Bitcoin made is made its appearance in 2009, the first in a wave of new cryptocurrencies. The digital currency has seen adoption by over 100,000 retailers and businesses. It has also been hailed for its use as private, borderless currency. Though many imitators have appeared, Bitcoin maintains superiority in the cryptocurrency market.
New currency is created through a process known as ‘mining’. Solving a calculation on a blockchain generates a new Bitcoin. This coin is registered to its miner, and is ready for trading and use as currency. Bitcoin mining has become a cottage industry, requiring only a computer and internet connection. As the calculations become increasingly complex with each solved, Bitcoin mining becomes more difficult over time.
This year bitcoin has seen enormous gains in value, rising by over 2000%. It has also seen price gains and drops, varying by thousands of dollars in each surge. The instability has been a boon to investors who have managed to take advantage. However, such variation makes Bitcoin’s long-term viability as currency somewhat suspect.
With more miners than ever, it is more difficult to complete blockchains. Profits relative to processing power are at an all time low. Independent Bitcoin miners are being phased out of the market by large, organized mining operations. These mining syndicates use large processing farms, and advanced software to maximize their Bitcoin yield. Most are based in China, due to low power costs that come with China’s oversupply of cheap coal power. Miners outside the developing world are increasingly unable to compete.
The sudden popularity of Bitcoin has brought increased attention from governments. China recently announced new initiatives to curb Bitcoin mining. They will be increasing power costs for Bitcoin mining companies, and issuing environmental fines.
There are also concerns with the financial instability that could come with a Bitcoin crash. Bitcoin trading has been suspended several times due to wild price swings. More regulation is expected to curb investment in Bitcoin.
Due to the anonymous nature of Bitcoin, it is receiving increasing attention from law enforcement. The SEC is currently investigating the activities of several Bitcoin exchanges. The DEA has expressed concern with use of Bitcoin by the illicit drug trade. Tax agencies worldwide are concerned with Bitcoin’s potential for hiding assets.
So, with all these issues in mind, is it worth mining Bitcoin in 2018? There is still some profit to be made, but only by the most organized of operations. A drop in Bitcoin value could easily wipe out even those gains. Investing in the infrastructure needed at this point would be unwise. Bitcoin mining is most likely an increasingly unprofitable venture. Unless Bitcoin sees a dramatic increase in adoption as a currency, these mining operations are likely to see an overall loss. There is more profit potential in Bitcoin for short term investments.