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Is Crypto Mining Still Profitable in 2023?

By Brian Nibley · January 30, 2023 · 11 minute read

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Is Crypto Mining Still Profitable in 2023?

Crypto mining is still profitable, but it’s potentially not as profitable as it was in years past. That’s true for a number of reasons, including the fact that for most of 2022 and into early 2023, crypto values were down way off their peaks.

Cryptocurrencies generally still have value, but calculating miner profitability can be a bit trickier than before, given the expense of computer hardware and software, as well as the energy it takes to keep that mining equipment running.

As the oldest and largest crypto, Bitcoin uses a proof-of-work consensus mechanism, and as such it is one of the main sources of crypto mining. Before deciding whether Bitcoin mining is worth it, and crypto mining in general, it’s important to know how it works and what the pros and cons are.

Why Bitcoin Mining Exists

Mining Bitcoin isn’t just the creation of Bitcoin (BTC). It’s also the decentralized global system by which miners validate and secure all Bitcoin transactions — and earn Bitcoin themselves.

It goes back to the blockchain technology that Bitcoin and other cryptocurrencies are built on. To run these networks, miners rely on powerful computer systems — or in some cases cloud-based technology — to solve complex mathematical puzzles and validate blocks of digital transactions.

This system is known as proof-of-work (PoW). With Bitcoin and other PoW systems, every transaction gets recorded in a transparent, immutable, public ledger known as the blockchain. The miner/s who solved it get rewarded with new Bitcoin.

What Is Bitcoin Halving?

It takes about 10 minutes for miners to confirm a 1MB block of transactions and earn new Bitcoin. But remember mining is intensely competitive, especially because the reward is halved every 210,000 blocks and now stands at 6.25 BTC.

As more Bitcoins are mined and the supply of new Bitcoins drops, the amount of Bitcoins released with every new block diminishes over time. This is known as Bitcoin halving, and generally, the value of Bitcoin increases after periodic Bitcoin halving.

So, to sum it all up, mining serves the purpose of validating a crypto network, and generating rewards for network participants, sometimes called validators or miners.

How Much Does a Miner Earn?

As of January 2023, a Bitcoin miner that successfully validates a new block on Bitcoin’s blockchain will earn 6.25 BTC. That reward will be reduced, however, during the next halvening.

And remember, Bitcoin is a deflationary cryptocurrency — so fewer BTC are produced every year, until the total amount of 21 million BTC is mined. If miners are working in teams or in pools, however, that reward is split up between them, too.

Hurdles to Mining BTC

While Bitcoin mining may seem lucrative, there are some caveats. For instance, to mine crypto effectively and efficiently, specialized machines built and tuned specifically to mine cryptocurrencies are often required. It also requires space — and a great deal of energy — to house and cool these powerful machines that operate around the clock.

There’s also competition to consider: The mining market is dominated by large companies who secure large warehouse facilities to house their army of ASIC mining rigs. Some of these companies might run mining pools that smaller miners can contribute to in order to get a piece of some block rewards in exchange for a small fee.

This is all to say that today, mining Bitcoin as an individual is rarely profitable unless someone has access to extra low-cost electricity and affordable equipment.

Bitcoin Mining Advantages and Disadvantages

Here are some positive and negative aspects of mining crypto.

Advantages

•   Proven track-record. Proof-of-work (PoW) consensus algorithms, which are the basis for crypto mining, have been around for many years. During that time, the Bitcoin network hasn’t seen a significant security problem.

   Many in the industry believe this is a result of Bitcoin’s significant hash rate, which refers to the amount of computing and process power being contributed to the network through mining.

   In the past, hackers have been able to destabilize smaller PoW networks, although the same can be said for smaller proof-of-stake (PoS) networks.

•   Cryptographic security. When trusting a network with large sums of money, PoW might be the best bet. It’s difficult to attack a PoW blockchain, so much so that would-be hackers are often content to become honest miners instead.

Disadvantages

•   Energy usage. Bitcoin mining uses a lot of electricity. Critics point to this as the main flaw of PoW. It’s possible that the Bitcoin network uses as much energy as an entire small country. Although Bitcoin’s overall energy usage is decreasing and much of it now comes from sustainable sources, this is still a primary concern.

