Cryptocurrency mining is futile without profitability in today’s era. In the beginning, cryptocurrencies like Bitcoin were easily mined through PC and CPU, but as the market grew, Cryptocurrency mining became more intense. It introduced the need for new categories of mining hardware, at first GPU and then ASIC miners.
Mining became complicated with the increase in the number of cryptocurrency mining enthusiasts, making profitability one of the most crucial factors to be considered by everyone. If you are also a mining enthusiast and want to know about the profitability in detail, this blog is for you. This blog aims to cover all the profitability aspects from scratch, such as what profitability is, its importance, how to calculate it, and the factors affecting it. Let’s get into the blog to understand cryptocurrency mining and profitability better.
Cryptocurrency mining uses cryptocurrencies to create new money and verify recent transactions added to the chain. Blockchain transactions are validated and secured using vast, decentralized computer networks from all over the world.
All cryptocurrency transactions are recorded in the distributed ledgers. Due to the immutability of these distributed ledgers, there is no chance that the network or trades will be compromised. New coins are earned as return rewards by the miners as payment for carrying out this mining procedure.
Cryptocurrency mining is crucial to the security of cryptocurrencies to add new coins to circulation. Unlike banks, it authenticates and protects the blockchain, enabling cryptocurrencies to operate as a peer-to-peer decentralized network without external supervision. Additionally, it encourages miners to add their computer power to the network.
Profitability is the most important thing for a miner because there are many factors associated with it that affect cryptocurrency mining. It isn’t easy to declare a miner profitable just like that because several factors are involved.
These factors include hash rate, power consumption, electricity cost, mining rig’s cost, etc. A prospective miner would always look for all these factors to ensure he is gaining profitability by giving in his time, resources, and money.
The mining difficulty is also essential to an individual invested in crypto mining. All these things are taken care of to ensure the mining is profitable, as after giving in all the inputs, one expects a sound output.
A miner’s hash rate effectively tells how fast the mining equipment is capable of mining the coins. A lot of power consumption will generate larger electricity bills, and the price will go so high that you won’t even be able to calculate the energy you use.
A miner’s profitability is calculated using the input value of the hash rate and power consumption. The greater the profitability of crypto mining hardware, the more beneficial the mining will be.
There is no particular formula set to calculate the profitability of a miner. Because digital profitability calculators are available, that does the work for you.
However, let’s look at the general equation that almost all the calculators use for giving the output. Let’s take an example of Bitcoin mining profitability to know how we can calculate the profitability with the help of CoinWarz, a reliable tool for profitability calculation:
Let’s check the profitability of Bitmain Antminer S19 XP:
Let’s Enter the Data Available – (To input the details, always refer to the specifications of the product)
Bitcoin Mining Hashrate: 140 Th/s
Power Consumption: 3010 W
Electricity Cost: $0.05 kWh
Pool/ Maintenance Fee: $0.00
The profit is $4.64 Per day, the mining revenue is $8.25, the pool fee is $0.0, and the electricity cost is $3.61.
Profitability calculators are used to calculate the profitability of mining hardware and return on investment. Several calculators are made available by pioneering companies that understand the importance of profitability statistics. However, note that these calculators only provide you with the approximated value, not the exact value. Here are a few calculators that are recognized worldwide and used reliably for profitability calculation:
CryptoCompare is the most accessible calculator to operate. All you have to do is input the details it requires, such as the cryptocurrency coin you are calculating it for, hardware information, energy consumption cost, etc., to get a better idea of the profitability of your mining operation.
The NiceHash calculator is used by many mining enthusiasts looking to see the historical background of the miner. It is the most reliable profitability calculator and is user-friendly, giving out the details concerning the mining hardware. It is excellent for new miners who want to know how profitable their mining device is before starting the mining process.
One of the most widely used free cryptocurrency mining calculators is WhatToMine. This thorough calculator offers various resources. They might contrast mining challenges, anticipated returns, and more. You can further personalize the calculator once you create an account, making it easier to obtain the data you require for decision-making.
Profitability depends upon several factors in cryptocurrency mining, such as hash rate, power consumption, cryptocurrency price, mining hardware cost, and much more. Let’s discuss the aspects one by one that affects the profitability of cryptocurrency mining:
Hashrate is the speed of the computational device to complete the mining operation, i.e., mining coins, authenticating them, and adding them to the concerned blockchain network. It depicts how fast the miner is delivering the results. Hence, the more the hash power, the more the mining operations will be executed promptly.
Power Consumption is an essential factor in profitability. Mining hardware requires energy to do the mining operation, which can significantly impact electricity cost and consumption.
If the mining hardware uses less power and gives better output, it can increase profitability. If the mining hardware takes in a lot of energy and provides less work, the mining can be unprofitable.
The volatile nature of the cryptocurrency price is the most significant factor influencing the profitability of cryptocurrency mining.
If the demand for a particular cryptocurrency goes higher, it is likely for its value to increase in the market.
