Is Bitcoin Mining Profitable in 2020?
Is Bitcoin Mining Profitable in 2020?
Bitcoin is one of the most popular decentralized cryptocurrencies worldwide and has been at the top for over a decade. Being a digital currency, new bitcoins are produced by a unique process known as mining. Any user can participate in mining and receive the rewards for every block mined.
As a Bitcoin enthusiast, you may have wondered whether you can start Bitcoin mining and if it is profitable in 2020. But before we answer your question, let us dive into the bitcoin mining process.
What is Bitcoin mining?
Bitcoin mining is the process of introducing new bitcoins into the blockchain. There is a limited supply of 21 million bitcoins. However, 18.5 million bitcoins have already been mined.
Every day around 900 bitcoins are mined, and all bitcoins are expected to be mined by 2140. Although the existing BTCs were mined in over a decade, the rest will need another 120 years before they are mined because of what is called ‘Bitcoin Halving.’
Bitcoin Halving is an event that occurs every four years or after every 210,000 blocks are released, and it reduces the miner’s rewards by half. The recent halving occurred in May 2020, and the reward was reduced to 6.25 BTC per block (from 12.5 BTC per block), and it will fall to 3.125 BTC per block in 2024.
The Bitcoin blockchain is open to all, and anyone can be a Bitcoin miner. They have to announce their hardware assets to the blockchain system known as Nakamoto Consensus or Proof-of-Work.
Mining also involves the process of verifying transactions on the blockchain. Any transaction is complete only when it has been verified by a miner or a group of miners. Hence each transaction takes at least 10 minutes to be completed.
Is Bitcoin Mining Profitable in 2020?
It is quite challenging to provide a clear ‘yes’ or ‘no’ answer to this question. However, from a profit point of view, you need to assess your investment and the increased power consumption of the mining rig. If you start now, it may take a couple of years to break even.
Bitcoin mining is performed using high-level computing machinery such as Application Specific Integrated Chips or ASICs for short. It involves solving complex mathematical puzzles, and you need to solve them before other miners to claim the reward. However, the computational hardware is quite costly (at least $3000) and consumes high power and electricity.
The capacity of the equipment used to mine is calculated in hash rate. The better the hash rate, the higher chances you have of solving the puzzles and earning the rewards.
Bitcoin mining was highly profitable when it was first released, but with successive Bitcoin halving, the number of active miners reduced drastically. The active miners built mining farms with an amazing infrastructure, making it hard for newbie miners to earn rewards.
Also, Bitcoin mining has a difficulty level that started at 1 initially and now has reached trillions making it harder for new miners.
However, you can make profits from mining in 2020 by joining a mining pool. A mining pool is a group of individuals who contribute their computational power to mine BTC. But, the rewards are split within the pool, and you may earn only a small portion of it.
If you plan to start mining, this is the right time, as, in the next four years, the mining rewards will be halved again.
