Well, the first term which comes in everyone’s mind when we talk about cryptocurrency is Bitcoin. Bitcoin, to date, has been the most influential cryptocurrency. Initially, when Bitcoin was launched it was mined using CPU using any computer and people really made a good profit with that. Then things changed slightly, and miners started using GPU which is more powerful than the CPU. What about now? Is mining still profitable?
The process of mining has changed these days. It requires a more powerful tool than CPU and GPU. A special tool for mining is used these days. In 2018 most of the mining has been done with application specific integrated circuit rigs which are commonly known as ASIC rigs. This tool is specially created for mining purpose. ASIC tools are good for miners, but some believe that this tool gives more power to the miners making it more centralized which is not good for the blockchain system.
What is Cryptocurrency Mining?
Cryptocurrency is decentralized in nature and so the only way to introduce more tokens is mining of cryptocurrencies. Mining is the process to solve mathematical calculations to find new blocks which are added in the ledger. A number of cryptocurrency miners keep trying to solve these mathematical problems and compete with one another. The miner who is first to solve these calculations gets rewarded for solving or completing the transaction. Mining is also a way to make cryptocurrencies secure as there is no one person or entity managing these cryptocurrencies. It is in the hands of miners.
Key factors that affect mining profits
The price of the cryptocurrency is a very important factor. The trend of mining became popular due to the hike in the price of bitcoin. There was a tremendous boom in the year 2016-2017. Mining profits of cryptocurrency are directly proportional to its price. Higher the value of a cryptocurrency, higher is the mining profits.
The block time of a cryptocurrency is the average time it takes the hashing power of the network to find a solution. This is basically a difficulty to find a new block. The block time is different for different cryptocurrencies. Mining profit increases if the block time is less. The lesser is the block time, higher is the profit.
Mining is an expensive deal and so the reward is a key factor to decide profits. Cryptocurrencies have certain block rewards which create hash power to the network. These are the rewards which miners receive as incentives however the amount of rewards they receive is not the same always. Most cryptocurrencies have a certain mechanism to reduce mining rewards with time. Bitcoin also has this process and it is called as halving.
Hash rate is the amount of power cryptocurrency consumes to generate new blocks. The hash rate for different cryptocurrencies is different. Both the miner’s profit and hash rate are dependent on each other in various aspects. As much as the hash rate increases, difficulty increases, and mining reward decrease.
Luck, the important factor
Luck is a very important factor in the mining of cryptocurrencies. Mining is not just solving mathematical calculations, it is about playing guess game all the time. The more has rate a miner has the more chances miner has to play the guessing game and more chances to win.
So, luck is a very important factor in cryptocurrency mining and it involves risks too. Some people are luckier, others put more efforts.
Is mining still profitable in 2019?
If we talk about 2018, it has been a very unpredictable year for cryptocurrencies. Crypto market witnessed a lot many changes. The year faced very huge price hikes as well as the biggest dips. There were rumors, partnerships, and a lot many different factors which influenced the price of the cryptocurrencies.
All these factors had a huge impact on the mining of these cryptocurrencies. Cryptocurrency mining almost felt un-profitable or on a break in 2018. Here is the study of the factors which had a huge impact in 2018 on the cryptocurrency market to evaluate the outcomes in 2019.
Mining involves hardware and the time is not at the time of the birth of cryptocurrencies. A lot has changed in these ten years and so does the hardware requirement. People started mining with their CPUs and nowadays it requires strong hardware like ASIC or cloud mining. This involves a lot of hardware cost which isn’t possible for most of the people as the outcome is still uncertain.
Dip in the cryptocurrency price
There is a huge dip in the price of cryptocurrencies and 2018 have been bad news for cryptocurrency price. The low price has distracted the interest of miners as it really requires a lot of effort and if the outcome is not as expected, it seems quite unrealistic to put so much time and efforts. The price of cryptocurrency has the highest impact on miners.
High electricity usage
These days mining requires well-equipped hardware which itself are very costly and consumes a lot of electricity. So, if you have access to cheap electricity which is very rare, you can go for mining else you will be under the debt of these electricity bills. This new generation hardware isn’t easy to deal with in any case.
Cryptocurrencies itself is volatile in nature. The market is very unpredictable. Mining was really easy back in 2009 when bitcoin was developed. People who invested in mining hardware are the ones who are still in cryptocurrency mining however no new miners are added in the list since very long. The price of various cryptocurrencies is expected to go high this year and if it happens, mining of these currencies will also increase.
In 2019, the price of cryptocurrencies will play a major role in the mining of cryptocurrencies. People expect profits if they are putting efforts, time and money. And if there is no return, they know their way out.