Crypto mining was once a popular way for people to earn cryptocurrencies like Bitcoin without having to directly buy them. However, in recent years it has become increasingly difficult for the average person to profitably mine cryptocurrencies for a variety of reasons.
Increased Difficulty
One of the main reasons it’s harder to profitably mine crypto today is because of the increased mining difficulty for major cryptocurrencies like Bitcoin. Bitcoin mining difficulty automatically adjusts based on the total computing power (hashrate) being used to mine Bitcoin. As more miners have joined the Bitcoin network over the years, the mining difficulty has skyrocketed.
In Bitcoin’s early days, mining difficulty was very low. This allowed average computers to mine dozens of Bitcoin blocks per day. But today, Bitcoin’s mining difficulty is orders of magnitude higher, requiring specialized high-powered mining rigs to have any chance of solving a block and earning the mining reward.
| Year | Bitcoin Mining Difficulty |
|---|---|
| 2009 | 1 |
| 2012 | 3,191 |
| 2016 | 13,451,580,618 |
| 2020 | 19,932,118,559,440 |
| 2023 | 43,432,302,733,042,167 |
As you can see in the table above, Bitcoin mining difficulty has increased exponentially over the years as more miners have joined the network. This has squeezed out hobbyist or small-scale miners, as the hashrate and hardware required just to have a chance of earning rewards has skyrocketed.
Rising Hardware Costs
In addition to increased mining difficulty, the costs of mining hardware and energy have also increased dramatically, making profitable mining even harder for the average person.
In Bitcoin’s early days, GPUs and then FPGAs were powerful enough to profitably mine Bitcoin. But as ASIC mining rigs hit the market, they blew previous generation hardware out of the water in terms of mining power and efficiency. ASICs are now required to have any chance of profitably mining Bitcoin today.
However, powerful ASICs are expensive. Top-of-the-line ASIC mining rigs can cost anywhere from $5,000 to $10,000 each. So you need substantial capital just to acquire the hardware necessary to mine competitively.
| Mining Hardware | Hashrate | Power Usage | Cost |
|---|---|---|---|
| GPU (Nvidia GTX 1080) | 20 MH/s | 100 W | $500 |
| FPGA (X6500) | 840 MH/s | 750 W | $2,000 |
| ASIC (Antminer S19 Pro) | 110 TH/s | 3,250 W | $10,000 |
As the table shows, ASICs are vastly more powerful and efficient for crypto mining than previous generation hardware like GPUs and FPGAs. But their high cost creates a significant barrier to entry for average miners today.
Rising Energy Costs
In addition to expensive hardware, operating mining rigs is also very energy intensive. ASIC mining rigs in particular can consume thousands of watts of power while running, requiring massive amounts of electricity to operate profitably.
Electricity costs make up a significant portion of the overhead for crypto mining operations. In areas where electricity is cheap, mines can spring up to take advantage of the lower energy costs. But in many areas, rising electricity costs have further squeezed profit margins for miners.
| Location | Electricity Cost per kWh |
|---|---|
| China | $0.08 |
| USA | $0.10 – $0.20 |
| UK | $0.15 – $0.25 |
| Germany | $0.30 |
Industrial-scale mining operations may be able to negotiate lower electricity rates. But for individual miners running rigs out of their homes, rising energy costs have further cut into profitability.
Declining Block Rewards
Another factor making profitable crypto mining harder is the declining block reward amounts for mature cryptocurrencies like Bitcoin. Cryptocurrency block rewards are programmed to decrease over time to control the total supply.
When Bitcoin first launched, miners received 50 BTC per block. But designed halvings have occurred throughout Bitcoin’s history to taper the block rewards. The last Bitcoin halving occurred in 2020, reducing the block reward from 12.5 BTC to 6.25 BTC.
With the declining block subsidy, transaction fees make up a larger percentage of miner revenue. But during market downturns when transaction volume is low, mining revenue takes a hit. This can squeeze profit margins further for miners.
Large Mining Pools
The emergence of large mining pools has also made it harder for individual miners to profit. A mining pool is when miners combine their computing power to improve their chances of solving blocks and earning rewards. The block rewards are then split proportionally among pool participants.
Mining pool mining accounts for the vast majority of Bitcoin’s global hashrate today. Some of the largest pools include AntPool, F2Pool, and BTC.com. With industrial-scale mining power, it’s virtually impossible for individual miners to compete for block rewards against the big mining pools today.
| Mining Pool | Bitcoin Hashrate Share |
|---|---|
| AntPool | 14.7% |
| F2Pool | 13.3% |
| BTC.com | 12.2% |
Unless you have thousands of high-powered ASIC rigs, solo mining is generally not viable anymore. Joining a pool helps smooth out rewards for smaller miners, but reduces the chance of earning a whole block reward.
Increase in Cloud Mining
Cloud mining has also contributed to making crypto mining more inaccessible for the average person. Cloud mining involves renting hashpower from a remote data center to mine cryptocurrencies without managing the hardware yourself.
Many crypto enthusiasts got their start by mining from home with an old PC. But today, companies like Genesis Mining and HashFlare dominate the cloud mining space. Some cloud mining plans have high membership fees or costly maintenance fees, making it hard to realize a return on investment.
Cloud mining has made mining more convenient by eliminating hardware maintenance. But it also removes much of the hands-on experience and learning that was once a hallmark of home crypto mining.
Conclusion
In conclusion, crypto mining has moved far beyond the reach of average individuals for a number of reasons:
- Skyrocketing mining difficulty for major cryptocurrencies
- Prohibitive costs of high-powered ASIC mining rigs
- Rising global energy costs
- Declining block rewards over time
- Emergence of large mining pools with industrial-scale mining power
- Rise of convenient but expensive cloud mining
Where once crypto enthusiasts could profitably mine from home with a basic GPU or CPU, those days are gone for all but a few niche cryptocurrencies.Specialized equipment, high startup costs, and industrial-scale mining operations have put crypto mining out of reach for most hobbyists.
While the barriers to mining have increased, cryptocurrency users still have ways to earn crypto without mining such as staking, playing crypto games, freelancing, and more. But for better or worse, profitable crypto mining for the average person is largely a thing of the past.