During its early days, Bitcoin mining was called a gold rush. Bitcoin, a peer-to-peer electronic currency has not only developed opportunities for technological advancements but also for profitable endeavors.

Calculating profit

Since its incredible increase in value, Bitcoin has gotten people wondering if they should start mining. But is mining profitable? Well, that depends on how much you are willing to invest. Bitcoin mining profitability depends on many different factors. In order to find out how much profit you can earn from Bitcoin mining, there have been devised “mining profitability calculators” which calculate profitability for each factor in particular.

These calculators work by inputting different parameters like electricity cost, initial hardware investment, hash power and other variables and giving an estimate of what profit you may obtain.

Profit variables

Hash rate

A hash is a mathematical equation the mining hardware needs to solve. The rate at which this equation is solved is called the hash rate. As more miners gather in the Bitcoin network, the higher that network’s hash rate becomes.

Hash rate also refers to a miner’s performance. Performance is measured in MH/s second), GH/s TH/s and even PH/s (Megahas/Gigahash/Terrahash/Petahash per second).

Mining difficulty

The difficulty of solving the hashes has to increase in order to adjust to the networks hash rate increase, meaning that more joining miners will make Bitcoins harder to mine.

Electricity rate

Mining consumes a lot of electrical power. You can find out your electricity rate on your monthly electricity bill.

Energy consumption

Miners have different hardware and that means they consume different amounts of power. Find out how many watts your hardware consumes by checking the internet or in your hardware’s specifications.

Conversion rate

Exchange rates cannot be predicted so it’s hard to say if Bitcoin mining will be profitable.

Bitcoins per block

Each time a hash is solved, a set number of bitcoins are generated. The number of bitcoins per block start at 50 and is halved every 210,000 blocks. The number of bitcoins resulted per block is 12.5.

Pool fees

A mining pool is a group of miners that share their processing power to solve blocks more effectively. Once the pool has mined a bitcoin, the profits are split among the members depending on the miner’s hash rate. The mining platform deducts some fees for it to maintain its operations.

Profitability decline per year

Since no one can predict how many miners will join the network, no one can also predict how and if the mining difficulty will increase over time. In your profitability calculator you can insert an annual profitability decline factor which will help estimate the increase in difficulty.

Cloud mining

Cloud mining is an alternative to traditional mining that rents processing power to a miner for a fee. This means that you don’t have to buy, store and maintain physical mining hardware as the mining company does that in your stead.

As good as it may sound, cloud mining sites are profitable up to a point, and those that seem profitable are usually scams or elaborate schemes.

Conclusion

Assuming that you dispose of time and money, and you are willing to invest in good mining equipment for the long run, you could make a profit by mining Bitcoins.