Can the average person still profit from Bitcoin mining?
Bitcoin mining was once a gold rush for hobbyists. Now, it’s a high-stakes game
The Crypto Radio’s Justin Harper sat down with crypto entrepreneur Joe David to explore the current state of Bitcoin mining.
In the early days, mining “digital gold” was a relatively straightforward process that allowed anyone with a decent computer to earn rewards. Nowadays, Bitcoin mining has evolved into a highly competitive industry dominated by large-scale operations. Companies like Marathon Digital Holdings, Riot, and Core Scientific are among the leading players.
Recently a lucky individual Bitcoin miner made headlines when they secured three Bitcoin (equivalent to about $330,000 at the time) using only a $400 mining rig. This was headline news because for individual miners, entering the Bitcoin mining arena has become increasingly challenging.
According to Joe David, founder and CEO of Nephos Group, the main challenge facing individual miners is the sheer computing power and energy requirements needed to successfully mine Bitcoin. "If you and I went on Amazon, purchased a mining rig, and tried to mine from our own home with our own electricity, it's going to be extremely unlikely that we're going to win $300,000," he explained.
The reason for this is the concept of "hash rate"—the measure of a miner's computational power. As more miners have joined the network, the overall hash rate has skyrocketed, making it exponentially harder for smaller players to compete. This has led to the rise of large-scale mining operations, run by corporations, that can leverage economies of scale and access to cheap electricity to dominate the mining landscape.
"The concern at the moment is that because it's become so difficult to mine Bitcoin in terms of the computer algorithms that are needed, and the computing power required, it's only the big players that can afford these huge warehouses full of mining rigs that can mine Bitcoin," David said.
So, what does this mean for the average person looking to get into Bitcoin mining? According to David's analysis, the numbers simply don't add up for most individuals. He estimates that running a $400 mining rig would cost about $100 per month in electricity, while only generating $40-$50 per month in Bitcoin rewards.
"This mining rig, on a longer-term basis, probably wouldn't be profitable at the moment, unless you had something like free electricity, or super cheap electricity somewhere," David said.
The one potential exception is the concept of mining pools, where individuals can combine their computing power to increase their chances of earning rewards. However, even then, the profitability is far from guaranteed.
So, while the allure of mining Bitcoin may still be strong, the reality is that the average person is likely to struggle to turn a meaningful profit. Instead, David suggests that those interested in cryptocurrency would be better off simply investing in Bitcoin directly, rather than trying to mine it themselves.
"If you want to understand crypto, start investing in it. And it doesn't need to be big numbers. Just buy some Bitcoin and then watch some videos on what Bitcoin is, or read some articles, or listen to the radio like this and understand it that way," he advised.
Listen to the whole interview on The Crypto Radio's live player or in the Community podcast.
