Bitcoin is a crypto asset that was launched in 2009. Today, it dominates the cryptocurrency sector in terms of market capitalisation. In Feb 2015, one could have bought Bitcoin for $251. As of Feb 14, 2022, Bitcoin’s price stands at $42,067.
Mining is the process through which Bitcoin is created. If you plan on mining Bitcoin, your job will be to validate transactions and secure the network. Bitcoin mining requires considerable energy. The mining process gets difficult every four years per the original design. Visit https://swyftx.com/au/blog/how-to-mine-bitcoin-in-australia/ to know more about the mining process.
If you plan to mine Bitcoin, you must go through these six factors to understand if mining would become a profitable venture for you.
Ways to Mine Bitcoin
The two ways you can mine Bitcoin are:
- Personal mining
- Cloud mining
In personal mining, you will need a powerful computer. Mining will be done through the GPU. There is also mining-specific hardware available such as ASIC. Trying to mine Bitcoin alone is challenging. However, you can be a part of the mining pool, work alongside the other miners and increase your chances of getting a reward.
You will be leasing or purchasing computing power from a mining farm in cloud mining. However, you will not be responsible for installing, running, or maintaining the hardware you buy. Cloud mining provides a more accessible entry into Bitcoin mining but generating a profit is tricky though.
How difficult will it be to mine a Bitcoin block? The difficulty level of mining is adjusted according to the computational power on the network. This action ensures that the time to mine a block is around 10 minutes.
In 2021, post the government crackdown on cryptocurrencies in China, the mining difficulty for Bitcoin significantly dropped. However, at the start of 2022, mining difficulty increased by 9%, hitting an all-time high of 26.64 trillion.
Hash rate is the computational power to verify a transaction and add blocks to the PoW blockchain. The formula to calculate energy consumption is hash rate divided by total power watts. You can use a profit calculator to understand if you will profit from Bitcoin mining.
Energy rates in Australia differ depending on the location you reside in. Thus, a standard formula will only give you an overall idea about your energy bills. It is best to consider your area-specific energy provider rates.
Software for Mining
A Bitcoin mining software generates new crypto assets and introduces components in the blockchain. Consider factors like usability, customisation, personal and pool mining support, and some advanced features like block self-detection when choosing a software.
Some of the top software options in the Bitcoin space are:
- Bitcoin Miner
You can use two types of wallets: digital and hardware wallets. Digital wallets run the risk of being hacked. Ensure you use strong passwords and enforce safe internet practices. Some popular digital wallets are Bread, Metamask, and Electrum.
Hardware wallets are small USB devices that contain your private keys separate from the web. Some popular hardware wallets are Ledger Nano X and KeepKey.
Improvements in the hardware and software area of mining can provide you with an edge. With the emergence of better mining pools, the entry barrier is relatively low.
Bitcoin mining could be profitable, but you need to aim for a realistic goal. Replicating cryptocurrency’s past success would be highly improbable.
Bitcoin mining requires considerable investment upfront. Instead of mining solo, it would be better if you mined with other users in a pool. Also, ensure you pick a safe digital or hardware wallet to store your earnings.