Is there money to be made in bitcoin mining

How Much Power It Takes to Create a Bitcoin

Bitcoin may be a useful way to send and receive money, but cryptocurrency isn’t made for free. The computer-based miners who create bitcoins use vast amounts of electrical power in the process. The energy-heavy process leads some experts to suggest that bitcoin harms the environment.

The process, known as «mining,» requires computers around the world to complete rapid calculations to try to solve the same puzzle. It always takes 10 minutes, and the winner is rewarded with some digital bitcoin. Then a new puzzle is generated, and the whole process repeats for another 10 minutes.

In August 2018, a Princeton University associate professor expert in cryptocurrency testified at a hearing of the U.S. Senate Committee on Energy and Natural Resources.

The testimony said that bitcoin mining accounts for nearly 5 gigawatts—or about 1% of the world’s energy use. That is slightly more than what is used by the entire state of Ohio.

Electricity must be made from other sources. The process creates large amounts of greenhouse gases, such as carbon dioxide, methane, and ozone. These allow sunlight to enter the Earth’s atmosphere, but then trap the heat. So, the more electricity produced, the hotter the planet gets.

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As more people learn about bitcoin and mining—and as the price of bitcoin increases—more are using their computers to mine bitcoins. As more people join the network and try to solve these math puzzles, you might expect each puzzle to be solved sooner, but bitcoin is not designed that way.

The software that mines bitcoin is designed so that it always will take 10 minutes for everyone on the network to solve the puzzle. It does that by scaling the difficulty of the puzzle, depending on how many people are trying to solve it.

The more people mining, the harder the puzzle gets. That is why it always will take 10 minutes.

In other words, although the time taken to produce a bitcoin doesn’t vary, the computing power used to produce it does. As more people join the bitcoin network and try to mine bitcoins, it becomes harder, and more computing power and electricity are used for each bitcoin produced. The best bitcoin mining software doesn’t just let you participate. It minimizes downtime, so you can mine more efficiently. That means a near-constant cycle of electricity use.

Calculating the Cost

To understand how to calculate the electrical energy used to power the bitcoin network, you’ll need to learn how bitcoin creation works. First, you calculate how many sums are conducted per second to solve the puzzles. Then find out how much electricity it takes to do each sum.

These sums are called «hashes.» There are so many, you must think in terms of millions (known as megahashes) or billions (gigahashes) to make any sense of them. In early 2020, the computers on the bitcoin network were cranking out close to 120 exahashes per second.

One terahash is a trillion hashes per second, One petahash is a quadrillion hashes per second, and one exahash is one quintillion hashes per second. (That’s a one followed by 18 zeros.)

There are various bitcoin-mining computers out there, but many companies have focused on Application-Specific Integrated Circuit (ASIC) mining computers. These use less energy to conduct their calculations. Mining companies running lots of ASIC miners as businesses claim to use only one watt of power for every gigahash per second of computing performed when mining for bitcoins.

If this data is correct, the bitcoin network in 2020 consumes 120 gigawatts (GW) per second. This converts to about 63 terawatt-hours (TWh) per year. Here’s how energy use relates to hashtag volume.

One Gigahash Per Second = One Watt

One Terahash Per Second = One Kilowatt

One Petahash Per Second = One Megawatt

One Exahash Per Second = One Gigawatt

This amount of power equates to 156 million horses (1.3 million horses per GW) or 49,440 wind turbines (412 turbines per GW) generating power at peak production per second.

No matter how many miners, it still takes 10 minutes to mine one bitcoin. At 600 seconds (10 minutes), all else being equal, it will take 72,000 GW (or 72 Terawatts) of power to mine a bitcoin using the average power usage provided by ASIC miners.

One watt per gigahash per second is fairly efficient, so this is likely a conservative estimate. Media outlets and bloggers have produced various estimates of the electrical energy used in bitcoin mining, so the accuracy of reported power use is sketchy at best. Many residential miners use more power.

Bitcoin Mining Costs Vary by Region

To calculate the cost of how much power it would take you to create a bitcoin, you need to know a few things first. First, what is the cost of electricity where you live? Second, how much power would you consume? More efficient computer equipment uses less power, which means lower power bills. The lower the price of electricity, the less cost there is to miners. This increases the value of the bitcoin to miners where the costs are lower to produce.

Bitcoin’s exchange rate has moved wildly up and down during its history. If the price stays above the cost to produce a coin, doing the work in an area where energy costs are very low is important to make the practice worthwhile.

Is It Worth the Environmental Cost?

The price that bitcoin extracts in terms of energy use and environmental impact depends on how useful it will be to society. Judging an ever-moving target is hard. The interest in Bitcoin continues to rise, which in turn leads to more power used to serve more people in the market. Whether Bitcoin mining will ultimately be worth the cost to the environment is an open question.

