bill after the ASIC’s price, is for power. If you’re going to make your own mini Bitcoin factory don’t be surprised that your electricity bills will be much higher than they are currently. If you can relocate your business to a less costly region, it’s definitely something to consider. Otherwise, you will not be able to compete with other Bitcoin miners who pay lower prices for energy.
That’s exactly the reason why most of the Bitcoin mining centers are located in China or nearby. They have cheap electricity, affordable staff and ASIC’s producers which are located mostly in China.
Bitcoin mining is quite an expensive business with a permanent need for investment into new equipment, looking for less costly places of renting and powering your business. Moreover, Bitcoin’s price is still not stable and reliable enough to make a long-term investment. A few months earlier a Bitcoin cost more than $450 per Bitcoin while now it’s about $380. It is very hard to estimate your potential profits and therefore calculate your costs and expenses. Anyway, it’s still possible in some cases and can still be very profitable. To invest your money in such a business or not is up to you.
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