Bitcoin is one of the most popular cryptocurrencies available. Bitcoin is being used for everything from online shopping to purchasing airline tickets, but how do these coins even enter the market? Bitcoin mining is the minting of new coins by using powerful computing systems within a decentralized network. Miners solve a mathematical problem to identify the unique “hash” numbers associated with a given Bitcoin. The first to find this string of numbers is rewarded with Bitcoin and voting power within the decentralized system. This somewhat complicated process comes with both the good and the bad. This article will examine the pros and cons of Bitcoin mining.
1. Easy to Start
Although pricey (see Cons), Bitcoin mining is relatively easy to start with the right hardware and software. With a powerful enough computer, an additional Application Specific Integrated Circuit (ASIC) or Graphic Processing Unit, a tech-savvy person could begin mining for Bitcoin. With the right electricity and equipment setup, this could be done from the comfort of your own home. If you have patience and tenacity, this could be the right path for you.
If you are able to establish your system for Bitcoin mining and are successful in your search, the payoff could be extremely lucrative. If a miner finds the correct hash number, they are rewarded 6.25 Bitcoin (approximately $250,000); not a small payout by any means. Owning Bitcoin offers potential for high returns as the value of the currency has greatly increased over the last decade.
Besides the obvious financial incentives, successful Bitcoin mining leads to voting power within the community, known as the Bitcoin Improvement Protocol (BIP). Having some decision-making capabilities allows Bitcoin miners to help determine which changes to the cryptocurrency protocols may be allowed. Furthermore, many miners are part of a “Mining Pool” or “Cloud Mining” meaning they work as part of a group to extract Bitcoin. This helps ease some of the necessary efforts to mine Bitcoin and offers a chance to be part of a group with similar interests.
Although Bitcoin mining is relatively easy to set up, to be a competitive miner, the hardware and software required is very costly. ASICs and GPUs require hefty upfront investments. Furthermore, without access to cheap electricity, Bitcoin miners could find themselves with extremely high electricity bills at the end of each month. Prospective miners would need to consider the start-up costs of Bitcoin mining before they begin to make sure that the overhead wouldn’t outweigh the benefits.
2. High Electricity Consumption
Long touted as the downside of crypto mining, the energy and power needed to mint new Bitcoins continues to increase. As the network grows, so does the need for more power, placing great strain on the electricity needs of any given mining area. However, there are companies working to change this. Groups like Gryphon Digital Mining are actively working towards a greener Bitcoin mining process. They are aiming to work off of 100% renewable energy in the near future to ensure the longevity of the cryptocurrency mining industry.
3. No Guaranteed Return
Maybe you set up your computer, you bought high-end hardware and you’re ready to mine. That in now way guarantees a return on effort. Bitcoin mining is extremely competitive and with a finite supply of the cryptocurrency, not everyone will walk away with a huge payout. Being part of a mining pool might help to increase your chances of some return but with the large amount of Bitcoin miners now in the network, it gets harder and harder every day to be successful. That being said, if you’re willing to put in the time, it might be a good way to make money. It can take a lot of work to mine a Bitcoin but if you are patient, willing to learn and have the capital to invest in the best equipment, it could all be worth it.
Bitcoin mining has greatly increased in popularity over the years. With that comes both the good and the bad. There are more opportunities for new miners to join established groups and to potentially see a return but there are also more fish in the sea, all chasing a finite cryptocurrency. With costly setup and upfront investments, there is a risk that you may not break even as a beginner Bitcoin miner. With the added overhead costs of electricity, one should consider all factors before starting out. If you’ve done the calculations and still want to pursue the illustrious Bitcoin, look at companies wanting to improve the industry and make the space more environmentally friendly like Gryphon Digital Mining. By supporting groups looking to change mining for the better, it will lead to a more sustainable industry in the long run.