Mining refers to the verification of Bitcoin transaction in order to earn from the transaction fees. It involves having a computer or a specialized machine run at full capacity on verifying said transaction, thus ensuring their accuracy and legitimacy. There are still opportunities to mine in the present day, but the returns from this venture have taken a deep owing to new entrants into this field. The influx of more miners has resulted into conglomeration by both individuals and corporations in order to pool resources together and enjoy economies of scale. The profits made by these mergers are therefore way better as compared to an individual’s. It is therefore better for you to be part of a group in the event that you want to mine in order to share the costs and benefit from the concept of resource pooling. There are a number of costs to factor in before you decide to pursue this venture and this article seeks to break down these expenses in order for you to make an informed decision on the viability of this venture.
WORK TOOLS (HARDWARE & SOFTWARE)
This is probably one of the most significant investment you will require to make. The competitive nature of this business means that only those with the latest and high-tech equipment will reap more. Considering the software is the interlink between the miner and the blockchain, you will probably require an efficient system for these operations. Hardware also plays a pivotal role in all this because it actually does the real work. An efficient miner requires a powerful CPU and GPU, an efficient cooling system and a reliable power supply.
For mining to occur, electricity has to be converted into hash power. The miner that is more efficient is better. Utilization of smaller electricity units for this conversion means lower cost of operation. There are various miners with different conversion rates and this should be taken into consideration during acquisition. The initial cost of investment may be higher for a piece of equipment but the operational cost may surpass the one off cost.
Nations and regions with affordable cost of power are suitable for individuals plying this trade. Electricity being a key factor in this activity, it follows that areas with considerably lower costs will be better placed since their overheads will be much lower. Countries that have instituted price controls and even subsidies in some instances, have contributed immensely towards the growth of this venture.
THE CLIMATIC CONDITIONS
For miners plying their trade in humid areas, there will have to incur higher costs in hardware acquisitions. The need to have bigger and more efficient fans in order to cool the computer processors is inevitable. Areas with lower temperatures may however be unaffected. The heat generated by the miners may be put into better use like heating in order to avoid such utility bills in the long run.
When starting out, the price of digital currency was very low, but as the popularity grew, so did the demand of this digital currency. This resulted in an upsurge in price which consequently led to a shortened supply. The price changes are now affected by various factors which play a role in price fluctuations. New entrants therefore need to take this factor into account when opting to pursue this trade.
MODE OF OPERATION
More working hours means more profit. Individuals or corporations that have a continuous work schedule stand to reap more benefits as compared to those with set working times. Finding a prospective blockchain is a matter of chance and those who spend longer durations of time exploring stand a better chance at landing the deal of a lifetime. Having a huge workforce to enable proper monitoring is a cost that has to be taken into consideration.
Digital currency usually halves its block rewards for every 210,000 blocks. This in turn affects the miner’s profits despite prices remaining constant. This occurrence, despite being expected and pre-determined, has a negative impact on the market and prices too.
From the general outlook, Bitcoin mining may seem like a profitable venture. However, you need to take into account all expected costs and those that may arise as a result of the ever changing macro-environment. Despite all this, mining still remains a viable activity and can be done.
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