Bitcoin is the single most valuable cryptocurrency in the word to date, despite the fact that over 1,000 altcoins have sprung up in recent years. Bitcoin can act as a store of value, as well as a conventional investment option, but it can also be mined, which is one of the preferred ways to build your wealth.
By mining, you reap financial rewards that have nothing to do with the current market value of the cryptocoin, and everything to do with the consensus algorithm that powers the cryptocurrency. Of course, mining bitcoin today is not as simple as it once was, and there are quite a few difficulties that you might face as a new miner getting into the field. What should you know about the challenges you might face?
Cost of the Rig
If you intend to mine bitcoin on your own or with the help of a bitcoin mining colocation, you’ll need to build a mining rig buy some ASICs and/or join a mining pool. These rigs can cost thousands of dollars, and they can consume a great deal of electricity, meaning they cost a lot to operate, as well. Depending on your financial situation, this may not be a particularly achievable goal.
Alterations to Lifestyle
Having a bitcoin mining rig in your home will lead to some important changes to your lifestyle if you do not rent out mining colocation from a miner friendly data center.. For instance, all that technology will generate a lot of heat, which will raise the temperature within your home, causing your HVAC system to run more frequently. That further increases your costs. You also have other issues – where will you house the rig? How will you combat the constant noise from fans?
When discussing bitcoin mining difficulties, we need to mention the actual “difficulty” of mining – that is, how hard it is to hit the target. The difficulty of mining varies depending on the speed of block discovery, with the system striving to maintain an average of one block found every 10 minutes. The difficulty adjusts every 2,016 blocks, and can both increase and decrease depending on the speed of block discovery.
While mining bitcoin does not put you in quite the same position as buying it outright through an exchange, or trading it like a commodity, it does mean that you need to pay attention to bitcoin’s current price on the USA market. The mining reward is paid in bitcoins, which means that your take will vary based on market sentiment at the moment of payout. Bitcoin’s value has generally increased over time, but there have been some marked setbacks, such as during the early days of 2018 when most cryptocurrencies lost a significant portion of their value. This could put a crimp in your own finances should a market tumble occur at the same time you discover a block and are paid in bitcoins.
What’s Your Cut?
For most people, getting involved with bitcoin mining will mean joining one of the many bitcoin mining pools out there. This allows you to combine forces with other miners, reduce the time required to discover a bitcoin block, and increase the chances of discovery. Of course, it also reduces the amount that you will see in a mining reward. Currently, the reward is 25 bitcoins per block discovered, but what if you have to split that reward with hundreds of other miners, plus the company that owns the bitcoin mining pool? Pay close attention to the pool cut or you could find that you’re paying out more than you’re bringing in.
In the end, bitcoin mining difficulties are present, but they can be planned for and overcome with the right strategy.