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Is Bitcoin Mining Profitable or Worth it in 2021?

The short answer is yes. The long answer… it’s complicated.

Bitcoin mining began as a well paid hobby for early adopters who had the chance to earn 50 BTC every 10 minutes, mining from their bedrooms.

Successfully mining just one Bitcoin block, and holding onto it since 2010 would mean you have $450,000 worth of bitcoin in your wallet in 2020.

If you’re motivated to learn, and you want to get a semi-passive income of bitcoin, then there are a few basics to get your head round, before working out if it’s even possible for you to profit from bitcoin mining.

Mining is the backbone of all proof-of-work blockchains and can be described with three key concepts:

Bitcoin Block Reward

Miners are rewarded with 6.25 bitcoins. This number will reduce to 3.125 bitcoins after the halving in 2024. The reward (plus transaction fees) are paid to the miner who solved the puzzle first.

This process repeats approximately every 10 minutes for every mining machine on the network. The difficulty of the puzzle (Network Difficulty) adjusts every 2016 blocks (

14 days) to ensure that on average one machine will solve the puzzle in a 10 minute period.

Network difficulty is calculated by the amount of hashrate contributing to the Bitcoin network.

What is Mining Hardware?

Mining hardware is specialized computers, created solely for the purpose of mining bitcoins. The more powerful your hardware is–and the more energy efficient–the more profitable it will be to mine bitcoins.

Miner	Hash Power	Price*	Buy
	Antminer S19	95.0 TH/s	$6k-8.5k
	Antminer S19 Pro	110.0 TH/s	$8k-10k
	WhatsMiner M30S+	100.0 TH/s	$2,550
	WhatsMiner M30S++	112.0 TH/s	$2,850
	AvalonMiner 1246	90.0 TH/s	$5,500

*BuyBitcoinWorldwide.com averages prices from various online sources. Actual prices may vary depending on seller.

What is Hashrate?

Hashrate is a measure of a miner’s computational power.

In other words, the more miners (and therefore computing power) mining bitcoin and hoping for a reward, the harder it becomes to solve the puzzle. It is a computational arms race, where the individuals or organizations with the most computing power (hashrate) will be able to mine the most bitcoin.

The more computing power a machine has, the more solutions (and hence, block rewards) a miner is likely to find.

In 2009, hashrate was initially measured in hash per second (H/s) — Due to the exponential growth of mining, H/s was soon commonly pre-fixed with the following SI units:

Kilohash	KH/s (thousands of Hashes/second)
Megahash	MH/s (millions of Hashes/second)
Gigahash	GH/s (billions of Hashes/second)
Terahash	TH/s (trillions of Hashes/second)
Petahash	PH/s (quadrillions of Hashes/second)

To try and put this into perspective, let’s look at how much revenue 1 TH of power can earn mining bitcoin. As the global hashrate is usually growing the revenue per TH for each miner is usually falling, — and the revenue chart for 1 TH/s looks like this:

When you consider how many TH/s there are in the entire Bitcoin network though, you get a true sense of the scale of the industry:

85 Exahash = 85,000,000 Terahash

That means in May 2020 the daily revenue, globally, for Bitcoin mining is: $8.45M

How do Bitcoin miners calculate their earnings?

You’ve probably heard the scare stories about Bitcoin mining’s energy consumption.

Regardless of whether the impact is overblown by the media, it’s a fact that the underlying cost of mining is the energy consumed. The revenue from mining has to outweigh those costs, plus the original investment into mining hardware, in order to be profitable.

Mining Revenue

In 2020, one modern Bitcoin mining machine (commonly known as an ASIC), like the Whatsminer M20S, generates around $8 in Bitcoin revenue every day. If you compare this to the revenue of mining a different crypto currency, like Ethereum, which is mined with graphics cards, you can see that the revenue from Bitcoin mining is twice that of mining with the same amount GPUs you could buy for one ASIC. Thirteen AMD RX graphics cards cost around the same as one Whatsminer M20s.

WARNING

This graph shows you the daily revenue of mining Bitcoin. It does not take into account the daily electricity costs of running a mining machine. Your baseline costs will be the difference between mining profitably or losing money. GPU mining for Ethereum is more efficient than mining with Bitcoin with an ASIC machine

You can think of it as though the miners are a decentralized Paypal. Allowing all the transactions to be recorded accurately and making a bit of money for running the system.

Bitcoin miners earn bitcoin by collecting something called the block reward plus the fees bitcoin users pay the miners for safely and securely recording their bitcoin transactions onto the blockchain.

What is the Block Reward?

Roughly every ten minutes a specific number of newly-minted bitcoin is awarded to the person with a mining machine that is quickest to discover the new block.

Originally, in 2009, Satoshi Nakamoto set the mining reward at 50 BTC, as well as encoding the future reductions to the reward.

