Is it still profitable to mine Bitcoin in 2021? To say the least, BTC mining is still profitable in 2021 but not for individual miners. Besides, the profitability of Bitcoin mining depends on several factors such as the initial mining costs, saturation of the blockchain network as well as the value of the block reward. The best way to realize profitability in bitcoin mining is to maximize the odds of realizing profit by staying on top of the mining difficulty curve plus acquire the latest, most efficient hardware at a lower price.
When it comes to investing in a new bitcoin mining hardware, the profitability is determined by the price plus shipping cost, import taxes and electricity involved in operating the new hardware. For enhanced profitability, a Bitcoin miner should be energy efficient plus offer excellent returns in terms of hash rate output. If you’re contemplating whether to mine bitcoin or buy on exchanges, hodl then sell later at a higher price, read on to find more on how profitable it is to mine Bitcoin.
Evolution of Bitcoin Mining
Bitcoin mining is a highly processor-intensive process where high-powered computers compete to discover a Bitcoin block and earn rewards. The leading crypto employs the Proof of Work (PoW) consensus algorithm as the basis of its security and operation of the network. Miners are essential in the running of the network by discovering blocks and validating transactions by adding pending transactions to the block rendering them irreversible. In return, BTC is provided as an incentive to the miner or miners in a mining pool for discovering blocks and validating transactions.
When the digital currency was starting out in 2009, there weren’t many Bitcoin miners. The mining activity was regarded as a well-paying activity where miners had a chance to earn 50 BTC every 10 minutes mining from their personal computers. At that time, what miners needed was just a sensibly powerful computer and a stable internet connection.
Starting in 2013, BTC mining went increasingly mainstream, increasing the difficulty involved in mining. This led miners to enhance their computing power to validate transactions and earn BTC rewards.
Over the years, miners have turned to several technologies to reduce mining difficulty and enhance profits. Some innovations in the field of mining include Graphics processing units (GPU) which increase the processing speeds, Field-programmable gate arrays (FPGAs) which reduce electricity, and Application-specific integrated circuit (ASIC) systems which were developed specifically to mine cryptocurrencies.
Of particular is the introduction of ASIC, which offered up to 100 billion times the capability of older personal machines, rendering the use of personal computers in mining the king coin obsolete. Today, most of the BTC mining activities are carried out by powerful mining rigs that have more computing power making it harder for an individual miner to compete.
The aspect of mining difficulty determines how much computational power a miner needs to solve the complex mathematical problem and add a new block of transactions to the blockchain. Bitcoin’s mining difficulty tends to either increase or decrease after every 2016 block, or roughly two weeks, depending on how quickly the previous block was found. Mining difficulty increases if the previous block took less than 14 days to be completed. It decreases if it took more than 14 days to discover.
In recent years, the mining difficulty has skyrocketed, making it less likely for an individual miner to solve the harsh problem and earn bitcoin rewards. For instance, in 2020 alone, Bitcoin’s hash rate increased by nearly 30%. However, the increase in mining difficulty doesn’t mean a reduction in profits since Bitcoin price tends to rise with an increase in the Hashrate.
Bitcoin Mining Profitability in 2021
In its early days (back in 2009), BTC mining was quite profitable thanks to the low operating costs. Besides, the mining difficulty was pretty low, and miners only had to compete with other individual miners using almost similar computers. However, when mining got competitive with the introduction of ASICs, the mining profits dwindled as well. Established mining rigs and cloud mining companies, including Arctos, Blockfills, BlockFi, SBI, Galaxy Digital, and DCG, increased mining competition leading to lower individual miners rates.
The truth is that individual BTC mining is not really profitable, considering that the mining profits are chipped away by expenses such as paying higher energy costs, purchasing and maintaining mining equipment, and the rising mining difficulty, which makes it less profitable.
Cost of Mining BTC in 2021
To establish whether BTC mining is profitable in 2021, let’s calculate the cost of mining 1 BTC this year. Several web-based profitability calculators, such as CryptoCompare, enable miners to analyze the cost/benefit equation of mining the BTC coin. Below is a rough estimate.
According to CryptoCompare’s mining profitability calculator, 1 TH/s of the hash rate will generate approximately 0.00000613 BTC or around $0.341 per day in profit at the coin’ss current value ($55,656). Due to this, a 73 TH/s Antminer S17+ would pull in around $24.89 per day, while a 112TH/s S30 M++ would bring in around $38.19/day.
The profits are subtracted from the electricity cost. Assuming an average power consumption of 30W/TH/s and an average electricity cost of $0.10/KW, BTC miners, can expect to pay close to $ 0.072 per TH of mining power each day. That works out at $5.26 for a 73 TH/s Antminer or $8.10 for a 112TH/s one.
This means that miners using a 73 TH/s Antminer S17+ would realize a profit of $19.63 per day or $ 30.09 for 112TH/s S30 M++ mining equipment. To compute overall profitability, miners will also have to factor in other costs such as acquisition and maintenance cost. Considering that mining hardware runs up to thousands of dollars, it may take years for individuals to break even and achieve full ROI.
Considering that electricity costs take up a sizable chunk of mining profits, securing low-cost energy can reduce operation costs and enhance profitability. The mining profitability is also determined by other variables, which include:
- Electricity cost- Electricity rates differ from country to country and also change depending on the time of day and other factors. Keeping electricity costs low enhances Bitcoin mining profitability.
- Bitcoin value- BTC is highly volatile with price fluctuations from time to time, and the price you sell it will influence the profit margin.
- Time: It takes about 10 minutes to discover each block, and each block yields 6.25 BTC rewards for the miner that successfully discovers it. The time you spend in mining determines the overall profit.
While mining Bitcoins may be profitable for mega-mining centers, it’s not really profitable for individual miners. Increased mining difficulty, costly power consumption, reduced mining rewards due to Bitcoin halving, and the high cost of acquiring and maintaining mining equipment, among other factors, have made BTC mining less profitable, especially for individual miners. More and more miners are turning to mining pools since they are actually more profitable and sustainable. Nonetheless, you can use a web-based profitability calculator to run a cost-benefit analysis and establish whether mining the pioneering digital currency will be profitable to you.