When it comes to potential ways to make money, the cryptocurrency group is commonly divided into three camps.
The first is occupied by traders who assume that trading is the only way to benefit from market fluctuations.
Long-term investors, also known as Hodlers, are the second form of investor. They assume a cryptocurrency's (usually Bitcoin's) value will rise significantly over time, so they don't exchange it; instead, they keep it.
The third option: miners. There are people who have spent a significant sum of money on hardware in order to mine a specific cryptocurrency.
Bitcoin Mining
Even though several different coins are “mined,” we will use Bitcoin as an example and clarification since it was the first cryptocurrency to use this idea and was the first to coin the word “mining” in the industry.
The “Proof-of-Work” consensus algorithm is used by bitcoin miners to solve complex computational math problems using high-powered computers. The outcome of this initiative is twofold: miners “create” new bitcoins while also assisting in the verification of each transaction, ensuring that the payment network remains stable and efficient.
The above occurs when miners group transactions into "blocks" and then link them to a public ledger known as a "blockchain." They are ensuring that the transactions are correct and that no double-spending occurs by doing so.
Miners are rewarded with bitcoins for completing each transaction, and the number of new coins issued for each mined block is referred to as the "block reward." Every four years, it is cut in half by a process known as
Bitcoin Halving
The Bitcoin halving happens every four years, halving the incentives that miners receive for their efforts. There have been three prior incidents, one in 2012, second in 2016 and the other in 2020. The former reduced the incentive for a solved block from 50 to 25 bitcoins, while the second reduced it from 25 to 12.5 bitcoins and the latter 12.5 to 6.25.
It occurs every 210,000 blocks, and the next one will occur 2024, with the rewards falling to 3.125 BTC. This takes us back to our original question: will Bitcoin mining be profitable in 2021? We'll get 3.125 BTC
Is it still worth it?
The big question has arrived, but it does not have a simple answer. It consists of more complicated problems that must be clarified before the result can be decided. Let's start with the four most relevant factors to remember.
The cost of powering computer devices with electricity.
Mining difficulty
The cost and availability of computer systems
Competition
The first is a little more subjective and is based mostly on location, as energy costs vary depending on where the mining machine is located. In addition, bills fluctuate with the seasons, and in most cases, the price is lower at night.
The hash rate of Bitcoin, which calculates transaction validation in hashes per second, is closely linked to the difficulty factor. The network is built to generate a certain number of bitcoins per second, and as more miners enter the network, the complexity rises to maintain a constant level of distribution.
Even though the availability of computing resources seems to solve all problems, this isn't always the case. Bitcoin mining became immensely common during the parabolic price rise of 2017 and the increased media coverage, and many people tried to get in. Hardware became scarce quickly, causing prices to skyrocket, leaving many potential miners “on the street.” Similar equipment can now be found more conveniently and at a lower price.
As previously mentioned, rivalry may be the most important factor. Large mining companies have entered the market, as we can see from the previous paragraph, leaving less grinding materials for the person.
We can see why the question doesn't have a clear "yes" or "no" answer. In reality, each potential miner should weigh all of those factors before deciding whether or not it is worthwhile for him. But, before you go to the hardware store to make big transactions with the purpose of Bitcoin mining, double-check that you've completed all of your calculations.
Final thoughts
In recent years, mining has developed into a multibillion-dollar industry, with a slew of major players vying for greater power. Individual miners, on the other hand, are largely unaffected by these shifts, and many continue to mine and benefit.
On the surface, this will deter potential entrants who wonder if it would be more beneficial to simply invest in the largest cryptocurrency and wait for it to expand over time. However, while growth is not guaranteed, mining rewards people with BTC while also keeping the network stable and validating transactions, making it one of the most important pieces of the Bitcoin puzzle.