(FILES) This file photo taken in Washington, DC, on May 1, 2014 shows bitcoin medals. Bitcoin makes its debut on a major exchange on December 10, 2017, a milestone for the digital currency that has some investors excited but others nervous. The Cboe Futures Exchange in Chicago will open trading in bitcoin futures at 2300 GMT on Sunday, a move that is expected to be followed a week later by a rival listing on Chicago Mercantile Exchange. / AFP PHOTO / Karen BLEIER
Have you decided to start bitcoin mining in South Africa? Are you wanting to make lots of money mining bitcoin? You might need think carefully about how much money you are willing to risk, as bitcoin mining is a very risky business.
After getting countless emails and cries for help from people who have tried and failed at bitcoin mining, this article is to warn people that while you can make money, you can also lose a lot of money.
Everyone writes posts about why you should mine bitcoin, so this one is about why maybe you should not….a little balance is good
New users of bitcoin are the most excited about possibly earning a living from mining bitcoin, or even just to have it as another stream of income. The reality is though, that bitcoin mining is expensive, requires adequate technical knowledge of bitcoin and the mining process, as well as some level of computer skills and possible troubleshooting or problem solving skills.
Bitcoin mining is kind of the digital equivalent of the analog mining for gold. In the old days, if you were a gold miner, and were lucky, you could make a fortune. The problem was then that everybody decided to also start mining gold, and soon all the easy to find gold was gone. The harder to find gold was deeper in the ground or rock, or needed bigger and more specialized equipment to mine it.
This is sort of the same with bitcoin mining. The easy to get bitcoins were mined years ago when you could use your laptop or home computer to mine a few bitcoins a day. These days you need the top of the range ASIC miners to stand a chance of mining any bitcoin, and they dont come cheap, or with a guarantee of being profitable. This is especially true since the bitcoin halving, when mining profitability was cut in half, an event that happens roughly every 4 years.
Profit calculator websites on the internet generally do not offer the full picture, and many times they are completely wrong. The amount of bitcoin you mine each day is generally on a constant downward trend due to the increases in the mining difficulty. Most profit calculators will tell you what you can earn with bitcoin mining today, and then they multiply that figure by days over time, without reducing the daily amount of bitcoin you earn due to the mining difficulty increases.
The fact is that your mining hardware will generate LESS and LESS bitcoin over time. Every time the bitcoin difficulty increases (it is recalculated roughly every 14 days), you generate less bitcoin, and therefore less profit. Once the bitcoin you are generating each day is worth less than your running costs, its time to turn off the bitcoin miner as it would be cheaper for you to just buy bitcoin. You need to have already covered the cost of your mining hardware and all other costs by this time, otherwise you would have made a loss.
Most miners only realize they might not get a return on their investment when it is too late, because in the beginning, the first 6 months or so, the profits look good. After the 6 month window, the declines in profit are far more noticeable.
Most computer hardware has a lifespan of around 3 to 5 years, and bitcoin miners are much shorter than that. You would be lucky to get 2 years of no problems or parts needing to be replaced, even the manufacturers themselves only offer a 90 day warranty on the hardware which does not instill confidence it will last for a very long time.
Should you mine bitcoin?
You can make money mining bitcoin, and you can lose money too, so the best thing to do is to not rush into it. Do your research thoroughly, and learn as much as you can first.
If you are confident that you can make a profit, and will have the skills to run a bitcoin miner properly, it can be a lot of fun, and make you some money at the same time.
Just dont go into it blind to the possibility that you might lose money. Learn about bitcoin, and the mining process before you rush out and buy a bitcoin miner, learn how to trade bitcoin so that you can pay for your running costs, learn all you can first.
Hopefully you will get back your return on investment BEFORE that happens! Good luck