Bitcoin mining is highly intensive
Bitcoin also happens to be one of the most minable cryptocurrencies in the world as a result of its popularity and relatively high liquidity as a virtual asset. Mining refers to a process whereby people or businesses with high-powered computers solve complex mathematical equations, which are a result of the encryption found on blockchains, to validate a group of transactions, known as a block. These miners compete with one another to be the first to solve these equations, as the first to do so is given a “block reward,” which is paid out in crypto tokens. Thus, bitcoin miners are solving complex equations to be paid in fractions of bitcoin tokens.
That method of mining is known as “proof of work.” It’s a highly intensive method of validating transactions to ensure that the same token wasn’t spent twice. In bitcoin’s early years, mining could be done with high-powered graphics cards from the likes of NVIDIA and Advanced Micro Devices. Today, however, bitcoin mining requires expensive ASIC (application-specific integrated circuit) chips that have narrowed the prospective field of miners.
It also means it takes a lot of electricity to mine bitcoin. Validating transactions can be quite costly, depending on where you live.
The cost to mine one bitcoin in the United States
According to a recently published analysis conducted by Elite Fixtures, which examined the electricity costs of 115 countries, the United States ranked as the 40th cheapest to mine a single bitcoin, with an average cost of $4,758. But given that bitcoin has shed more than 55% of its value since nearing $20,000 per coin in December, the margin to mine bitcoin has tumbled from as much as $15,000 per coin to less than $4,000 per coin in the U.S.
Of course, bitcoin miners in the U.S. are in considerably better shape in terms of margin relative to some other countries. A total of 24 countries examined by Elite Fixutres had mining costs for a single bitcoin that topped $10,000, with South Korean electricity costs pumping its aggregate bitcoin mining expense above $26,000 per token. That’s more than three times higher than what each bitcoin is currently worth! In fact, taking into account bitcoin’s move lower to about $7,800 within the past week, miners in 41 of the 115 countries examined would probably lose money mining bitcoin.