How to stay profitable after the halving of bitcoin

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Date Published

10/15/2019

The halving of bitcoin is slated to take place in the spring of 2020, at which point the profitability of all but the most efficient mining operations will be greatly challenged. To stay in the green, most will either be forced to upgrade their equipment or to shut down their mining operations altogether.

But there are several steps miners can take to set themselves up for sustained profitability in the wake of the halving. To understand all the factors at play, we must look at everything that goes into mining profitability in the first place. This includes:

  • Hash rate
  • Power consumption
  • Power cost
  • Difficulty
  • Block reward
  • And the exchange rate of BTC to USD

Hash rate

Hash rate is the estimated number of tera hashes per second the bitcoin network is performing. It is a general measure of the processing power of the network, and of how many times the network can attempt to add a block to the bitcoin blockchain every second.

Hash rate is a good indicator of the network’s health, and while it can’t be precisely measured, it can be estimated based on the current difficulty and time of block confirmation of bitcoin.

It’s expected that the bitcoin price will ultimately increase following the halving, as it has after previous halvings, which will bode well for hash rate as it should keep miners interested in the network. At least, miners who are able to operate efficiently enough to still turn a profit. There are a couple key factors at play in that regard.

Power consumption

The electrical efficiency of your mining devices has a massive impact on your overall profitability. If you’re expending excess energy and paying more in electrical costs than you’re receiving as a resulting of solving a block, you’re going to end up in the red.

A more efficient device will lead to greater profits in less time while also expending less energy, thus reducing your costs. Such efficient machines are going to be needed to correct for the reduction in block reward following the halving. Machines such as the Antminer S9 are going to become essentially obsolete and will need to be replaced with newer, more efficient miners like the Antminer S17.

Power cost

Power cost also has a big impact on profitability and is directly related to the power consumption of your miners – as well as to the cost of electricity at the location of your operation. As more efficient miners are needed to keep up with the reduced revenue following the halving, you’ll also need to run your operation in a place with low energy costs.

Mining colocation centers offer high power and low costs of energy, along with several other benefits such as 24/7 security and equipment oversight. Compute North has several state-of-the-art facilities throughout the country to help miners make the most of their operations at a fraction of the cost and consumption.

Difficulty

Mining bitcoin is not easy, and it has only gotten harder as more miners have joined the network. The difficulty of mining a block correlates with overall network hash rate, and thus with competition. The more people trying to solve a block, the more difficult it is to do so.

You increase your chances by employing high-powered ASICs that are efficient and always running. The ultimate goal is to solve a block that is worth more than it costs you to solve. You can also improve your odds by joining a mining pool, in which your profits are shared with the other members of the pool and vice versa.

It’s not expected for the halving to have a big impact on mining difficulty. It may adjust slightly to make up for no-longer-profitable miners leaving the network, which will allow for the remaining miners to mine more profitably and to drive forward the hash rate, price, and difficulty at large.

Block reward

This is what the halving is all about. The current block reward of 12.5 BTC will be halved to 6.25 in the spring, and the revenue of all miners on the network will be cut in half, as well. The only way to make up for this is to increase your mining power and reduce your operational costs.

Exchange rate of BTC to USD

The price of bitcoin has historically responded well to previous halvings – for those miners capable of remaining in the market after the fact.

Stay profitable through the halving with Compute North

When the bitcoin block reward halves, so will the total revenue generated by all miners. If your hash rate, power consumption, and power cost all stay the same as before, you’re operation is doomed.

Unless you upgrade your miner and your hosting strategy. Compute North offers the latest in Bitmain Antminers and provides hosting via colocation capable of elevating your profits in the long term. Contact us today for a quote on equipment and to reserve your hosting space.

Date Published

10/15/2019

Author

First Scribe

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