Bitcoin has revolutionized the digital payment system. But, most people still do not know where does Bitcoin come from? Basically, computers, mining rigs made of GPUs solve complex mathematical equations and the Bitcoin algorithm rewards them with bitcoin(What Is Bitcoin Mining: How Does it Work, Proof of Work, Mining Hardware and More, simplilearn.com,2022). So, yes, it is possible to mine Bitcoin.
At the start of Bitcoin, in 2009, a simple computer could be used to mine Bitcoins easily. But as the popularity of Bitcoin has risen, huge industrial facilities with thousands of GPU rigs worth tens of millions of dollars have popped up.
On the question as to whether Bitcoin mining is worth it or not; it’s answer depends upon a number of factors that are explored below:
1. Cost of electricity
Computers and mining rigs run on electricity. As a result, the cost of electricity is the biggest factor that affects the profitability of the mining operation. If the cost of electricity that you use for Bitcoin mining is less then your profits will be high and vice versa (Is Bitcoin Mining Still Profitable? The Economics Explained, blockworks.co, 2022).
The low cost of electricity was one of the biggest reasons that majority of mining operations were located in China before being banned by the Chinese government and now they have moved to Texas because of low cost of electricity there.
2. Processing Power of GPUs
GPU stands for Graphic processing unit. A mining rig can consist of a single GPU or multiple GPUs. The more GPUs you use, the more processing power you have; the more processing power you have, the better are your chances are of solving the mathematical equations and being rewarded a bitcoin.
After the cost of electricity, GPU processing power determines the success and profitability of your bitcoin mining operation.
3. The current price of Bitcoin
Finally, whether the Bitcoin mining will be profitable or not will depend upon the current price of Bitcoin. It goes without saying that mining Bitcoin at 69,000 Dollars is much more profitable than mining it at 20,000 dollars, more than three times profitable; given the other factors, cost of electricity and GPU processing power, remain constant.
So, the higher the price of Bitcoin, more profitable is the bitcoin mining and lower the price of Bitcoin, the less profitable it is. Mine when the price is higher than your cost of operating the mining.
We are going through a crypto winter. The price of major cryptocurrencies has fallen more than 90 percent from their all time highs. Even Bitcoin has fallen more than 70 percent from its all time high prices of 69,000 Dollars.
At the current prices the cost of mining Bitcoin is higher than the price of Bitcoin, resulting in an unprofitable operation. The large scale bitcoin miners, such as Marathon Digital holdings has expressed the current unprofitability of bitcoin mining.
The current inflationary environment has also caused the price of electricity, the most important factor to rise. So, it might be a good idea to wait a bit before starting your own Bitcoin mining operation.
What Is Bitcoin Mining: How Does it Work, Proof of Work, Mining Hardware and More. Simplilearn. 2022, 28 June. Retrieved July 15, 2022 from https://www.simplilearn.com/bitcoin-mining-explained-article#:~:text=Bitcoin%20mining%20is%20the%20process,on%20the%20decentralized%20blockchain%20ledger.
Is Bitcoin Mining Still Profitable? The Economics Explained. 2022, 1 July. Retrieved July 15, 2022 from https://blockworks.co/bitcoin-mining-economics-explained/