•   Barriers to entry. PoW mining becomes more difficult with time, making it harder for the average person to get involved. A major principle of a decentralized PoW network is to distribute tasks as well as profits among many users. But as mining becomes more complex and difficult, a handful of large companies — which can afford to build warehouses full of mining machines — dominate the mining sphere.

Crypto Mining Advantages

Crypto Mining Disadvantages

Proven track record High energy usage
Cryptographic security Greater barrier to entry
Difficult to attack Gets more difficult over time

The Risks of Crypto Mining

While crypto mining can be profitable in some instances, it does have its risks and downsides. Here’s a brief rundown.

Environmental Risks:

As mentioned, crypto mining is resource-intensive. Running mining rigs eats up a lot of electricity, which, in turn, generates environmental pollution.

Security Risks:

Malware and other security risks exist in the mining sphere, too. For instance, it’s possible that bad actors could use techniques (like phishing) to access someone’s computer, and then load mining codes and programs onto it without them knowing. As such, the victim could be sharing their computing resources and electricity mining with a hacker without even realizing it.

Regulatory Risks:

Regulation has yet to make it to the crypto space, but the federal government is working on it, and anyone involved in crypto can probably expect new rules and regulations to be announced within a few years. Those new rules and regulations will likely affect miners, too, so that’s another thing to keep in mind.

Investment Risk:

Crypto mining requires some upfront investment. You’ll need to buy a “rig,” first and foremost, and stocking up on computer power isn’t always cheap. But, as with any investment, there are risks in doing so. Mining may not be as profitable in the future, meaning your investment may not earn you the types of returns you were hoping for.

Or, if new regulations make mining illegal (though there’s no indication that will happen), investing in mining equipment may have all been a sunk cost.

Bitcoin Mining Pools

Due to the high cost and rising difficulty of mining Bitcoin, most miners today use something called a mining pool, as mentioned previously. Participating in mining pools is considered by many to be the only way for smaller miners to make any profit today, and even then it can be difficult to recoup the costs of equipment and electricity.

Within a mining pool, individual miners pool their resources together with other miners, improving their chances of mining a block and earning the Bitcoin rewards. When a block gets mined, the rewards are then split up among the different miners in proportion to the amount of computing power (known as hashing power) they contributed.

Mining pool owners typically charge mining fees for maintaining and participating in the pool. There are several different pools to choose from, each with their own structure.

Further, there are also Bitcoin cloud mining opportunities out there, which effectively allow miners to use computing resources over the internet. Miners using this strategy are renting others’ equipment, which incurs more costs.

Factors to Consider When Choosing a Mining Pool

After securing the Bitcoin mining equipment and electricity required for mining, a small miner will need to find a suitable mining pool. There are a few important factors to consider:

•   Fees: Most, but not all, Bitcoin mining pools charge fees. The fees are taken from the reward payout and can be as high as 4%.

•   Pool size: The larger the pool, the more frequent the potential payout, as more hashing power equals more blocks being found. However, this also means that the payouts are smaller, since rewards are shared between more people. On the flip side, smaller pools pay out less frequently, but in larger amounts.

•   Security and reliability: Miners might want to find a mining pool that they can trust won’t steal users’ funds or get hacked. Joining established pools with long histories may help to reduce these risks.

•   Required equipment investment: You’ll need to bring some power to the pool, too. And it’s becoming increasingly expensive to mine. When Bitcoin was first created, the computer power required for Bitcoin mining was enough for the computer-processing unit (CPU) of an average laptop computer to handle. But over time, the calculations have become more complex. Today, mining can mostly only be accomplished with advanced Application Specific Integrated Circuit (ASIC) machines, created specifically for mining Bitcoin.

And yet the hardware needs of Bitcoin mining is constantly evolving, as older machines become obsolete. An ASIC that was powerful enough to be profitable six months ago might not be able to produce enough coins to match the cost of electricity needed to run that same ASIC today. When this happens, miners must acquire new, more advanced hardware.

