The cryptosphere has seen various business ventures since Bitcoin (BTC) came into limelight far back in 2009. Today, cryptocurrency mining remains one way to make a living within the blockchain ecosystem with the practice seen in various countries across all continents. To envision how globally widespread the embrace for cryptocurrency mining is, the Belarusian President, Alexander Lukashenko, made a case for Bitcoin (BTC) mining in the country despite the uproar in the past weeks.
Cryptocurrency mining or crypto mining is the process of earning digital currencies such as Bitcoin in exchange for running the verification process to validate digital currency transactions. Earlier, only cryptography enthusiasts served as miners. However, as cryptocurrencies gained popularity and increased in value, mining is now considered a lucrative business that almost anyone can be involved in.
What makes cryptocurrency mining a profitable venture depends on a number of factors which this article seeks to propound on.
State of Cryptocurrency Mining In Africa
Mining is energy-intensive, it requires a lot of hours of energy up to about 215 kilowatts per hour or 7 gigawatts of electricity which equals 0.21% of the world electricity supply.
In Africa, a continent with 54 nations, Bitcoin mining is predominant in such countries as Egypt, Kenya, South Africa, Ghana, Nigeria, and Uganda, to mention a few. This is because the conditions necessary for mining are not quite favorable across the board. Such conditions include the cost of setting up a mining rig, the cost of electricity, cooling equipment, as well as government regulations.
Some African country’s location encourages mining, while others discourage it. South Africa and Egypt pay low electricity fees than other African countries; therefore, mining thrives more in these countries. South Africa is generally being tagged as Africa’s mining hub because of its particularly affordable electricity and favorable government regulations.
Generally, Africa has strict regulations, a high cost of electricity, and a comparatively higher cost of setting up a mining rig. A complete mining kit consists of graphics cards, a processor, power supply, memory, cabling, and cooling systems, which may cost anywhere from about $5,000. Africa has a hot climate, and mining generates a huge amount of heat, and this could lead to the destruction of the computer hardware, and to avoid such disaster from occurring, large cooling equipment is needed to make the atmosphere conducive for mining, and very few Africans can afford to build a basic Bitcoin mining rig with the associated cooling systems.
Besides the cost of setting up the rig, other factors that determine the profitability include the cost of the electricity to power the computer system, the availability and price of the computer system, the difficulty in providing the necessary workforce for the services, and the number of miners in the system. When more miners enter the market, the mining difficulty increases, as seen recently, and this helps to attain a level of balance in the system. The last factor for determining profitability is the market price of the cryptocurrency being mined compared with a standard hard currency such as the United States Dollar.
Mining in Africa: Pain or Gain?
Cryptocurrency mining can generate a small income for a cryptocurrency miner, in most cases, only in the amount of a dollar or two per day for individuals using their own equipment. This means that their computer hardware, expenses like electricity and internet connection also impact the net revenue generated by cryptocurrency mining.
Furthermore, to control the introduction of new digital currency, particularly Bitcoin into circulation, the network protocol halves the number of Bitcoins awarded to miners for successfully completing a block about every four years. Initially, the number of Bitcoin a miner received was 50. In 2012, this number was halved, and the reward became 25. In 2016, it halved again to 12.5. In May 2020, the reward halved once again to 6.25, which is the current reward. Prospective miners should be aware that the reward size will decrease into the future, even as the difficulty is liable to increase.
Taking all these costs and factors into consideration, miners in Africa can decide if mining is pain or gain when they can successfully analyze the cost/benefit of Bitcoin mining and understand their break-even point. Some miners and prospective miners go as far as importing pieces of equipment, which is quite cost-intensive and tedious. But if a miner earns as much as 6.25 Bitcoin with 1 Bitcoin currently valued at $11,415.41 as at the time of writing, according to Coingecko, the procurement of such equipment may be of great value in the long term.
Joining a mining pool is another easier method to go about mining. It increases the speed and reduces the difficulty of mining. Consequently, the reward might be less because it is shared amongst participants, but mining would be completed faster. Miners can profit if Bitcoins’ price exceeds the cost to mine at any point in time, with the former factor largely relative and varies amongst several miners across Africa.
Cryptocurrency mining is profitable in countries with excess electricity like Iran, where power plants can run mining rigs. Africa’s productivity is best evaluated when miners personalize the old proverbs that go thus, no pain, no gain.