The days of mining Bitcoin in your bedroom on a desktop computer are long gone. It used to be that a small network of staunch Bitcoin supporters would mine the cryptocurrency on individual systems, more as a hobby than anything else. But as time went by, this became more and more of a challenge.
At the end of 2009, the Bitcoin hash rate was 8 million times per second. By the end of 2010, it had grown to 116,000 million times per second. During 2014 the network surpassed 10,000,000,000 million times per second. Needless to say, by this point, it had already become nearly impossible to mine Bitcoin profitably from your personal computer.
Small-scale mining challenging
The hashing power of the network increased exponentially over time as more and more people started to mine. This meant that mining became increasingly difficult, requiring ever more powerful computing capabilities to take on the complicated algorithms. Powerful hardware cost a lot of money, and that is the first challenge when it comes to mining. Even for an entry-level machine that will be able to cope with the complex calculations, you can expect to fork out a few thousand dollars (including cooling systems).
However, the likelihood of successful mining with an entry level machine is slim at best. Most serious miners spend tens of thousands of dollars on strong hardware that can compete with other miners on the network. In fact, Bitcoins are now mostly mined in mining pools, with huge data centers running the latest mining hardware. This state of the art hardware is extremely power-hungry, and electricity bills escalate into the thousands.
Big mining pools take the electricity factor so seriously that they do one of two things: either move to operations where electricity is cheap, like China, or to colder countries, such as Iceland, were running powerful data centers are more energy efficient. It is therefore clear that, without economies of scale, it is impossible for individual miners to compete profitably in the current Bitcoin mining market…