Dear Steemit friends,

today i read through articles about Bitcoin Mining, especially Genesis Mining and one important question.

important note first: The following are just thoughts on the topic and how i answer it for me. I'm invested in Bitcoin mining. If you have other ideas i'm curious to know about.

One of the most popular questions regarding Bitcoin is the following:

Should i simply buy Bitcoin or invest in Bitcoin Mining?

Every time someone ask a lot of discussion is going on from both sides against and in favor of mining. My simple and hopefully objective answer to that is the following question:

Will you get more Bitcoin after mining as you'd invested?

Assume the case:

• You'd invested 1 BTC for a price of $4,400 a while ago in a mining provider.

• You have a lifetime contract, which means it will run til it's no more profitable or in other words the fees the miner gets is not covered by the income from mining anymore.

• Maybe after a year or two you reached the threshold and your contract is terminated.

Remember at start you'd invested exactly 1 Bitcoin. Now answer the question.

What's in your wallet <1 BTC or >1 BTC after that?

That's it! It doesn't depend on the current BTC price. What matters is the amount of Bitcoin you'll have after that, in comparison to your initial investment (when the contract is terminated). With a simple buy and hold approach the amount of Bitcoin is constant. With mining you may have a chance to increase the amount of BTC. The fees are a important factor in the equation. You should always reade the fine print in your contract. Last time at Genesis Mining it was $0.00028 per Gh/s (SHA 256). But that can change all the time.

picture from https://www.exodus.io/

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To take this a bit further the following question:

How long can you mine with your contract?

and even more important!

How much can you mine with the ever increasing difficuilty and hash power devouring monster Bitcoin?

Below you see how fast the difficuilty increases over time. Imagine the metaphor you bought with your investment a single computer on the mining farm which never will get any upgrade. So you should consider that over time that your amount of mined Bitcoin decreases or flattens.

difficuilty graph over 9 months

difficuilty list over 12 months

comparison of two values year to year

All graphs and data from bitcoinwisdom.com

You can see a factor of 5.73. Assume you mined 0.1 BTC per day in the beginning now you get only 0.017 per day after a year. That means your BTC amount is diminishing with a high rate. But if you get more BTC as you invested initially in the end you are fine with.

Remember the 💲 amount you get at a time doesn't matter, the amount of BTC you'll get is the number you should watchin' all the time! Because you can always choose simply buy BTC and hold or mine it with the risk of early termination of the contract with paying fees until the end.

Coinwarz is a little helper where you can calculate profitability as a snapshot of time! It doesn't take into account the ever increasing difficuilty or a halving from what i read and understand.

So if you think long term you must do the math for yourself to get a more realistic picture of a possible breakeven point because your pickaxe or the number of workers remains the same but Bitcoins hardens over time and it will take longer to carve the precious cryptocurrency.

picture from coinwarz.com

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Now we make it a bit more complicated with asset allocation:

Think of the opportunity costs. After you'd invested 1 BTC in mining. Your capital is tied up in the contract and now you see some Altcoin rise you researched and you're quite sure that's one of a kind.. like Steemit. But now you're sitting on the mining contract without free money and must watch the development from the sidelines without skin in the game. That could be painful. That's the same like if you're decided to power up with Steem Power (SP) like i did and you're just in for value appreciation and nothing happens. (I personally don't think of a powerdown because i belief the best is yet to come 😉) Maybe there are better chances but it's my belief what's a better opportunity.

Sure you can always get a better return on investment and so it's important to think where you put your eggs in and how many.

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The halving of Bitcoin

It happened recently the rewards for mining were halved! That's a huge impact if you think of invested in hash power before and suddenly your amount of BTC will decrease by 50% forever combined with the ever increasing difficuilty! So it's a good idea to watch the timer before investing in mining. Currently we still about 3 years til the next halving, so nothing to concern about.

picture from http://www.bitcoinblockhalf.com/

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Conclusion for me: Make it easy and use common sense. If i don't understand something i leave it alone or kick the tires until i get a understanding of it. I'm sometimes wrong but i constantly learning. I'm personally invested in both Steemit and Bitcoin because i believe in real world application and fundamental value of blockchain technology at all which is represented by projects who show a real application.

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see also my other posts

Exciting times ahead steemit friends!

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unmarked pictures/animation from giphy.com, pixabay.com