Yesterday was an exploration of Bitcoin for the first time in several. It’s frustrating to see something you once bought at $250 now worth $2700. Water under the bridge, right?
So, a little digging was necessary. Can someone make money digitally mining for Bitcoin as the equations get harder and harder? Right now, it looks possible.
Mining for Bitcoin and other digital currencies requires ever more powerful GPU’s, and now ASICs (application specific integrated circuits) miners. A GPU is the processor used primarily in computer graphics cards and was the mining standard for a long time. It is now necessary for ASICs to profitably mine for the coins. These processors are made for one purpose only, mining Bitcoin. The creator of Bitcoin, who is still a mystery and used the name Satoshi Nakamoto, intended for the coins to be mined by regular computer CPU’s, but the desire for more and more hashing power, has created hardware far beyond what was intended.
Bitcoin was established as a limited amount of coins to be dispersed over time through an ever harder mathematical equation required to mine those coins. Only 21 million Bitcoins will ever exist and will all be found by 2140. Coins are broken down into 100,000,000 satoshis each, which are like pennies that make up a dollar. Approximately every 14 days the equation gets harder after 2016 blocks.
It’s a lot to understand. So, let’s talk money.
While looking at the charts it became clear that the equation for mining was based on whether the price was going up faster than the difficulty. The equipment isn’t cheap and the electrical bills can add up fast. One must ask themselves if it is possible to make a decent return of investment.
Since December 18th, 2016 the level of mining difficulty has increased by double. In the same period, the value has risen from $700 to a current trading range between $2600 - $3300. Essentially a 100% increase in difficulty and a 280% increase. Some money has been made. Should the trend continue, mining is very profitable, even for a small miner.
While miners in China utilize massive amounts of equipment with free energy, mining systems can still be bought that work for individuals that join Bitcoin mining collectives. The best systems are made by Antminer, with their new S9 system that mines at 13.5 TH/s (essentially 13.5 terrahashes per second or 13.5 trillion per second) runs about $2600 on Amazon and then requires a power supply that is about $150. In order to achieve positive ROI the cost of the miner must be covered after subtracting for energy costs. Earnings on such a machine would currently be $393 / month at current price and difficulty. They would fall to an estimated $339 at the next 2-week difficulty level. The drop of 14% would require and appreciation of Bitcoin value well above 14% to be profitable. If the price increase was the same as the difficulty increase, don’t mine Bitcoin. At that return you have to buy it outright in order to make money.
Why does it have to be well above? Think of walking toward a door but each step is half the distance of the next. Infinity is spent walking toward the door. You’ll never arrive at the door. If Bitcoin merely kept up with the increases in difficulty, your equipment would never be paid off. This equation becomes more favorable by buying older equipment that equal the same TH/s and is well depreciated. The same 13.5 TH/s of the new $2600 machine can be achieved with three 4.7 TH/s machines that run $650 each with power supply. While the energy cost is higher, saving the money upfront when they mine faster now, makes it worthwhile.
Based on the last six months, your equipment would be paid off and you’d be making money right now.
If you want to mine, ask yourself where Bitcoin is going in price. Someday it could be worth zero or each one could be worth $1 million. If you see it reaching $1 million, buy as much equipment as you can and start mining right now. You might just get rich.
These are the thoughts formulated yesterday with a few looks at charts and prices. zenruption will keep up with new digital coin trends as they arrive and keep you informed.
Digital currency is exciting, disruptive and bold. We think it is very zenruptive.