In the early days of Bitcoin it was possible for anyone to leave their computer on and validate blocks on their CPU. And back then it was 50 BTC for the block reward, but with BTC at fractions of a penny, it wasn’t very profitable to mine.
As Bitcoin has grown up and risen in price, however, the competition to win the block reward has gotten much fiercer. And we see this with all the huge investment going into the Bitcoin mining industry.
For solo miners, the profitability of mining depends on a few factors, including the Bitcoin halvings, electricity costs, the cost of competitive mining rigs, and of course the value of Bitcoin
With all this in mind, we ask is Bitcoin mining still profitable in 2020?
Things a Bitcoin Miner Has To Consider
CPUs are no longer competitive at mining Bitcoin, and even powerful GPUs are nowhere near as powerful as the latest application specific integrated circuit (ASIC) mining rigs.
Powerful mining rigs like the Bitmain’s ASIC Antminer S19 Pro hash BTC at rates of up to 110 TH/s. These cost about $2850 depending on your location and dealer, but they will give you the most hashpower, ensuring you get most BTC in return.
Another thing to consider is the electricity costs. Depending on your location, will determine the profit margin for you. Mining rigs use a great deal of energy to run, and obviously, the more you have the more electricity you’ll guzzle up.
Probably the most important thing to take into account is the price of BTC. In the early days when the block reward was 50 BTC, and there was little competition for the mining, the electricity costs weren’t really significant, but neither was the price of a BTC, but today, a powerful mining rig will use a fair bit of electricity.
Mining Bitcoin With The Most Powerful ASICs Mining Rig
6.25 BTC are mined with every new block. This takes roughly 10 minutes, and this is paid out to the winning miner, and the more hashrate a miner has the more likely they are to win the block reward.
Depending on your set up determines the length of time it takes to mine a bitcoin, but if we go by someone mining with the latest Antminer S19 Pro, we can work out a rough estimate.
The Antminer S19 Pro provides up to 110 TH/s, using around 3250W of electricity. Therefore, if the miner is using one S19 Pro, he would mine about 0.02741 BTC per month, which works out at about 0.3335 BTC per year.
So, it would take roughly 3 years to mine a full bitcoin with the most powerful mining rig working on its own.
How much does it cost to mine Bitcoin?
The cost of electricity is one of the main things to consider when working out your bitcoin mining profitability.
Bitcoin network uses a proof-of-work algorithm, which is quite energy intensive, so always consider your local costs if you’re interested in mining Bitcoin.
The average cost of electricity is about $0.14 KW/h, but this varies a lot. For example, if you live in Germany, you’re paying about $0.35, and if we compare this to Russia, where it’s $0.06 KW/h, it doesn’t take Einstein to work out it’s much more profitable to mine Bitcoin in Russia.
But going on the average price of $0.14 and using the Antminer S19 Pro as an example let’s work out the electricity costs for mining 1 BTC.
We know the S19 Pro uses 3250W to run, which costs a rough estimate of $10 a day at average prices. Running this year round it would cost about $3650 just to run.
Being a solo miner, however, you have to join a mining pool, even if you have the most powerful mining rig.
Joining a mining pool means you’ll join thousands of other miners, combining your hashrate, making it much more likely you’ll win some BTC block reward.
Mining pools have different payout systems, but you’re usually rewarded according to your hashrate compared with other miners in the pool.
Of course there’s a charge for being part of the mining pool, so this is also eats into your mining profits. Each mining pool has different costs, and reading a good review of the best mining pools is a necissity, but the average fees are about 2% of your earnings.
Bringing It Altogether
Is Bitcoin mining profitable in 2020? As we know we have a few factors to take into account. But going by the cost of an Antminer S19 Pro, which is $2850, then add the average cost of electricity for a year will be $3650 (much more in most of western Europe).
So the cost of your mining rig and electricity for a year would be about $6650. With our S19 Pro, we would earn about $0.3335 BTC in a year, which at today’s price of $9487, it works out at about $3167. Less 2% for mining pool costs, it works out at $3103 return.
So buying a new Antminer S19 Pro and getting started would see your first year return a loss of $3547. Seemingly not a good investment.
However, your second year would be cheaper, because you wouldn’t need to buy a new rig, so if we even out the price of the rig over two years, the annual cost would be about $5075 – working out at an annual loss of $1972.
And even if we take the cost of the mining rig out of the equation (not that we should), at today’s price we still have a negative return of -$547.
Why are miners still mining Bitcoin if it’s not profitable?
Well, many miners need to cash in their BTC to pay for costs, and they’re the miners that probably switched off after the halving. However, many mining farms and solo miners can cover the costs, and they see it as a long term investment.
According to Tradeblocks, the average cost to mine a BTC is $12,500, and cheaper for mining farms who have struck up deals with electricity firms. So you can be sure, once the price is over $12,500 a BTC many more miners will switch back on, and mine Bitcoin at a profit once again.
Author: Tommy Limpitlaw