The past few years have been like a roller coaster ride for cryptocurrencies. It has seen dramatic growth in 2020 and changing trends with the newbies in the market. New platforms and currencies appear now and then, but Bitcoin still holds its position as the most valuable decentralized cryptocurrency.
However, as the value grows along with the same application process, many of us wonder if mining Bitcoin or other cryptocurrencies is still profitable even in 2022. In this article, I explain how it works and the situation today in the market.
How does Bitcoin mining work?
The transactions are recorded in the blockchain, and after every new transaction, it is sent to the miners for verification. It involves billions of calculations per second to confirm and add to the blockchain. As soon a miner solves it, they get the reward with a new Bitcoin. The more mining is done and supplied, the more Bitcoin will be released with the new diminishing block over time. It is called Bitcoin Halving, and the value soars periodically.
Cryptocurrency mining is an essential component for the majority of prevalent coins. To validate transactions, ensure network security, and infuse the market, miners enable a dispersed way that the cryptocurrencies use the newly minted coins in providing rewards. Some of the existing market leaders like Ethereum are shifting from proof-of-work (traditional mining) to proof-of-stake (staking). So, there will be less dependency upon mining, but it will never disappear.
— Bitcoin Magazine (@BitcoinMagazine) August 4, 2021
Is mining still profitable?
Well, it’s complicated. It would help if you apprehended a lot of things as there are barriers to access, but mining cryptocurrency is still profitable. Bitcoin is becoming a trillion-dollar asset this year, and it’s continuing to see an upward trend. As it is becoming more popular, people are getting highly interested in learning the process of mining cryptocurrency.
Yet, mining can be expensive as it requires technical knowledge regarding hardware and software. If you are determined to do so, you will find a possible way as mining continues growing in scale and efficiency, implementing yield farming leveraging current crypto assets to generate a return. Get a general overview of the present condition of Bitcoin, cryptocurrency, and the blockchain industry trends so you can decide from where you should begin.
Mining cryptocurrency today
The price is leading on a meteoric uptrend, and the value is growing by more than 340% in the last year, mostly in Bitcoin (BTC). Simultaneously, the hash rate was increased by over 41% in 2020, and it reached around $63,500. It is still difficult to keep track if Bitcoin mining makes enough profit because you need to know a few more details about it. You can mine Bitcoin using GPUs. Recently, ASICs are becoming popular, but it can be a bit difficult.
— Decrypt (@decryptmedia) January 15, 2021
At present, about 900 bitcoins are mined every day, and according to this ratio, there would be 328,500 bitcoins mined in 2021. The block reward is set at 6.25, and it will remain stagnant until the next halving.
To stay at the top requires maximizing the odds and increasing profitability by acquiring the latest and efficient mining hardware at a fair price. You also need to consider price, shipping cost, tax, electricity consumption and find an ideal Bitcoin miner that offers excellent hash rate output. After all these, Bitcoin miners can expect to generate around 226% profit in a day. If you can employ upgraded hardware, the electricity cost can be minimized, and the chunk of profit can be maximized.
Mining other cryptocurrencies
Bitcoin is the obvious popular cryptocurrency at the moment, but there are others out there that are gaining ground. Here are just some of the more known ones in the market:
- Ethereum (ETH) is making mining worthy of profit. It can be done on GPUs and a few using ASIC. As of April 2021, Ethereum became a large network of mining machines is supporting to validate transactions or execute Smart Contracts, and so on.
- Monero (XMR) is privacy-focused from the beginning and maintains the privacy of transactions. The mining process works opposite of Bitcoin as it is ASIC resistant and favors CPU mining with the ability to mine on some GPUs as well. It is indeed an interesting option to access through a bunch of high-speed processors.
- ZCash (ZEC) is another privacy-focused cryptocurrency that maintains the transparency of transactions and protects encrypted addresses against prying eyes. Mining is possible by GPUs, but it can be difficult to make a profit, but ASICs are less popular and relatively easier.
"The ecosystem built on top of Ethereum continues to grow, supported by an increased activity in Decentralized Finance (DeFi) and non-fungible tokens (NFT) and a general optimism about Ethereum’s ongoing transition to a proof of stake consensus." ~ Goldman Sachs crypto division
— Frank Chaparro (@fintechfrank) August 4, 2021
The blockchain technology and cryptocurrency markets are here to stay, implementing newer applications and currencies. Utilizing technology evolution will rise acceptance, the profitability of Bitcoin mining will endeavor. The process isn’t faster or simple. It requires patience and time and will be fruitful with proper research and preparation.
YouTube: How To Mine Bitcoin – Easy & Simple
Photo credit: The feature image used has been taken by Pedro Henrique Santos.
Sources: Nasdaq / Euny Hong (Investopedia) / Eric Lam (Bloomberg) / Daniel Phillips (Decrypt) / Brian Nibley (SoFi) / Niall McCarthy (Statista)
Editorial notice: This article was written in 2021 but updated in 2022 to reflect the latest facts.