- Published: Thursday, 06 February 2014 11:00
- Written by Editor
In many ways the rush to mine Bitcoin is very reminiscent of the great Gold rushes of yesteryear, with the allure of becoming extremely rich overnight. The prospect of buying some mining hardware, plugging it in and waiting for thousands of dollars in Bitcoins to pop out the other end is too tempting for many to resist.
However, this could well be "fools Gold" for those rushing to the mine Bitcoins without any idea of what is really involved - just like the Gold Rushes of yesteryear in fact.
The main differences between Gold Mining and Bitcoin Mining are these:
1. No one knows how much Gold is in the ground, so every mining operations could strike a "mother lode" with industry standard mining gear. There is a finite number of Bitcoin - 21 million - and the only way to mine them is by using more and more powerful and sophisticated equipment just to keep yields consistent.
2. Gold mining is the same no matter where the Gold mine is, only the terrain and other geographical factors making a difference - but these can always vary from easy to extremely difficult. Bitcoin mining is algorithmically programmed to get progressively more difficult based upon Bitcoins mined, requiring ever more powerful and expensive equipment.
When Bitcoin began it was simple to mine Bitcoins using a home computer, but as difficulty increased it became necessary to use more and more powerful computers, and then graphics processors, until eventually it became necessary to use very specialised ASIC based equipment.
Bitcoin difficulty increases algorithmically, and very soon by the time that ASIC based equipment was delivered to customers, it was already obsolete because Bitcoin difficulty had moved beyond it.
If we evaluate mining rigs using a mining profit/loss calculator such as the Mining Calculator at The Genesis Block it can be quickly determined that the realistic lifespan of a mining rig is about 3 months on average, before Bitcoin Mining Difficulty renders the rig unprofitable. So even assuming a mining rig was delivered immediately, then it is a case of making as much Bitcoin as possible for 3 months and then moving on to something more powerful - a never ending process which is always dependant on taking delivery of a mining rig as soon as it is ordered.
In practice there is usually a several month delay in delivery or mining rigs, rendering most of them already unprofitable from the day they are received. As difficulty algorithmically increases, then even if a mining rig is received immediately it is ordered, the useful mining life of the rig will ever reduce.
So Bitcoin Mining has already moved beyond solo home miners for the most part, with Bitcoin Mining becoming the realm of large Mining Farms and millions of Dollars investment.
What then are the alternatives for those wanting to participate in Bitcoin Mining?
It is possible to buy "shares" or "contracts" in Mining Rig farm operators such as Cloud Hashing which offers and easy way in to Bitcoin Mining without the initial investment and technical expertise involved. Although these may seem very attractive, and may or may not be, it is wise to calculate potential profits/loss using a mining calculator before entering in to any contracts.
Another possibility for the aspiring miner is to mine another Crypto-Currency such as "Litecoin" - but all of the factors mentioned above still apply to a greater or lesser extent.
At the final analysis, before becoming involved with mining, it is as well to carefully consider the motives. Is it to get rick quick - if so - you will likely be very disappointed and could easily lose money. If it is not about the money but rather the allure of participating in Bitcoin Mining, then there are plenty of choices, although considerable research and due diligence is due first.
There is a saying:
"The only ones to make real money in a Gold rush are the ones selling the picks and shovels".
Same with Bitcoin. There will always be plenty of business for Bitcoin mining equipment and big money to be made due a never ending stream of people attracted to the allure of getting rich quick. In reality only the equipment makers will get rich.
The good news is that Bitcoin and Altcoins are still in their infancy, and there are numerous opportunities to participate in the Bitcoin revolution and make serious money with innovation, dedication and realistic expectations.