Welcome, welcome to One Minute Crypto!
I'm your host, Chronos, and today I want to
talk about why mining bitcoin is such a tough
business to make money in.
It's not intuitive that this would be the case,
I mean, you buy the equipment, you plug it
in, and you make bitcoins.
What's so hard about that?
Two words: mining difficulty.
Bitcoin has an internal control called the
mining difficulty to regulate how quickly
new blocks are mined.
Basically, this means that if the amount of
mining power on the network goes up, it gets
harder to get a slice of the new coins.
This means you're actually competing against
every other miner on the network.
Let me explain.
Let's say the network difficulty is at a certain
level, and you're making a good profit.
Everything's great, and the money is rolling
in.
But since mining is profitable for you, it's
probably profitable for everyone else, too,
so pretty soon some more competition joins
the network.
This pushes the difficulty up, which means
your profit margin just took a hit.
But everybody is still making money, right?
Wrong.
Someone on the other side of the planet might
have really cheap electricity, or really cheap
mining equipment, and they just keep adding
power until the difficulty is so high that
you're running at a loss.
That's right, for every dollar you spend in
electricity, you might not even mine enough
bitcoin to cover the cost!
Some other guy is more efficient than you
are, and it drives you right out of the market.
In the end, competition is so fierce, I would
guess that most people end up losing money
when they try to mine bitcoin.
What do you think?
Post your comments below the video.
I'm Chronos.
Thanks for watching!
