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Advice on Bitcoin Mining

Calculating the Profitability of Bitcoin Mining

Bitcoin mining is the process of earning Bitcoins with the use of specialized software that follows a mathematical formula in solving blocks on the Bitcoin network. The mining of Bitcoin helps to secure the Bitcoin network, the ceasing of which would make the cryptocurrency susceptible to attacks or even cause it to shut down.

Mining is therefore very important to the Bitcoin network to sustain it. Miners who can solve a block successfully are usually rewarded for their service with a fixed amount of 12.5 worth of Bitcoins.

bitcoin mining

It is estimated that there are over 21 million Bitcoins available that haven’t yet been mined. With the ever-increasing popularity of cryptocurrency in recent times and the adoption of Bitcoin as a worldwide payment system, it is evident that the profit earning potential from the mining of Bitcoin is enormous.

While mining Bitcoins today is very competitive, it is still possible for you to operate a successful and profitable farm. If you’re interested in becoming a Bitcoin miner and staking your claim on it, it is important that you calculate the profitability first.

Several factors determine the profitability of Bitcoin mining. This report will help you analyze each of these factors in detail and reveal how you can calculate the profitability of Bitcoin mining.

Things to Keep in Mind when calculating If Bitcoin Mining is Profitable Enough

To calculate the mining profitability of Bitcoins, we typically use a mining profitability calculator. A mining profitability calculator gives you a general overview of how much you are expected to earn as a Bitcoin miner. It takes into account the different parameters or factors to give you an estimate of your projected profits.

These different parameters are the things you should keep in mind when calculating if Bitcoin mining is profitable enough for you.

  • Cost of hardware
  • Cost of software
  • Cost of electricity

Cost of Hardware

Bitcoin mining requires the use of specialized hardware. The cost of hardware is a very important factor that you should keep in mind when calculating if Bitcoin mining is profitable enough for you.

Normally, the upfront cost of any mining hardware is the largest expense you will pay when starting out on your new mining farm. You’re most likely not going to get rich by mining from home unless you purchase some heavy-duty equipment.

Just as good quality computers cost more money, good mining hardware is usually expensive. Fortunately, there aren’t a lot of choices out there for you to pick from so finding suitable and efficient hardware should be easy.

When purchasing mining hardware, it is important that you take note of the following metrics: Th/s or Gh/s, and W/GH.

Th/s measures a miner’s terahashes per second (Th/s) while Gh/s measures a miner’s gigahashes per second (Gh/s). Both metrics are called hash rates. A hash rate is the measure of a miner’s computational power, the higher the miner’s hash rate, the more powerful the miner.

A miner with an extensive amount of hash power will likely be able to find more solutions, thus earning more Bitcoins. It is important to note, however, that the hash power is not the ultimate criteria for determining good mining hardware. You should go for a miner that has both a high hash rate and guarantees efficient use of electricity.

W/GH is the metric used to measure the efficiency of a Bitcoin mining hardware. Efficiency here means being able to manage electricity without eating up your profits. Below is a list of some of the best Bitcoin mining hardware currently available. You should include this breakdown when calculating your Bitcoin mining profitability.

1. The Antminer S7

The Antminer S7 is currently the most efficient miner available on the market. It is manufactured by Bitmain, and it operates at 0.25 W/GH which is very low and favorable for mining. A brand new Antminer S7 costs $440 while a second-hand one costs around $440-$674. You can enjoy good second-hand value with the S7, and even with the increased difficulty levels, you can still make 0.15BTC a month.

2. The Antminer S9

One of the most advanced miners ever invented is the Antminer S9. It is also manufactured by Bitmain and has a mining rate of 14 TH/s. A brand new S9 costs around $1831 to $2016, and there aren’t any second-hand ones available. The S9 is capable of mining around 0.5BTC every month which makes it seem quite profitable. At the current difficulty level, you can make around 0.11BTC a month with it.

3. The Avalon6

The Avalon6 from Canaan Creative is another powerful Bitcoin mining hardware that is available at a competitive price and is also a great alternative to the Bitmain miners. It has a very reasonable hash rater and can generate a revenue of 0.12BTC each month. A brand new Avalon6 costs $550, while a second-hand one costs around $360 to $875.

Cost of Software

The cost of software is also a very important factor you must consider when calculating the profitability of Bitcoin mining. The software of a Bitcoin mining operation usually monitors the performance of the hardware on which they are installed. They transmit super calculations performed by the hardware on which they are installed to the Blockchain network.

