Is Bitcoin Mining a Profitable Business in Nigeria?
Bitcoin mining is performed by high-powered computers that solve complex computational math problems; these problems are so complex that they cannot be solved by hand and are complicated enough to tax even incredibly powerful computers.
The result of bitcoin mining is twofold. First, when computers solve these complex math problems on the bitcoin network, they produce new bitcoin (not unlike when a mining operation extracts gold from the ground). And second, by solving computational math problems, bitcoin miners make the bitcoin payment network trustworthy and secure by verifying its transaction information.
When someone sends bitcoin anywhere, it’s called a transaction. Transactions made in-store or online are documented by banks, point-of-sale systems, and physical receipts. Bitcoin miners achieve the same thing by clumping transactions together in “blocks” and adding them to a public record called the “blockchain.” Nodes then maintain records of those blocks so that they can be verified into the future.
While many miners compete to add each block, the miner who solves the problem will add the block, along with its approved transactions, to the blockchain.
The miner who is successful in solving the problem adds a block to Bitcoin’s blockchain and receives a reward of 6.25 bitcoins. As of the time of writing this article, a single bitcoin is worth more than $32,000. This means every successful miner receives approximately $200,000 worth of Bitcoin. Very good returns for verifying a “bunch of complex math problems” isn’t it?
Due to the inherent difficulty in mining Bitcoins, there are several requirements when it comes to the actual mining process.
Is Bitcoin Mining a Profitable Business in Nigeria
This means your iCore 7, 16GB ram computer will not be able to mine Bitcoin as regular household computers will not see any success in the modern Bitcoin mining ecosystem.
In Nigeria, the first and most important piece of equipment needed to mine Bitcoin is specialized mining hardware called application-specific integrated circuits (ASICs). A new ASIC device can cost anywhere from $500 to $10,000. But the price of mining hardware is only a fraction of the expense involved. ASICs consume tremendous amounts of electricity, the cost of which may quickly exceed the cost of the device using it depending on the cost of electricity in your country or region.
You’ll also need to choose Bitcoin mining software to join the Bitcoin network but this isn’t nearly as expensive as hardware. There are even mining software for free online but it’s best to get a more reliable software that will cost between $100 to $3,000
Another very key cost is the cost of a standby, industry generator to power the mining rig in case of power failure which is a common occurrence in Nigeria. This will cost between 10 million to 20 million, depending on what works best to power the mining rig.
This is the most important cost to consider and it is the major determining factor as to whether or not to venture into the mining business. According to The Digiconomist’s Bitcoin Energy Consumption Index, one Bitcoin transaction is estimated to take 1,544 kWh to complete or the equivalent of approximately 53 days of power for the average US household.
To determine the profitability of Bitcoin mining, 3 major expenses must be considered which are the hardware, software, and electricity. The current value of Bitcoin will also be considered especially because the market is very volatile. Tax in Nigeria which is currently at 30% must also be taken into account.
The mining rig, software, generator and other ancillary cost shows how capital intensive mining can be. These costs are enough to think twice about the mining business and another cost which may seem insignificant but very vital is internet speed. Mining is like a competition between different miners who want to earn a commission on mining the block. Without good enough internet speed, the rigs and software become useless and good internet speed in Nigeria is hard to come by.
Olumide Adesina, a market analyst gave his take on mining stating that “First is the environmental concerns surrounding bitcoin mining. The carbon emission from Bitcoin mining affects the environment negatively. Bitcoin produces more carbon emission than a leading America airline company, American Airline, that has more than 200 million passengers a year.
In Nigeria, we do not have a stable power supply that could make the business somewhat viable. Bitcoin mining is known to be an energy-intensive endeavour which Nigeria is not ready for.”
To mine a Bitcoin worth $32,000 as of today will not yield so much return on investment. Especially when considering other costs like rent and human capital needed to monitor the machines.
As an individual, it will not be cost-effective to get into the mining business and on a large scale with a significant level of capital investment, to mine a Bitcoin worth $32,000 may not yield so much return on investment either.
When considering costs like rent and human capital needed to monitor the machines, the issues surrounding power supply and the difficulty in getting strong internet connectivity to power the mining process, it is hard to see how mining can be profitable in Nigeria.
Culled from Leadership