How much can you earn from Bitcoin mining – A realistic analysis

The basics first

Bitcoin mining is the process by which transactions are verified and added to the blockchain. Miners solve complex mathematical problems to validate new blocks. Each solved block provides rewards in the form of newly generated Bitcoin ( called block subsidy ) plus transaction fees. The system ensures the integrity of the network and is the foundation of Bitcoin security.

What you earn – numbers that matter

The block reward changes over time

The Bitcoin protocol halves the block subsidy every 210,000th block ( approximately every four years ). This schedule started in 2009 with 50 BTC per block, reduced to 25 BTC in 2012, then 12.5 BTC in 2016, and finally 6.25 BTC in 2020. A new halving event is expected in 2024. To provide perspective: in May 2021, a block reward was approximately 300,000 dollars.

However, the reward does not consist solely of new Bitcoins. Miners also receive transaction fees from all transactions included in the block. As the block subsidy decreases over time, these fees become an increasingly important source of income.

The Secret Formula of Profitability

Two measurements determine whether mining can become profitable:

Hash rate – The speed at which your equipment can test random inputs and produce hash values. The higher the hash rate, the greater the chance of solving the block first. This is usually measured in TH/s ( terahashes per second ).

Energy consumption – Your only major cost. If electricity costs exceed the Bitcoin you mine, the project will never be profitable. This is the critical factor that many beginners overlook.

What equipment do you need?

CPU (Central Processing Unit)

CPUs function as the general processor of the computer. They are completely impractical for Bitcoin mining today and produce almost no returns.

GPU (Graphics Processing Unit)

Graphics processors can break down complex tasks into smaller components. Some alternative coins can be mined with GPUs, but for Bitcoin, the efficiency is negligible. The GPUs are better suited for other blockchains with different algorithms.

FPGA (Field-programmable Gate Array)

These can be programmed for different functions and are cheaper than specialized hardware. However, they are less efficient for Bitcoin mining and often represent a compromise between cost and performance.

ASIC (Application-specific Integrated Circuit)

ASIC machines are completely dedicated to Bitcoin mining. They are designed for a single purpose and offer the best ratio of hash rate to energy consumption. The downside is that they are more expensive and cannot be used for anything else. For profitable Bitcoin mining, an ASIC is practically mandatory today.

Mining Pools – Collective Power for Better Odds

The probability of solving a block alone is vanishingly small. A mining pool allows you to combine your computing power with thousands of other miners. When the pool solves a block, the reward is distributed proportionally based on the power you contributed.

To connect to a pool, you usually register on a pool website, configure your ASIC machine with the pool's server address and your port key, and start contributing immediately. Rewards are paid out regularly, often daily, to your Bitcoin wallet.

Cloud Mining – Fast but Risky

One option is cloud mining, where you rent mining power from a company that owns and maintains the machines. You pay a fee for them to mine on your behalf and share the profits.

Warning: This sector is filled with fraud. Many cloud mining services have been shown to be Ponzi schemes or have completely disappeared with users' money. If you choose this path, you must do deep research and only use well-established services.

Costs You Cannot Ignore

The initial investment is significant. An efficient ASIC miner costs several thousand dollars. Add electricity, cooling, maintenance, and network costs.

Your return also depends on factors outside of your control:

• The price of Bitcoin fluctuates daily
• The difficulty of mining increases as more join the network
• Hardware improvements quickly make older machines obsolete
• Local energy prices vary drastically

Is it worth it?

Bitcoin mining can potentially generate income, but it is far from a quick way to get rich. It combines high startup costs, operational complexity, and unforeseen risks. Many who start never see their investment returned.

If mining doesn't feel right for you, there are other ways to contribute to the security of the Bitcoin network – by running a Bitcoin node, you can validate transactions without the need for mining equipment.

Before you spend any amount of money on mining equipment, do thorough research, calculate costs based on your local electricity price, and consider all risks.