If you plan to try Bitcoin mining on your own, here are some things to consider when purchasing equipment:

•   Equipment cost

•   Electricity cost

•   The time it will take to recoup equipment costs

•   How BTC price fluctuations might impact profitability

•   The frequency with which you will need to buy newer, more powerful machines and sell old ones

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How Long Does it Take to Mine 1 Bitcoin in 2023?

There’s no correct answer here: The amount of time it takes to mine one whole bitcoin varies, and depends largely on the amount of hashing power a miner contributes.

In general, the more hashing power, the faster a block will be solved, resulting in the miner reaping the block reward in the form of newly minted bitcoins. Mining difficulty is another important variable. The lower the difficulty, the greater the odds of finding a new block.

When prices rise, more people are generally motivated to mine crypto. Then, as the Bitcoin hash rate increases due to more miners coming online, the difficulty adjustment (which happens every two weeks) tends to increase.

When prices fall, the opposite tends to happen, as the costs of Bitcoin mining equipment and electricity rise in relation to the value of the coins being mined. As hashing power comes offline, the difficulty tends to adjust downward.

How Many Bitcoins Will Be Mined in 2023?

There are about 900 new Bitcoins being mined every day. Assuming that rate held up during the entirety of 2022, then about 328,500 Bitcoin would’ve been mined in total. That should hold true during 2023, too. Roughly speaking, the amount of Bitcoin remaining to be mined totals around 2 million.

The interesting thing to note is that more people mining Bitcoin does not lead to an increase in the number of coins being mined. The block reward is currently set at 6.25 (this will remain true until the next Bitcoin halving), and one block gets mined roughly every 10 minutes. Increased competition for blocks leads to a higher hash rate, but the number of new coins being minted remains the same.

Alternatives to Mining Bitcoin

For those who choose to undertake the cumbersome task of mining crypto, the best cryptocurrency to mine might be the one with the lowest difficulty and highest price. But it’s critical to remember that these dynamics are in a constant state of flux, so the best cryptocurrency to mine today might not be the best one to mine tomorrow.

Historically, the only time altcoin miners have made significant profits has been when they were mining lesser-known, cheaper coins in the weeks and months before a large increase in prices, or an “alt season.” This has happened twice so far — once in 2017 and again in late 2020/early 2021.

Is It Worth Mining Ethereum In 2023?

Ethereum is the crypto market’s second-largest player. But unfortunately for miners, mining is no longer possible on the Ethereum network.

That’s because the “Ethereum 2.0” upgrade has gone into effect, which changed the consensus mechanism for Ethereum from proof-of-work to proof-of-stake. As such, the network no longer utilizes mining.

Only those who hold large quantities of ETH will be able to stake their tokens and become “validators.” Validators will have a chance at winning the next block rewards, with the highest odds going to those with the greatest amount of ETH staked. You can do more research about crypto mining vs. staking to learn more.

The Takeaway

Crypto mining is still profitable in 2023, however, it’s not as profitable as it once was, given that crypto prices have fallen from their peaks, and that mining operations have become more expensive to run and maintain. That’s not to say that prospective miners won’t make a profit, but there are more things to consider than in years past.

With that in mind, mining is a complex operation that carries considerable costs and risks. Most people interested in crypto mining may find it more worthwhile to join a mining pool than to try and go it alone.

But Bitcoin mining is not the only way for an investor to grow their crypto holdings. You can also buy and sell crypto using the SoFi app. It’s streamlined and secure and you can view all your holdings on a single dashboard.

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FAQ

Is Bitcon mining profitable?

Bitcoin mining can be profitable, but there are many things prospective miners need to take into consideration. Given lower crypto prices and increased costs for equipment and resources, it may not be profitable for everyone.

What is the average profit margin for mining crypto?

It’s difficult, if not impossible to say what the average profit margin for mining crypto is without knowing a miner’s costs for electricity, mining equipment, and more. Those taking part in a mining pool, too, would have different costs to consider as well.

What risks are associated with mining crypto?

Some of the main risks associated with crypto mining include environmental concerns, security risks, investment risks, and regulatory risks. These are all things that any and all miners should take into consideration.


Photo credit: iStock/Chris Tamas

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