Bitcoin mining has received a lot of attention lately. Since Ghash suspended it’s cloud mining operation, many people have been asking a couple of very simple, but important, questions: Is Bitcoin Mining worth it? Is it possible to profitably mine bitcoins? Well the answer is complicated, and mining bitcoins can be a great financial choice…or lead to financial ruin. Bitcoin mining has a complicated history, but we can learn much from looking at what has happened over the past few years.
What Made Bitcoin Mining Worthwhile Before?
Mining bitcoins has been a very profitable venture for a very long time. While many people who tried Bitcoin mining failed to profit, didn’t receive their mining rigs due to fraudulent or inept companies, or barely reached a positive ROI on their Bitcoin mining attempts, that was not true for the more experienced miners. Those who had successfully optimized GPUs, or aquired FPGAs in 2012 and early 2013, as well as those that were able to obtain early ASICs, or were lucky enough to “bet” on the right Bitcoin mining hardware company for the following generations of ASICs have made incredible profit.
However, the business of Bitcoin mining experienced a fundamental shift between when GPUs / FPGAs were the norm, and the rise of ASICs bitcoin mining hardware. These ASICs completely changed the game by increasing the efficiency of mining bitcoins by many orders of magnitude, and completely destroyed the profitability of mining with a traditional computer.
Why Mining Bitcoins With GPUs Was Worth It Until 2013
Before the ASICs, Bitcoin mining was worth it simply because the difficulty stayed quite close to Bitcoin’s price. This was true for a few reasons:
- Many Bitcoin miners were only mining part-time, and were simply using GPUs that they already had purchased for gaming to mine when they were not using their computer. This completely removed the equipment cost from the ROI equation, as the ability to effectively mine bitcoins was just a benefit of having a decent gaming computer. Of course, mining at a high intensity had the potential to burn GPUs out, but smart part-time miners would only mine when the difficulty / price really made it worthwhile. Also, these individuals would alter their system settings, as well as the settings for the Bitcoin mining software, to lower the stress placed on their hardware, as well as increase their power efficiency.
- At that time, there were very few huge Bitcoin mining farms. The average miner was not competing with datacenters full of machines…they were competing with one another. This meant that individuals who lived in areas with low kWh (kilowatt-hour) prices could easily mine enough bitcoins to cover any additional power costs, and even those in areas with average – slightly above average electricity costs could profit from mining if they had an efficient setup.
- A large portion of the mining community, at that time, were not mining for profit alone. They were mining to support the Bitcoin network, and/or to obtain BTC that was “clean” and truly anonymous (as long as the were taking certain security measures).
Read more: Is Bitcoin Mining Worth It? | 99Bitcoins