How Much do Bitcoin Miners Make?
Bitcoin Mining Profitability Examined
We’ve talked about how long it takes to mine bitcoin, and more importantly, how long it takes to actually get a bitcoin reward from mining (it’s not the same answer).
But after hearing about Bitcoin millionaires, you might be wondering how much miners really do make, and whether it’s still profitable today.
The answer isn’t cut and dry, but we’ll break it down so you can see for yourself.
What is Bitcoin Mining?
The concept of “mining” bitcoin might seem a little strange, so let’s first define what it actually is.
Mining is when a computer runs complicated formulas that are part of the bitcoin transaction verification process, and earns a reward when the formula is solved. Any time a given miner verifies the transactions that form a block on the blockchain, they’re rewarded with bitcoin.
Over time that reward is halved, which is designed to slow the process of bitcoin creation. Only 21 million bitcoin will ever exist, and that’s slated to happen in about 120 years. The first miners were rewarded 50 BTC for a block, then it dropped to 25, then 12.5 and now 6.25, with each halvening occurring at approximately 4-year intervals. The next halvening, in around 2024, will cut that down to 3.125, and so on until all 21 million have been mined.
Times Have Changed
Back in the day, when Bitcoin first came out (which was 2009), obviously the reward was a lot more bitcoin. But keep in mind that 50 BTC was barely worth anything at the time. (Miners who held onto their stash, however, have seen those 50-BTC rewards become worth half a million dollars each today.)
But the bigger change is that back then, pretty much any computer could handle the calculations. It cost a lot in energy consumption, but you didn’t really need a computing powerhouse to mine bitcoin.
In 2013, new mining software was developed, along with Application Specific Integrated Circuit (ASIC) devices that had up to 100 billion times the ability of older computer processors. These factors made bitcoin mining on a regular old personal computer pretty much impossible. Or at least terribly inefficient.
Power and Difficulty
So first of all, you need a special, super-fast computer with a lot of processing power. Then you need a lot of electrical power to run it. Getting the trend? Gotta have power! You will probably hear talk of “hashing power” to describe this.
Then we have to factor in difficulty, which is measured in “hashes per second” (H/s). Most commonly you’ll see TH/s, which is terrahash per second.
The hash rate tells you the rate of solving the calculation, and this becomes more difficult as more miners enter the network, because only one block with one set of rewards is being finalized every ten minutes. With a million miners, your chance is a million to one for each block. If you don’t hit it, you don’t get the reward.
So again, back in the day there were only a few miners, each completing blocks on a regular basis and earning 50 BTC every time they did. Now there are a ton of miners, some with super-powerful and super-expensive rigs, each completing blocks every now and then, and being rewarded 6.25 BTC each time.
But is Mining Profitable?
You can, in theory, still mine with your computer. But it will be making slow calculations in comparison to other machines, which makes it hard to beat the competition to the prize. Your chances of winning the jackpot are so slim, and the costs to get there so high, that it’s probably not going to be very profitable. You might even lose money during the process.
It’s kind of like entering your old beat-up Buick in a NASCAR race and expecting to win.