This is an opinion editorial by Keaton Reckard, the Hiveon community engineer, a mining ecosystem that includes an operating system for Bitcoin mining hardware.
Bitcoin mining refers to the process by which new bitcoins are introduced into circulation. The mining process plays an important role in confirming new transactions and maintaining the Bitcoin blockchain ledger as an immutable record of transactions. In essence, miners use ASIC hardware to solve complex computational problems, with the first to find the solution earning a bitcoin reward before the cycle begins.
Although Bitcoin mining can be time-consuming, expensive and can provide inconsistent rewards depending on the price volatility, it still has a strong appeal for investors who are drawn to the idea of earning bitcoin as payment for their efforts. For tech-savvy individuals and hobbyists, mining can be an interesting opportunity for many different reasons.
In contrast to traditional investment assets, such as standard bank deposits, real estate properties or stocks, bitcoin can provide higher returns. It is an environmentally conscious business that prevents energy waste by using excess energy, such as natural gas burned during oil extraction, idle wind turbines and excess energy from hydroelectric or nuclear power plants.
Hiveon’s long-term predictions are that the value of bitcoin will increase after the halving (more on that below), so we are accumulating coins now to multiply the money in the future. We also believe that, in the future, an alternative global financial system based on blockchain technology such as Bitcoin will become dominant, and network validators will be able to make money from processing transactions.
But with the difficulty of mining and hash rate constantly hitting new highs and rising fees, many may wonder if the practice is still worth investing in.
Is Bitcoin Mining Worth It?
To determine if Bitcoin mining will be “worth it” for them, equipment, prospective miners should conduct cost-benefit analyzes to determine their break-even points. Factors to consider include electricity costs, hardware costs and efficiency, time and the market value of bitcoin. You can choose to factor in the current price of BTC ($28,190 at the time of writing) or, try to extrapolate where you believe the price of BTC will be in the future.
Electricity costs
At the time of this writing, Bitcoin mining can be profitable for individuals paying $0.10 or less per kilowatt hour (kWh) of power.
Access to energy at this price, however, can vary in different regions, with some areas offering cheaper electricity than others. In terms of domestic electricity prices, many countries in the Middle East would make good homes for bitcoin miners, including Iran, Qatar and Saudi Arabia. Meanwhile, prices in European countries such as Denmark, Germany and the UK, make bitcoin mining a difficult proposition.
Hardware Costs
Acquiring ASIC equipment has become easy, although the price of ASICs ranges from several hundred dollars to five-figure sums. I recently found a used Antminer S19 for sale in the UK, listed for £2,700 (or about $3,343.38).
Market Value
Bitcoin reached its highest price of $67,549 in November 2021. At this time, as the 2021 bull market reached its peak, bitcoin rewards to miners were naturally more valuable in fiat terms than at the time of writing this, with the price of bitcoin. about $27,600. However, with the increase in bitcoin transaction fees as a result of ongoing experiments in the block space, miners have benefited.
A profit calculator helps potential miners evaluate the cost-benefit ratio of Bitcoin mining. These calculators may vary in complexity and may provide slightly different results.
What Are ‘Other’ Reasons For Bitcoin Mining?
But for some Bitcoin miners, a simple cost-benefit analysis may not be the only factor in deciding whether mining is “worth it” or not in 2023.
Mining is an important aspect of Bitcoin’s decentralized transaction recording and validation process. Bitcoin mining serves a critical purpose by solving an issue called “double spending,” a problem inherent in any digital currency system. Double spending is the digital equivalent of counterfeiting, which is monitored in the physical world by middlemen like governments and banks.
For Bitcoin, this need to trust third parties is largely replaced by the computational effort provided by miners. Maintaining that independence from middlemen, in addition to collecting revenue, can be a motivation to contribute to the mining network for some.
Bitcoin Halving Cycles And What To Expect In 2024
The next expected Bitcoin halving in April 2024 will likely have a significant impact on the mining dynamic.
Bitcoin halving is an event where the reward for mining new blocks is reduced by 50%, resulting in miners receiving half the amount of bitcoin as their reward for solving a block. Scheduled to occur every 210,000 blocks, Bitcoin halvings continue until the maximum supply of 21 million bitcoins has been issued.
The impact of the next Bitcoin price halving remains uncertain. Some analysts predict that the price will follow a similar pattern to the previous halvings, increasing post-event due to the restriction of the supply of new coins. However, any price increase will ultimately depend on the demand for bitcoin and it should be noted that the market has matured significantly since the middle of 2020, and many established cryptocurrencies are now competing for users.
Anyone wondering if Bitcoin mining will be profitable in 2023 will probably want to factor the impact of Bitcoin’s next halving into their calculus as well.
Difficult, But Not Impossible
Profitable Bitcoin mining is a challenge, but it is not impossible. The price of Bitcoin is relatively low at the time of writing, however an Antminer S19 can make a profit at a maximum electricity cost of $0.10 per kWh. While it rules in areas of the world like the UK, there are many global locations where power is cheaper. Naturally, renewable energy sources (especially solar panels) can really help improve profitability and, as the world shifts from oil and gas to renewable energy sources, it is expected that the price of electricity will decrease again.
Access to cheap electricity, the fast-growing nature of Bitcoin and upcoming events such as halving are just some of the many factors to consider when you ask, is Bitcoin mining profitable?
This is a guest post by Keaton Reckard. The opinions expressed are their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
