Can Bitcoin Mining Still Be Profitable?

Will Bitcoin mining soon no longer be profitable?

Bitcoin mining is currently profitable as the costs are less than the payouts. But that could change from 2024, says a recent study. We shed light on the developments and their effects.

2021 is the year of cryptocurrencies. While Bitcoin and Co. have been becoming more popular for a few years now, since 2020 a number of factors have led to the fact that cryptocurrencies are currently extremely popular.

In addition to the worldwide corona boredom in lockdown and a new crypto hype in the art world, Tesla boss Elon Musk also made a not inconsiderable contribution, be it with various recommendations on Twitter and then, of course, with Tesla's billion-dollar investment in Bitcoin.

Bitcoin is currently the most commonly mined cryptocurrency. As the value increases, Bitcoin mining is of course also worthwhile. Still. Because a current study now predicts that from 2024 the costs of Bitcoin mining will exceed the payouts.

From 2024: Energy costs for Bitcoin mining are more expensive than profits

At least that applies to China, write Chinese researchers in a study that is now in the science magazine Nature has appeared. But since 75 percent of all Bitcoin mining processes actually take place in China, this is a very important finding.

The authors emphasize, however, that this only applies if nothing changes in the political framework for Bitcoin mining. Above all, you are looking at the high carbon footprint caused by mining bitcoins.

According to their calculations, emissions could be 130.5 million tons of CO2 equivalents in 2024. That would be in direct contrast to China's climate goals, write the researchers: inside. So they create different scenarios to predict how and when Bitcoin mining might no longer be attractive in China.

Your forecast: If nothing changes in the framework conditions, Bitcoin mining in China in 2024 will be so expensive, especially due to energy costs, that the payments will no longer be worthwhile.

Bitcoin mining is only worthwhile if the profit is right

Does that mean that Bitcoin mining won't be making any more money in a few years? Yes and no. Indeed, this depends on many different factors. This includes:

  • Hardware costs (especially the Application Specifiv Integrated Circuit Chips, ASIC)
  • Energy costs
  • Blockchain complexity
  • Bitcoin payouts
  • The value of bitcoins in everyday life

Back when Bitcoin mining was still done on the home PC

In the early days of cryptocurrencies, Bitcoin mining was primarily something that individuals did on their home PC. The individual miners were able to work profitably because they only needed their own computer as equipment and thus had hardly any material costs.

With a few changes in settings, it was also possible to run the processes very efficiently, so that the only competitors on the market were other individuals at their PCs. Even those who lived in regions with higher energy costs could still work profitably.

That changed suddenly with the introduction of ASIC.

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From bitcoin miners to bitcoin farms

These chips suddenly increased the capacities of PCs by a factor of billions. Anyone who wanted to dig with their home computer now was clearly at a financial disadvantage.

Because when it comes to solving the hash processes required for mining, those who can do it particularly quickly have an advantage. After all, there are payouts for this.

Since the faster ASIC chips offer a decisive advantage, private individuals must now invest in expensive chips so that Bitcoin mining is still worthwhile.

In fact, the majority of Bitcoin mining takes place via crypto farms with correspondingly large capacities. But even at a high level, mining is not endlessly profitable. That also depends on the distribution system of bitcoins.

It's over at 21 million bitcoins

So far, the Bitcoin network has an upper limit of 21 million Bitcoins. This is to control the supply of the cryptocurrency. At the moment, over 18 million bitcoins have already been mined.

In order to control Bitcoin mining and thus not to flood the market, the payouts to the miners per solved block are halved about every four years. In 2012 the number was 25 Bitcoins, in 2016 it was 12.5 and the current number has been 6.25 since 2020.

In other words: The earnings for solved blocks in Bitcoin mining will decrease over time and the profits will decrease in the long run.

Blockchains are becoming more and more difficult to solve

At the same time, the complexity of the blockchains is increasing, which in turn requires more computer capacity, which in turn is tied to more expensive hardware, but above all to higher energy costs.

The complexity of the blockchains changes roughly every two weeks. The more difficult it is to solve the hash problems, the fewer blocks a miner solves and the less money there is in the end.

With the start of Bitcoin, the difficulty level was one. Now the level of difficulty is over 16 trillion.

Energy costs rise

Carrying out such complex processes consumes a lot of energy. First and foremost, the electricity is generated from fossil fuels such as coal. Bitcoin mining is therefore also a climate problem. The annual global energy consumption for cryptocurrency processes is currently around 118 terawatt hours.

The researchers in the Chinese study assume that in China alone the energy requirement will be 297 terawatt hours in 2024. That would correspond to the energy consumption of Italy or Saudi Arabia in 2016.

At this point, the energy costs for Bitcoin mining would exceed the payouts from it, the researchers estimate.

In addition, there are a few other factors that could reduce profits from prospecting, such as an energy tax or a declining Bitcoin value (compared to other currencies).

If you want to know exactly whether Bitcoin mining is worthwhile, you can also use appropriate online calculators, such as Crypto Compare.

However, it is foreseeable that Bitcoin mining will at some point bring very high costs and the payouts will decrease. By then, at the latest, it will no longer be profitable for the vast majority.

And then?

Then, at least the theory goes, Bitcoin mining will no longer be very attractive. The number of Bitcoin miners will decrease.

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But then the processes will become easier again, the competition will decrease and the money will be distributed among fewer people. Until we get back to the point that it is financially worthwhile to mine Bitcoins again and the cycle begins again.

And the upper limit of 21 million bitcoins? According to calculations, this will not be reached until 2140.

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