Today’s post is all about understanding the Bitcoin mining process and how much money you can make from Bitcoin mining.
How Bitcoin Mining Works?
Unlike the paper currency issued by the banking system, Bitcoins are the digital form of currencies. Bitcoin Mining is decentralized authority, meaning that it can carry out transaction of funds to one account from the other account. The system functions in a decentralized manner and updates the ledger of Bitcoin which is known as the Blockchain.
Bitcoin miners can take part to update the ledger of Bitcoin transaction, by guessing a specific number that is the solution to the puzzle generated by system. Of course, your computer does the guess for you!
That is why you need to invest in a powerful computer with great cooling, equipment, and storage to race against the competitive miners. The first miner to solve the hashing puzzle gets rewarded Bitcoins for updating the ledger of transactions, and get the chance to write for the next page of Bitcoin transactions of the blockchain.
The block you’ve created with the right solution is then sent to the network of participating computers to validate it. Every computer in the system confirms to the given solution and updates their copy of Bitcoin transaction in the ledger with the transaction you perform to add in the blockchain. All of these transactions validated by the Network of Bitcoins are irreversible.
How much can You Earn with Bitcoin Mining?
The Bitcoin Miners work as auditors of the previous Bitcoin transactions. The profitability of Bitcoin Mining depends on the list of elements such as Bitcoin rewards, mining difficulty, Bitcoin mining software, power consumption, hash rate (miner’s computer performance). The reward generated for the miner by solving the block is in Bitcoins. Back in 2009, it was 50 BTC and the current reward in Bitcoins for one block is 12.5 BTC.
Bitcoin rewards are halved every four years. The last block halving occurred in 2016 and the next is expected to be this year in 2020. It will become 6.25 BTC after halving.
Moreover, to become the first miner and win the solution, they have to invest in powerful computer equipment like a GPU (graphics processing unit), or application-specific integrated circuit (ASIC). This needs you to measure the power consumption of your miner and the monthly electricity bill to power up or cool down your system.
The most important thing here is everything is a variable at hand and no one can really predict how much can you earn with Bitcoin mining in the coming years. The rate of miners joining the network is not constant either. We conclude that there can be no pinpoint accuracy about the profitability of the Bitcoin mining process. However, some people believe that the strategy for Bitcoin trading offers them to earn easily with Bitcoin.
One can employ Bitcoin Calculators to determine the profit you can make from a particular Bitcoin Miner under the relevant expenses of hardware and electricity.