Digital currency like bitcoin has continued to take over the world over the years and it’s more ground. Although the currency has been on a roller coaster ride, it is experiencing massive growth in 2021.
Many cryptocurrencies have been introduced in the digital market and they are changing the trend. But Bitcoin still maintained its position as the most valuable decentralized cryptocurrency in the digital market today. This has also made the process of mining bitcoin valuable.
What is Bitcoin?
Bitcoin is a decentralized digital currency stored in a digital wallet. It can be sent from one user to another on the bitcoin network without an intermediary. Bitcoin is used for trading, shopping, investments, and many more. Bitcoin is powered by a decentralized blockchain ledger that tracks transactions in the cryptocurrency. The blockchain verifies and processes transactions to create a new bitcoin.
What is Bitcoin Mining?
Bitcoin mining is a way of introducing new bitcoins into circulation. It is a process of getting a new bitcoin by solving computerized problems that verify bitcoin transactions. These transactions provide security to the bitcoin network and also reward the miner with a predetermined amount of bitcoin.
Cryptocurrency mining is an important component of the digital market coins. Bitcoin mining helps validate bitcoin transactions and infuse the market. Many digital currencies such as Ethereum, dogecoin, XRP, and others are now moving from proof of work to proof of stake. This helps reduce the dependency on mining but does not eradicate its existence.
With the development of technology, professional mining centers have been created with enormous computing power. Over the years, the interest in mining bitcoin has increased greatly as the price of bitcoin is skyrocketing. But mining bitcoin is complex and sometimes costly.
How does bitcoin mining work?
To complete a mining process, miners solve complex math problems that require the use of electricity and sophisticated computers. It requires computer hardware known as Application Specific Integrated Circuit (ASIC).
Mining with ASIC consumes an enormous amount of electricity. These have limited the profit of miners and draw much criticism in the digital marketplace.
Every bitcoin transaction is recorded in a blockchain and new transactions are sent to miners for verification. If the miners successfully solve the problem and add a block to the blockchain, they will be rewarded with a new bitcoin. But the volatility of the price of bitcoin has made it difficult for miners to know the exact worth of the bitcoin they receive.
Why is bitcoin mining still profitable?
Many factors determine if bitcoin is profitable. These include the cost of electricity, profitability, and many more.
Here is what makes bitcoin mining profitable.
Awareness and acceptance
Bitcoin is the first cryptocurrency to hit the digital market and has gained more awareness and acceptance over the years. The cryptocurrency has received acceptance from financial entities, traders, investors, bitcoin miners, and others.
According to research, many large financial institutions have started during transactions with bitcoin. bitcoin. This has pushed its growth and increased its values in the world. It has also shown an unprecedented level of exposure to bitcoin among institutional investors.
Bitcoin has infinite supply therefore it will never lose its value. According to bitcoin enthusiasts, the bitcoin supply is a set of 21 million coins and 18.77 million has already been mined. Miners now have smaller amounts of bitcoin to mine as more people accumulate the cryptocurrency. To ease the growth of bitcoin and reduce its expansion, through a halving process.
Bitcoin halving is a process where the reward for bitcoin mining is divided into two. This doubles the numbers of the remaining bitcoin left to be mined. Halving events happen every four years when 210000 blocks are created.
One of the biggest benefits of bitcoin is the profit it brings to miners and the economy. According to a report, the energy consumed during the process of bitcoin mining is equivalent to the annual carbon footprint of some countries.
The increase in bitcoin demand and mining has also brought about an increase in energy consumption. Bitcoin mining is profitable for many individuals as they can easily obtain equipment to carry it out. Many machines have adapted to the Application Specific Integrated to stay competitive.
The bottom line
With the increase in cryptocurrency demand, Bitcoin is here to stay. The use of new technologies and acceptance has also made bitcoin mining profitable. But it is difficult and expensive to carry out. Also, bitcoin volatility has added to the uncertainties of its profit.