This article will give you an idea on how to profit from bitcoin mining only. It is not a complete guide to the world of bitcoin or other crypto currency since there is a lot of ways to profit from this emerging market.
This article will not explain any deep knowledge behind the idea of bitcoin mining (we will provide reference instead), you have to do your own research as part of the learning process in this cryptocurrency adventure!
What's the logic?
Broadly speaking, to profit from bitcoin mining, it is just a simple equation with 3 major components:
Profit = Revenue - Expense (Revenue > Expense)
Loss = Revenue - Expense (Expense < Revenue)
To further simplify the idea of profiting from bitcoin mining, though the followings may not strictly follow the financial terminology usage, but should give you a basic idea on how bitcoin mining works.
- Getting started
- What do I need?
- A bitcoin wallet
- A wallet will allow you to save and spend/send bitcoin (store your Revenue)
- There is no ownership of a single wallet. Whoever has the credential of the wallet will have the ability to spend/send bitcoin
- A wallet comes with a unique address, which is the only identifier of a particular wallet. Anyone (including the miner) will be able to send bitcoin to it (receive Revenue)
- One can have multiple wallets
- Each transaction comes with a fee (where Expense occurs)
- A bitcoin trading platform will allow you trade your bitcoin with other currency, for instance, US dollars (materialize your Revenue, turn your bitcoin into currency that backed by certain country)
- It also allows you to trade bitcoin with other cryptocurrency, for instance, Ethereum (ETH)
- Produce bitcoin (generate Revenue)
- Use electricity (induce Expense)
- First, the core motivation that you mine bitcoin is because bitcoin has value. if the bitcoin value drops or reaches to zero, there is no reason to mine.
- A bitcoin miner will certainly generate bitcoin for you, meaning, it generates Revenue (depending on the market price of bitcoin).
- But you will also need to consider your electricity bill, which is your Expense.
- It narrows down to a simple question: how long does it take to break-even (Revenue = Expense)?
- The time for one to break-even depending on the quantity of the miners and the type of miner you owned.
- The more miners you have, the more bitcoins you can get (Revenue) within a particular timeframe, but your electricity cost (Expense) will also increase.
- What is a reasonable break-even time?
- It depends, someone can wait a month, someone can wait a year.
- It is also uncertain, because your electricity bill (Expense) will unlikely to change in a relatively short-time, but the bitcoin price (Revenue) may change a lot for a given time. And that's the risk you need to take when engaging bitcoin mining activity.
- If you believe in the philosophy of bitcoin and blockchain technology, you don't need to do anything, because the current market value of the bitcoin you mined exceed all the expenses, you have made a profit!
- If you wish to sell your bitcoin and instead receive other type of currency, for instance, US dollars, you will need to go to a bitcoin trading platform and sell it there.
Suppose a fictional person, Jean Paul Gaultier, purchased one miner, which happened to be the Whatsminer M3 with a computing power of 11.5TH/s and power consumption of 2000W. Assuming his local electricity price is 0.06USD/h, the summary of the profit is shown below:
|Per||Pool Fee||Est. Rewards||Rev. BTC||Rev. $||Cost||Profit|
Please be advised that there is also a pool reward (extra bitcoins) which we do not take into account here.
For more accurate result, please consult https://www.cryptocompare.com/mining, and enter the hash rate: 11500 (noticed that its unit is Gh/s), power: 2000W (actual running power may be varied), your local electricity price.