How to Calculate Bitcoin Mining Profit

The Foundation: Bitcoin Mining

Bitcoin mining is the procedure by which new bitcoins are circulated. The mining process uses sophisticated hardware to solve complex computational numerical problems. Mining is costly and intensive, yet investors are still interested. Due to the fact miners are rewarded for their efforts with tokens, Bitcoin mining can be lucrative.

Mining for Bitcoin leverages economic motivation and offers a reliable method of ordering data. The ordering of transactions by third parties is decentralized, allowing them to receive monetary compensation for correct behavior. However, the same is true on the reverse— misbehavior will reduce economic resources. Bitcoin mining results are achieved with blocks, mathematically proven to be in the correct order.

How to Calculate Bitcoin Mining Profit

Calculating Bitcoin mining profit involves a number of components to be successful. A Bitcoin mining calculator gives you a rough estimate of energy costs and probability. While this estimate is helpful as a starting tool, you will need to research and consider a few other factors as well. The following aspects are outlined below.

* The network hashrate
* Inceptive hardware costs for all mining gear. This number can be anywhere from $2,500 to $6,000 per Bitcoin machine. This is also referred to as an ASIC miner.
* Mining pools
* Electricity prices
* The future worth of cryptocurrencies such a Bitcoin

The Four Steps to Success

The following four steps will outline everything you need to know about Bitcoin mining. This information will instruct you how to calculate and analyze Bitcoin mining profits so you can make the most advantageous design.

Mining Profitability

If you have sufficient investment capital, mining for Bitcoin can be lucrative, as long as you are making intelligent decisions along the way. Despite mining rewards dropping to 6.25 BTC, the reward is still priced near $400,000. While 6.25 BTC may seem like a good figure to many, that is not the amount ending up in your pocket. There are associated costs that come along with it.

Electricity Prices

The cost of energy plays a significant role in the effectiveness of mining efforts, coupled with the sheer difficulty of mining a brand new Bitcoin. Creating profitable Bitcoin at this stage in the game can be challenging, even with the cryptocurrency at an all-time high. In order to better understand the costs associated with mining, take a look at the following information.

According to statistics, Whatsminer M20S is an ASIC miner that costs $110 in electricity if priced at $0.045kWh. This price is for one month. Keep in mind this is the price for places around the world such as China and Russia. This figure is significantly less compared to the United State’s cost of electricity, priced at $0.12 kWh.

In addition to energy costs, hashrate calculations must also be considered. The global network hashrate your miner would constitute must be calculated in terms of percentage. The network hashrate as of January 2022 is 174 million TH/s or terahashes per second. The formula for hashrate calculations is your hashrate divided by the network hashrate.

Hash Difficulty

Due to the fact one new Bitcoin is mined every 10 minutes around the world, the code for Bitcoin is adjusted to the hash difficulty. Hashrate is defined as the measure of computational power used by miners every second. The hash puzzle becomes more difficult to solve based on the higher level of computing power. If a computer does mine a Bitcoin, the reason is because of speed and chance.

The chances of mining a Bitcoin block on an ASIC miner such as Whatsminer M20S are 1 in 1,470,588. That is over a 1 in a million chance. Flashback to 2009 when Bitcoin was first initiated, the entire process was completed with personal computers instead. The reward in 2009 was 50 BTC. While it is agreed Bitcoin was of very little worth back in 2009, anyone who was ahead of the curve proved to be on the right track.

Every four years, Bitcoin’s code will halve the BTC reward. The rate for this is altered based upon the popularity and utilization of the coin. To give perspective, in 2012, the reward figures dropped to 25 BTC. In 2016, the figures dropped again, to 12.5 BTC. The halving has continued as of 2020, with a current figure of 6.25 BTC. This process is expected to continue until the threshold of 21 million Bitcoin in circulation is met. The next halving is set for 2024. The final Bitcoins will be mined in 2140, according to estimates.

Mining Pools

A mining pool is undoubtedly the most profitable route to begin mining Bitcoin. The collaboration of computing networks will combine hashpower in a mining pool. Mining pool profits are shared amongst everyone who partakes in the pool.

A couple of the oldest pools are F2Pool and Slush Pool. It is worth noting F2Pool is currently the largest Bitcoin mining pool. F2Pool supports approximately 20% of the total Bitcoin network. The payout method of F2Pool reduces the risk for miners dramatically. F2Pool will payout transaction fees and block rewards regardless of the success of block mining. In other words, even if the pool does not successfully mine each block, pool participants are paid transaction fees and block rewards. This type of payment is known as a PPS+ payment. Take a look at the formula used by PPS+ pools for all payouts.

* Bitcoin Hashrate is 85 EH/s, or 85,000,000 TH/s.
* ASIC miner WhatsMiner M20S earns 0.000702 BTC per day with 68 TH/s.
* Pool fees are set between 2.50% and 4.00%.
* Minus pool fees

In order to estimate, if a commission is set at 2.50%, the mining revenue would be 0.00068445 BTC (net). The figure 0.000702 BTC is determined by the miner hashrate of 68 divided by the network hashrate of 85 million. This figure is then multiplied by the number of blocks per day which is 144. It is then multiplied by the block reward of 6.25. To put this into perspective, assuming BTC is priced at $50,000 USD, M20S will have a per day revenue of $34.