If you’re considering mining Bitcoin, it’s important to figure out how to mine in the most profitable way.
This is where a Bitcoin mining calculator comes into play. By inputting various parameters, the calculator will show you how long it will take to pay back your investment. This will help you to decide whether Bitcoin mining is right for you.
Why should I use a Bitcoin mining calculator?
Mining Bitcoin used to be a fairly simple process. You could set up a computer to solve complex maths problems and, in return, receive Bitcoin. It was possible to earn Bitcoin quickly just by using the computing power in your home.
Now, however, the process has become more complicated. Some people are mining Bitcoin on an almost industrial scale, which makes it difficult for small miners to compete. Without the use of specialised, high-powered machinery, it can be hard to mine profitably on a small scale.
As a result, it’s a good idea to work out what your likely profits will be before you get into Bitcoin mining. A Bitcoin mining calculator will help to provide the answer.
What details to enter into a Bitcoin mining calculator
You can find an array of Bitcoin mining calculators online. There are several parameters you can fill in, and the more information you provide, the more accurate it will be.
The information you can enter includes:
- Upfront equipment costs.
- The hash rate of your Bitcoin mining hardware. This is usually measured in GigaHashes per second. The higher the hash rate, the faster it can mine Bitcoin.
- The amount of power your miner consumes (in watts). If you take your mining hardware’s hash rate and divide it by its power consumption, this will give you an indication of how efficient it is.
- Power costs. Mining Bitcoin uses a huge amount of power, depending on the size of your operation. The lower the price of your electricity, the more profitable your mining operation will be.
- Pool fees – if you’re in a Bitcoin mining pool, it probably charges a small percentage-based fee.
Pre-filled information
The calculator will also have some pre-filled sections, which are continually updated. These include:
- The current Bitcoin price – the higher it is, the more profitable mining can be.
- The Bitcoin block reward – this is halved roughly every four years. In 2012, the reward was cut from 50 Bitcoins per block to 25. It is currently 12.5 Bitcoins per block but will fall to 6.25 in 2020.
- Mining difficulty – in order to keep inflation under control, it gets harder to mine Bitcoin as more miners join the network.
Calculating the results
Once you’ve entered all your mining information, click “calculate” and the results will appear automatically. Some calculators will show your likely profits on an hourly, daily, weekly, monthly, and yearly basis. Most display the results in US dollars.
Although certain values are pre-entered, such as the current Bitcoin price, some calculators let you change these to simulate potential future scenarios.
It’s worth bearing in mind that factors like Bitcoin price and mining difficulty can change rapidly. This means it’s important to ensure you have up-to-date calculations and don’t rely on past results. Each time your electricity costs change, you’ll also need to carry out a fresh calculation.
In addition, some calculators don’t take into account upfront costs such as the price of your mining equipment. Setting up a proper mining rig with multiple ASIC miners can cost thousands of dollars. And because miners produce heat, you’ll also need to buy cooling fans to ensure your operation stays efficient (this also uses a lot of electricity). It could take months or even years to break even on your initial investment.
Conclusion
Mining Bitcoin profitably has become a lot harder in recent times, but it isn’t impossible. You just need to ensure you do your research, have the right hardware, and opt for low electricity costs where possible.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.