Why you should still mine bitcoin in 2020
In the early days of bitcoin, mining was dominated by hobbyists with an interest and passion for the nascent crypto mining space. Due to the minimal barrier to entry and relatively low competition, miners could earn rewards in minutes with just a passable computer setup from the comforts of their own homes.
As the years have gone on, however, mining profitability has become less of a surefire certainty. As miners have continued to join the network, the difficulty of solving blocks and earning rewards has grown, as well.
On top of that, the block reward has been halved three times (most recently in May of 2020) and is now down to 6.25 BTC. This has resulted in increased scarcity and a greater need for computing power in order to turn a profit.
This trend – as well as the rise of professional data centers – has led to many in 2020 questioning whether or not mining is still a worthwhile pursuit. Would it be better to focus solely on buying and trading bitcoin instead of mining?
Here is why mining is still a smart and profitable strategy to pursue in 2020 and beyond.
Mining vs. Buying
You may be wondering, “What is the difference between mining and buying bitcoin?”
Mining is the act of bringing new units of cryptocurrency into circulation. In the case of bitcoin, a new block on the blockchain is solved roughly every 10 minutes, at which point new bitcoin are brought into existence to be held, traded, exchanged, etc.
To remain profitable, the price of bitcoin must exceed the total cost of mining (which includes electricity, miner hosting, hardware costs, and more).
Buying bitcoin is the act of purchasing units that have already been mined into circulation and are now able to be transferred between parties. The only cost associated in this case is the cost to purchase. Ideally, you are purchasing bitcoin for less than you believe it is (or will be) worth in the future. You can currently buy and sell bitcoin via exchanges like Coinbase.
So why mine?
While buying may seem like the better option given its reduced cost variables, mining has a number of considerable upsides – it can be accomplished at a low cost, it puts bitcoin securely in your possession from the moment it is mined, and it is the best way to ensure the continued health and operability of the network.
Here are several key strengths currently lending themselves to profitable mining.
The power of hardware
As the landscape of the bitcoin network grows more competitive, miner manufacturers continue to roll out highly advanced hardware to support mining efforts more profitably and efficiently. Names like Bitmain, MicroBT, and more are consistently producing cutting-edge miners capable of adapting to shifts in the market.
Not only are data centers that are designed specifically for blockchain and other compute–intensive operations becoming more prominent across the U.S., but these same companies are also investing in technological innovations around software for demand response programs, operational strategies for quick deployment and scalability, firmware for increased miner efficiency, and miner management.
Many of these forward–looking projects aim to attract global customers that are seeking a trusted hosting provider, with the capabilities to support an efficient mining operation. Many of these facilities make use of low-cost, renewable energy sources, meaning operational costs and hosting fees are reduced for users while profitability benefits.
Certain hosting providers are also offering managed services to take care of onsite support issues, hardware optimization, rules-based reboots, and more.
The post-halving bitcoin price climb
The first two bitcoin halving events in 2012 and 2016 saw price increases in the months and years that followed – and we have already seen a similar trend in the three months since the most recent halving in May.
This price increase makes right now an outstanding time to invest in mining operations in 2020 and beyond.
For those concerned about the profitability of a solo mining operation, mining pools can represent a great alternative. In a mining pool, a group of miners agrees to work together to solve blocks and then shares the consequent rewards between all members.
This strategy increases the group’s mining speed while also reducing difficulty. While it is true that a pool sees a reduction in reward per member per block, the offsetting increase in computing power means there is a greater likelihood of solving blocks and seeing frequent rewards.
Calculate your profitability
Before getting involved in crypto mining, it is smart to calculate your projected profitability as best you can. There are mining profitability calculators all over the web that can help you do this while considering factors like hash power, power costs, miner difficulty, and more.
In an environment of decreasing block reward and increasing network difficulty, it is imperative that miners find additional ways to improve their revenue. Ethan Vera, Co-Founder and CEO of Luxor Tech, suggests that one of the more innovative solutions is to implement profit-switching algorithms.
Profit-switching is chain-agnostic mining, meaning that hashrate is deployed to multiple blockchains rather than just one.
From a technical standpoint, it is implemented either at the pool level or by a third-party application. At a pool level, such as Luxor, the mining pool automatically assigns work to your machine and collects your hashrate. The pool then submits the hashrate to the most profitable coin’s network. This way, the miner is paid out for the hashrate they submit, at a higher (or equal to) payout than a normal pool.
Start mining cryptocurrency today with Compute North
As the crypto landscape continues to grow, there has never been a better time to get involved and invest in the future of this cutting-edge technology.
Compute North owns and operates state-of-the-art facilities designed specifically to make the most of blockchain technology. We have the vision to adapt to market demands, recognizing there are many applications being designed that do not require maximum uptime and hyper-scale redundancy. Each of our campuses is constructed in a strategic location across the U.S. to allow users to focus solely on ROI and less on logistics.
With years of mining colocation experience, we have best-in-class solutions designed to help you maximize business operations. Benefits of our services include:
- Cost-competitive infrastructure powered by renewable energy
- Secure environment to keep your hardware and your data safe
- Core infrastructure with power, space, ambient air cooling, internet access, physical racks and security
- And more