There are plenty of Bitcoin mining software options. They each are designed to work with either Windows, Mac or Linux Operating systems. They are available to download for free, but they do not all produce the same output.

The output which a particular software produces determines its value and its overall profit-generating potential. Some of the best and popular Bitcoin mining software available today are listed below.

1. CGminer

The CGminer software is currently the most popular GPU/FPGA/ASIC miner. Its features include overclocking, monitoring, fan speed control, remote interface capabilities, self-detection of new blocks with a minidatabase, binary loading of kernels, multi GPU support, CPU mining support and much more. It can be downloaded for free here.

2. BFGminer T

he BFGminer software is an offshoot of the CGminer. It possesses similar design specs with the CGminer but without the central focus on GPUs. It is a super versatile software with features which include clocking, monitoring, remote interface capabilities, vector support, integrated overclocking and fan control, ADL device reordering by PCI bus ID, support for mining with free Mesa/LLVM and so much more. You can download BFGminer for free here.

3. BitMinter

The BitMinter may not be the most popular mining software, but it’s certainly one of the best. According to the creators of BitMinter, it’s all about making Bitcoin mining “easy” and winning “high payouts.” This software belongs to a mining pool and promises good mining speed, long polling to reduce stale work and high mining profits. It is simple to install and can be accessed via the software’s official website by first registering and filling out the pool sign-up form.

4. BTCMiner

Another great software that delivers good profits for your Bitcoin mining operation is BTCMiner software. This software runs mainly on the Linux and Windows operative systems and features a ready-to-use Bitstream, which does not require a license or any Xilinx Software. It is a unique software which automatically selects the frequency with the highest rate of valid hashes. You can download it for free here.

Cost of Electricity

The cost of electricity is a major determinant of the profitability of any Bitcoin mining operation. Mining consumes a lot of electricity, and that costs money. It is therefore important that you have stable and affordable electricity because electricity costs can make or break your mining operation.

Electricity costs are one of the most expensive things in any mining operation. The monthly profit you make from your mining operation should be more than enough to cover your monthly electricity bill. Check how many hashes you are getting for every watt of electricity you consume. You can do this by dividing the hash count by the number of watts and confirm from your electricity bill how much it translates to in hard cash.

To earn the most profit from your Bitcoin mining operation, it is recommended that you mine from a location where electricity is cheaper. China and Venezuela have very cheap electricity costs; hence, the bulk of mining operations are located there. In the U.S., Washington State has the cheapest electricity, so mining is more concentrated there.

How to Calculate Bitcoin Mining Profitability

After you have gotten the values for all the metrics and compiled the cost of hardware, cost of software, pool fees, and electricity, it’s now time for you to calculate your Bitcoin mining profitability. To do this, you would need a Bitcoin mining calculator.

A simple Bitcoin mining calculator helps you to determine how much profit you can make. Some reputable Bitcoin mining calculators you can use include:

1. CryptoCompare

This calculator can be used for calculating a wide variety of other cryptocurrencies apart from Bitcoin. It takes into account the various parameters including hashing power (H/s, GH/s, KH/s, MH/s, and TH/s), power consumption (w), and Cost per KW/h ($). It can be used to determine the daily, weekly, monthly, and even yearly profit of a Bitcoin mining operation. You can find the CryptoCompare calculator here

2. 99bitcoins

The simple Bitcoin mining calculator from 99bitcoins takes into account all relevant costs including Difficulty factor, Hash rate, BTC/Block reward, USD/BTC exchange rate, Pool fee %, Power (Watts), Power Cost (USD/kWh), and Hardware Costs (USD). You can find this calculator here.

3. Coinwarz

The Coinwarz Bitcoin mining calculator only needs you to enter your Bitcoin mining hardware hash rate in GH/s, the power wattage and your cost of electricity in dollars per kilowatt-hour ($/kWh). It will automatically enter the current Bitcoin difficulty, Bitcoin block reward, and Bitcoin price for you, and generates your estimated expected Bitcoin earnings. It can give you either hourly, daily, weekly, monthly and annually profit projections. You can find the Coinwarz BTC calculator here.

Determining your expected profits before going into any mining operation is very important. With the above costs accounted for, and the Difficulty level and exchange rates in mind, you should be able to get a rough estimate of your mining profit potential. Note, however, that if you’re using a mining pool, your estimated earnings can vary greatly depending on the pools efficiency, fees, and stale/reject/orphan rate.