The Bitcoin code is predetermined to halve this payout roughly every four years. It was reduced to 25 BTC in late-2012, and halved again to 12.5 BTC in the middle of 2016.

Most recently, in May 2020, the third Bitcoin halving reduced the block reward to 6.25 BTC.

What about transaction fees?

The second source of revenue for Bitcoin miners is the transaction fees that Bitcoiners have to pay when they transfer BTC to one another.

This is the beauty of Bitcoin. Every transaction is recorded in an unchangeable blockchain that is copied to every mining machine.

Bitcoin doesn’t rely on a central bank to keep records, it’s the miners themselves that keep the records, and they get to keep a share of the transaction fees as well.

Taxes on Bitcoin Mining Profits

Of course, while profiting on Bitcoin mining isn’t certain, paying taxes on your mining rewards is. Every miner needs to know the relevant tax laws for Bitcoin mining in his area, which is why it is so important to use a crypto tax software that helps you keep track of everything and make sure you are still making enough money after you account for taxes.

Here is a great guide on how that software works to pay taxes on Coinbase buys.

How do you know if you can profit from Bitcoin mining?

First of all, Bitcoin mining has a lot of variables. This is why buying bitcoin on an exchange can be a simpler way to make a profit. However, when done efficiently it is possible to end up with more bitcoin from mining than from simply hodling.

One of the most important variables for miners is the price of Bitcoin itself. If, like most people, you are paying for your mining hardware, and your electricity,- in dollars, then you will need to earn enough bitcoin from mining to cover your ongoing costs; and make back your original investment into the machine itself.

Bitcoin price, naturally, impacts all miners. However, there are three factors that separate profitable miners from the rest: cheap electricity, low cost and efficient hardware and a good mining pool.

1. Efficient Hardware

So far in this article I’ve used the Whatsminer M20S as an example of the kind of machine you will need to mine bitcoin. These days there are several hardware manufacturers to choose from.

The price of hardware varies from manufacturer to manufacturer and depends largely on how low the energy use is for the machine vs the amount of computing power it produces. The more computing power, the more bitcoin you will mine. The lower the energy consumption the lower your monthly costs.

Miner	Hash Power	Price*	Buy
	Antminer S19	95.0 TH/s	$6k-8.5k
	Antminer S19 Pro	110.0 TH/s	$8k-10k
	WhatsMiner M30S+	100.0 TH/s	$2,550
	WhatsMiner M30S++	112.0 TH/s	$2,850
	AvalonMiner 1246	90.0 TH/s	$5,500

*BuyBitcoinWorldwide.com averages prices from various online sources. Actual prices may vary depending on seller.

When choosing which machine to invest in, miners should think about the machine’s profitability and longevity.

Profitability is determined by the machine’s price per TH, how many watts the machine uses per TH, and your hosting costs.
Longevity is determined by the production quality of the machine. It makes no sense to buy cheaper or seemingly more efficient machines if they break down after a few months of running.

If the hosting cost is low enough, it often makes sense to prioritize the ‘price per TH’ over ‘watts per TH’, as your lower operational expenses (OpEx) will make up for the loss in your machine’s efficiency — and vice versa if your hosting costs are high.

The manufacturer with the lowest failure rate right now is MicroBT, who make the Whatsminer M20S and other Whatsminer models.

Bitcoin Mining Hardware Turnoff Prices

One useful way to think about hardware is to consider what price BTC would have to fall to in order for the machines to stop being profitable. You want your machine to stay profitable for several years in order for you to earn more bitcoin from mining than you could have got by simply buying the cryptocurrency itself.

The following table shows that the majority of the most modern machines could remain profitable at a bitcoin price between $5000 and $6000. Some machines could handle a drop below $5k, if they are being run with electricity that costs under $0.05 kWh.

Unfortunately most older machines are now no longer profitable even in China. The Bitmain S9 has been operational since 2016 and interestingly enough they are still being used in Venezuela and Iran where electricity is so cheap that it outweighs the risk of confiscation. There may, eventually, be more reputable sources of sub 2 cents electricity as the access to solar and wind improves in North America.

Miner	Hash Power	Price*	Buy
	Antminer S19	95.0 TH/s	$6k-8.5k
	Antminer S19 Pro	110.0 TH/s	$8k-10k
	WhatsMiner M30S+	100.0 TH/s	$2,550
	WhatsMiner M30S++	112.0 TH/s	$2,850
	AvalonMiner 1246	90.0 TH/s	$5,500

*BuyBitcoinWorldwide.com averages prices from various online sources. Actual prices may vary depending on seller.

For the individual miner, the only hope of competing with operations that have access to such cheap electricity is to send your machines to those farms themselves. Not many farms offer this as a service though.

