Cryptocurrency mining – is it still worth it?
About three years ago, there was a boom for cryptocurrency digging. Investors dug up Bitcoin with their computers, excavators stored in rented flats and garages or even with the help of twisted software installed on the equipment at work. This effect is long gone. What was the reason and does mining still make sense?
What is cryptocurrency mining?
Cryptocurrency digging is the activity of approving new blocks and attaching them to the chain. For the block to be dug up, the excavator must solve an advanced cryptographic operation. The solution is the so-called hash – a sequence of characters that meets a specific equation. If the hash proves to be correct, a new block will be dugout, and the miner or mine will be rewarded with a sufficient number of cryptocurrency units.
However, the prize is variable and in many cases – Bitcoin, for example – is reduced twice every now and then. The difficulty of the equation is also regulated by the source code itself, which prevents new blocks from being dug out too quickly if there is an accumulation of miners and excavators. In other words, the more people who take part in mining, the more difficult it becomes.
Why is digging up Bitcoin not worth it anymore?
At the moment, digging up Bitcoins became a completely unprofitable investment. It is due to two overlapping phenomena – too many miners and a cyclical or longer-term bear market.
A large number of miners, especially those combined in groups, is always bad news for an investor who wants to start digging on his own. There is very little chance that a single person will dig a block – giant mines have almost wholly monopolised the market. Also, the price of digging equipment and electricity has increased in recent years, which also affects the profitability of mines.
There is also the problem of Bitcoin’s bear market stage, where Bitcoin has been for a year. We want to remind you that, compared to December last year, this currency has lost more than 70% of its value and, at this point in, the prices of excavators, combined with the consumption of electricity alone, are too high to invest in digging worthwhile.
What about the other cryptocurrencies?
Some miners have turned to finer altcoins, which can still be worth digging up. The vast majority of this type of cryptocurrency, meanwhile, is characterised by an unstable exchange rate, which means that investors prefer to buy it on the stock exchange and resell it at a high price, rather than spend time on meticulous extraction. It does not mean, of course, that there are no longer any miners at all – simply, there are far fewer of them compared with a year ago.