You’ve probably heard the stories of how a friend is “mining” bitcoins and making money. The bitcoin market is quickly changing both in the value of the coins and the ability to “mine” them at a profit. Recent reports have indicated that mining profits are currently less than half what they were in December 2017. So before you invest a few thousand in that mining rig, you might want to look deeper. Of course, the fact that the bitcoin itself is down to about $8,600 today (Coinbase) doesn’t help.
Today new bitcoins are created/earned through an energy-intensive “mining” process that uses high computing power to solve a complex mathematical equation. As a matter of fact, the equation is so complex that it is best processed not by a traditional computer CPU chip but by a multiple number of computer graphic chips (GPU’s). Graphic chips can do complex math because math is just a series of calculations that can be done in parallel, there is no “logic” type statements like a CPU handles (for example: if this, then this task). Therefore a current bitcoin rig is actually a simple computer motherboard, and a series of high level graphic cards with massive cooling. These are computer gaming cards strung together in a single “rig”. These rigs can then be slipped into large rack systems and become huge data centers. This complex math is called a “hash”, think of it as figuring a combination to a lock.
As time goes by there is a pre-established formula as to how many bitcoins will be rewarded for completing blocks. These reward rates are cut in half every 4 years, until all bitcoins have been used up. In addition, the more miners the more competition.
An 8 GPU mining rig.
A crypto mining data center.
The mining process help proves an anonymous miner used the process the network agreed upon to build a “blockchain” record of transactions. The successful miner who does all of this first then get a small fee and a tiny piece of a bitcoin as a reward for successfully completing the equation.
The average transaction fee mentioned above has fallen below 50 cents from as high as $34 in late December, according to bitinfocharts.com. If you are mining other currencies other than bitcoin the fee portion may be pennies.
If you want to make money mining Bitcoin or another crypto currency you need to compete with the big data centers. A bitcoin miner in China has very cheap electricity produced by hydropower. The rule of thumb to be able to compete with Chinese miners is to have electricity costs of 4 cents or less per kilowatt hour. Chinese miners also have an incentive to produce bitcoins regardless of cost because it allows them to send money overseas and evade the government’s capital controls. Four out of the five largest bitcoin “mining pools” in the world are Chinese, according Blockchain.com.
So before you go out and buy your bitcoin rig from Amazon:
You might want to consider your electric bill, it will be huge and since you won’t be the first to solve the math equation, you probably won’t make any money after buying all of this equipment. If you are still interested you can Google search on various calculators to see estimates of income you can generate.