The cryptocurrency market experiences fluctuations every second. Therefore, When the price goes high, the profitability increases. However, if the price goes down, it will increase the profitability of mining.
The network mining difficulty is mining and validating the transactions on the blockchain using computational devices by performing mathematical calculations. The more challenging it is to mine crypto, the more computer power will be required.
The network difficulty escalates due to the rise in mining enthusiasts joining the network. As more miners join the network, the mining difficulty rises, making it harder for them to receive the return awards.
Block rewards are the return rewards a miner gets for validating a block of transactions and adding it to the blockchain to mine fresh, authenticated cryptocurrencies. As the expense of maintaining mining increases gradually while the returns invariably decrease, it is known as halving.
If the coin doesn’t increase in value to offset the recurring reduction in block reward, mining can become unprofitable. The coin’s value decreases as miners leave the network because of the smaller block reward.
To improve their chances of discovering and mining blocks on a blockchain, miners can pool their computational resources by joining mining pools. If a mining pool is successful, the reward is split among the miners in the pool in proportion to the resources they have provided.
Downtime is a thing in a mining pool that affects the performance of the mining pool as, at this time, it fixes the bugs, takes in maintaining the pool network, and solves technical issues. However, if the downtime of a mining pool is high, it can adversely affect profitability.
You must know which algorithm your cryptocurrency requires. It is because it makes a difference when it comes to calculating profitability.
For example, SHA-256 mining algorithms need ample processing power; therefore, using ASIC mining hardware would be an ideal choice. Also, the SHA-256 algorithm is considered one of the most profitable algorithms.
However, for scrypt, RAM and a processor are required, which will also work well with a quality GPU. Hence, check the algorithm your coin uses to know which mining hardware you choose to make the mining profitable.
As per an Article by Cointelegraph released on August 24, 2023, In this episode of Market Talks, they spoke to Dan Rosen, an Associate Director at Luxor, a US-based mining pool service provider.
The program covered a variety of general subjects, such as Rosen’s predictions for how the imminent Bitcoin price halving will affect BTC prices and why Bitcoin volatility is expected to stay in the double digits for a long time in the future.
“Rosen said, Approximately four years back, Bitcoin’s volatility surged to high levels between 70% to 100%. It is declining over time, but this pattern is expected to continue as the asset becomes more profitable and an ETF [exchange-traded fund] eventually launches. In four or five years, we might eventually witness an asset class with an annualized return of 20% or less.”
The cryptocurrency market is expected to keep expanding, which reflects well on the future of cryptocurrency mining.
However, it’s critical to remember that environmental concerns and regulatory changes may significantly impact the industry.
Although it may alter over the coming years, mining cryptocurrency is still a vibrant and possibly rewarding sector.
It confirms that Bitcoin is the future of the cryptocurrency and can bring profitable results if several other factors are also in sync with Bitcoin, such as its mining hardware, electricity consumption, hash power, etc.
Also, the profitability is expected to increase when cryptocurrency mining goes all green or sustainable. The sustainable will cut electricity costs and deliver efficient results by adopting sustainable mining solutions.
Sustainability is increasingly a critical metric for the blockchain industry’s future.
Creating an effective and efficient cryptographic system is necessary to enhance the adoption of blockchain-based cryptocurrencies.
Bitcoin is mined globally and uses a lot of energy due to the increased demand on the cryptocurrency market.
As more people attempt to solve these mathematical puzzles, they inevitably get harder, requiring a more extensive investment from the miners’ electrical and processing resources to enjoy the rewards.
Sustainable mining is a thoughtful process that can save the environment from waste, conserves energy, prioritizes the environment, and cuts extra electricity costs.
The chart below depicts a significant decrease in electricity consumption and an increase in efficiency and sustainable electricity as per BMC’s survey.
New technologies are continually revolutionizing the crypto-mining industry. The expert miners who succeed and get the most extraordinary profits constantly research the area and refine their mining techniques. Mining enthusiasts consider the profitability of cryptocurrency mining to carry out efficient mining to generate more profits.
As more and more fossil fuels are burnt to power the mining process, the climate is getting polluted. It encouraged mining enthusiasts to adopt sustainable practices for a green environment saving future resources for sustainable development.
Cryptocurrency is vital in creating fresh coins by authenticating the transactions in blockchain networks as it maintains the decentralization and immutability of a blockchain network, making the industry thrive.
Several calculators are introduced to the blockchain and Crypto industry to calculate profitability. However, there are only a few which are reliable and user-friendly, including NiceHash, WhatToMine, and CryptoCompare.
Every time a miner validates the transaction and adds it to the blockchain successfully, he procures a reward for that, which is a cryptocurrency. The return rewards are vital to them, which they charge as a fee for their mining process. It keeps the miner motivated and saves other people’s time by authenticating the transaction for others
Sustainable electricity is seen to be taking over the world already because of environmental degradation. The miners are adopting a green mining method to decrease fossil emissions to set up a healthy pace for the environment. Sustainable mining is helping the environment and cutting down the cost of electricity, which is expensive for the miners to carry out mining operations.