Want to make money off Bitcoin mining? Hint: Don't mine
Think you have what it takes to be the next Bitcoin millionaire? You might not want to quit your day job.
The suddenly popular electronic currency is drawing the ire of skeptics. And trying to explain how Bitcoin works and where it comes from to non-geeks only tends to raise eyebrows, but it's easiest to think of this way: When Bitcoin was created by a shadowy programmer or group named Satoshi Nakamoto in 2009, a limit of 21 million coins were scattered throughout the digital realm and hidden in blocks of data. Successfully unlocking these equations with computer software, or "mining," yields a haul of bitcoins.
But Bitcoin mining ain't easy. While you can purchase coins outright (hence its fluctuating value), the actual process of mining is "supposed to be arduous," says Bloomberg, like extracting gold or diamonds from the earth. While you're not climbing down treacherous dig sites with a helmet, per se, you are dedicating a significant amount of computing power to solving what are essentially complex math problems.
Not just any old PC will do, either: Dedicated Bitcoin mining rigs with the sole purpose of crunching through algorithms can cost you up to $6,000 on eBay.
Then there's the fact that your chances of finding coins solo are incredibly slim. Miners can go many fruitless months before they ever hear a coin's hypnotic clink. For that very reason, most users join mining pools, which combine the processing power of multiple machines and distribute any bounty among members, depending on how much work they've contributed.
From an economic standpoint, that division of labor is partly why Bitcoin mining can get to be so expensive. According to Bloomberg, which uses data from a tracking site called Blockchain.info, 24 hours of mining from around the world consumes in the ballpark of $150,000 in electricity. That works out to 15 cents per kilowatt hour — a little higher than the U.S. average, and enough to power roughly 31,000 U.S. homes.
At least for now, though, the Bitcoin mining industry remains profitable business for the truly dedicated. (A recent 24-hour period of work yielded Bitcoin miners around the globe $681,000 profit.) But as more Bitcoins are discovered, the odds of finding new ones will exponentially diminish. That's why, even though about half of the global Bitcoin yield has already been pocketed, the last few probably won't be unlocked until 2030.
As TechCrunch cautions, "While you could simply set a machine aside and have it run the algorithms endlessly, the energy cost and equipment deprecation will eventually cost more than the actual Bitcoins are worth." That's why, "as with most gold rushes throughout history, it's those who are supplying the miners that are finding the real riches."
As many have noted, there is money to be made feeding unrealistic dreams.