2. Cheap Electricity

Electricity prices vary from country to country. Many countries also charge a lower price for industrial electricity in order to encourage economic growth. This means that a mining farm in Russia will pay half as much for the electricity you would mining at home in the USA. In places like Germany, well as you can see from the chart, that’s another story…

In practical terms. Running a Whatsminer M20S for one month will cost around $110 a month if your electricity is $0.045 kWh in somewhere like China, Russia or Kazakhstan. You can see from the table below that you would make $45 a month in May 2020 with those electricity prices.

Profitability with $0.045 kWh electricity

However, with the typical home electricity price in the USA, of $0.12 kWh, you would be running the machines at a loss from the start and it would not make sense to mine under these conditions:

Profitability with $0.12 kWh electricity

3. Reliable Mining Pool

These days, every miner needs to mine through a mining pool. Whether you are mining with one machine, or several thousand, the network of Bitcoin mining machines is so large that your chances of regularly finding a block (and therefore earning the block reward and transaction fees) is very low.

If the Bitcoin Network Hashrate is 100 EH/s (100,000,000 TH/s), a WhatsMiner M20S ASIC miner with 68 TH/s, has approximately a 1 in 1,470,588 chance of mining a Bitcoin block. With one block per 10 mins they may have to wait 16 years to mine that one block.

The oldest two pools are Slush Pool and F2Pool. F2Pool is now the largest Bitcoin mining pool and they support around 20% of the entire Bitcoin network.

F2Pool’s payout method is called PPS+. PPS+ pools take the risk away from miners, as they pay out block rewards and transaction fees to miners regardless of whether the pool itself successfully mines each block. Typically, PPS+ pools pay the miners at the end of each day.

This is how PPS+ pools calculate how much to pay out to miners in their pool. Here comes the science part…

If the Bitcoin Network Hashrate is at 85 EH/s (85,000,000 TH/s), a WhatsMiner M20S ASIC miner with 68 TH/s, will earn around 0.000702 BTC per day before pool fees.

0.000702 BTC is calculated by 68 (miner hashrate) ÷ 85,000,000 (network hashrate) × 144 (number of blocks per day) × 6.25 (block reward).

Pool fees are normally 2.50–4.00%, so let’s use 2.50% for the example; the net mining revenue is therefore 0.00068445 BTC.

If BTC is priced at $9,000, then this M20S has a daily revenue of $6.16.

Choosing the right mining pool is very important, as you will receive your mined bitcoin sent from the pool payouts every day. It’s important to choose a pool that is reliable, transparent and offers the right suite of tools and services to help you optimize your mining operation.

4. Fees When Selling Bitcoin

An often overlooked facet of mining profitability is the fees one pays to sell the Bitcoin one mines. If you are a small time miner, you may have to sell your coins on a retail exchange like kraken or Binance. Sometimes your fees are low but sometimes your fees are high — it really just depends on the fee structure of the exchange and the state of the orderbook at the moment.

However, if you are a professional miner like F2 or Bitmain, you likely have really advantageous deals with OTC desks to sell your coins at little to no fees — depending on the state of the market. Some miners are even paid above spot price for their coins. Either way, professional mining operations deal with Bitcoin at a large scale and so they have more leverage to get deals that are good for them, and this doesn’t just apply to electricity purchases.

If you think you have what it takes be mine profitably, we suggest you make sure first by using our mining profitability calculator.

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Unless you have access to very cheap electricity, and modern mining hardware then mining isn’t the most efficient way to stack sats. Buying bitcoin with a debit card is the simplest way, but we also recommend using a payment network like Skrill or Interac e-Transfer or use a bank transfer such as SEPA when available.

To buy bitcoin in your country or state, check our guides! A few of our most popular are listed below!

…or visit our exchange finder if your country is not listed above.

Professionals vs Amateurs

It’s common knowledge that it has become very difficult for individual miners to get access to the best machines and the cheapest electricity rates. Bitcoin farms that operate at scale use these advantages to maximize their returns.

As the difficulty of mining bitcoin increases, and the price lags behind, it is becoming harder and harder for small miners to make a profit.

It all comes down to scale and access to cheaper prices. When people enter the space, without prior relationships, they struggle to compete with established mining operations.

Bitcoin mining is starting to resemble similar industries as more money flows in and people start to suit up. With increased leverage, margins are lower across the whole sector. Soon, large scale miners will be able to hedge their operations with financial tooling to lock in profits, whilst bringing in USD denominated investments like loans or for equity.

As mining becomes more professional, it will make things even harder for DIY miners.

Can you Mine direct to an exchange?

If you have put in the effort to learn about mining, and you have found a location with low cost electricity for your machines, then you still need to consider where to store the bitcoin that you mine.

It is possible to mine direct from the pool to an exchange, but we recommend you keep your bitcoin in a wallet where you have access to the private keys.

Here are our top picks for Bitcoin wallets:

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