Before looking at the profitability of Bitcoin (BTC) mining, let’s first look at the meaning of the two terms. Bitcoin is a form of cryptocurrency, a digitalized currency that allows for instant payments to be made to anyone anywhere. Bitcoin is a P2P system with no central authority, like the government, regulating printing and distribution. Mining refers to the use of special software that solves complex mathematical problems in exchange for the issuance of bitcoins. This constitutes the distribution of bitcoin, as well as an incentive for mining.
A private key allows for bitcoins in the miner’s wallet to be spent.
Mining and the Network
Miners help keep bitcoin secure. While generating bitcoins, they are also approving and verifying transactions and protecting the network through the miner’s digital signature. A miner is simply a person with a computer using the appropriate software to generate bitcoins through the solving of complex mathematical problems. While doing so, the miners are also verifying and securing transactions and preventing fraud. Thus the more miners there are, the more secure and reliable the network is, which is why the miners are compensated for their efforts for two things: verifying transactions and generating new bitcoins.
Variables Effecting Mining Profitability
Like anything, there are costs to mining, and whether or not it will be profitable for you in 2018 depends on a number of variables, some impossible to predict. You will need to decide how much you are willing to spend on Bit mining. Variables to consider include:
– electrical and power costs to run the blockchain software
– the hash rate (rate at which the problems are solved)
– bitcoins per block (varies with a number of miners)
– bitcoin difference (math problem difficulty increases)
– pool fees
– time frame (more time spent = more bitcoins)
Profitability Decline Per Year
In terms of calculating profitability, the most crucial and fluctuating variable is the profitability decline per year. As the number of miners joining the network at any given time cannot be predicted or known, the potential amounts of bitcoins generated cannot be predicted; thus mining outcomes cannot be predicted for the near or distant future.
Ultimately, it is extremely difficult to predict how profitable bitcoin mining will be as the BTC/USD exchange rate is unpredictable. Questions of profitability are also dependant upon how miners intend to use their bitcoins. If one is mining solely to accumulate bitcoins, these fluctuating variables are of lesser importance. If the miner’s goal is to convert the bitcoins into another currency in the future, the conversion rate will be of primary importance.
So is bitcoin mining going to be profitable in 2018? As is so often the case, the answer is not a clear-cut one and depends on the culmination of a number of fluctuating variables, as well as what the individual miners plan to do with their accumulated bitcoins. As the world is catapulted into the digital age, the monetary system is sure to catch up in the ever-growing cryptocurrency market.