Is cryptocurrency mining still profitable? Is bitcoin mining worth it?

Is cryptocurrency mining still profitable? Is bitcoin mining worth it?
on March 2, 2018

Mining can still be profitable if you have access to decently priced energy, follow a few good practices and build the right rig for the right price. In this article we give you a few tips for mining cryptos in 2018 and we also share some of our own experience. We hope the advice contained in this article will help you decide on whether to embark in a mining adventure.

Don’t be fooled by hyped videos which promise immense wealth and returns in exchange for almost nothing. Most kids promoting Youtube videos and hyping some mining solution are just trying to sell you some immediate product (hardware, software or cloud solutions) and have little actual mining experience. An experienced miner knows that to make a profit you’ll need to work hard and monitor the operation 24×7 for optimal results.

Mining cryptos requires discipline, knowledge about hardware and software configurations and an initial investment in hardware and electrical installations. One of the keys to successful mining is to keep the rig functioning at optimal speed 24×7. Downtime due to hardware crashes, overclocked GPUs, faulty hardware, software bugs and others will eat up your profits very quickly. Especially when the operation is run by a single person, problems tend to creep up during sleep or leisure hours when you’re not near the rig to fix it.

Bitcoin Mining

Bitcoin mining is no longer worth it for home users.

Large scale mining has taken over the niche and there’s little that can be done about it. The most a home miner might accomplish is to scrape a few pennies here and there, if lucky. Therefore amateur miners have to turn to different altcoins in order to make a profit.

Crypto Algorithm Selection

First things first: find a suitable cryptographic algorithm for mining. CoinWarz.com is great for this, as it allows you to enter some parameters and instantly receive a list of profitable coins and their respective algorithms. To determine mining profitability you need to provide the maximum hashrate your rig is capable of providing, the power consumption in Watts and the electricity cost in KW/h. With these 3 parameters in place, CoinWarz will provide a list of coins. If the graph under¬†Profit Ratio column is green, it’s good news, it means your rig and electricity costs allow you to be profitable. If it’s red, then forget it, mining will not provide a ROI.

Here is a sample CoinWarz screen capture from early March 2018:

Listed under each cryptocurrency logo you’ll find the cryptographic hashing algorithm employed by this coin. Your mining rig will need to be set up for a specific hashing function.

For home users we recommend the EtHash and Equihash algorithms, these still allow for reasonable returns using GPUs. SHA-256 and Scrypt now have ASIC machines available which have eaten away at mining profitability for home users.

The Art of Crypto Mining

If you are able to maintain a constant hashrate nonstop 24×7, mining profitability will reflect the CoinWarz numbers almost exactly. But this is not an easy task. Blackouts, spikes, especially due to storms and other weather conditions will eat away your mining revenue. A UPS that can accommodate the power consumption of the average mining rig might cost thousands of dollars.

The mining software is also crucial. Bad algorithms and subpar GPU kernels will not yield top performance. In our experience, optimizing the Scrypt kernel on Radeon cards could increase hashrates as much as 15% without extra energy consumption. We ran a medium sized Litecoin and Dogecoin mining operation for a few years until Crypto.BI offices moved and we had to stop the rig. Each mining algorithm has special requirements which the miners must understand in order to optimize power usage. Hacking the Scrypt mining software for AMD Radeon GPUs consumed a significant amount of time in our experience.

The initial investment amortization will spread over the mining lifetime. To start mining you need to invest in GPUs or ASIC miners, proper electrical installations and perhaps an additional dedicated circuit just for the rig, optional UPS, decent internet connection and some convection based cooling which you can build yourself or hire someone to build. All these costs will be amortized along the time you spend mining.¬† Your rig will only truly be profitable once the initial investment principal has been paid off. Some mining calculators take the amortization into consideration, others don’t. Anyway the longer you run the mining operation, the less the initial investment will weigh down on your monthly profits until it is fully paid off.

Lastly, remember that the immediate value of coins is not your only source of income. Holding the coins for longer periods may turn out to be a much better investment. To be able to hold the coins, you need to carefully analyze the cash flow needed to keep the rig functioning without having to sell the production. If you have enough cash reserves from other sources of income in order to sustain the mining operation, future coin values may offer a much larger return than selling the production each month. Some miners view the mining expenses as a monthly investment into cryptos. It’s a way to “buy” cryptos that doesn’t involve the traditional exchanges.

If you are able to keep the initial investment to a minimum and your electricity costs are suitable for mining, there’s actually lots of potential in altcoin mining. There are many great tutorials online, especially videos on Youtube which show you physical details of the installations, which you can use to build an initial mining rig. If this is your first time mining, make sure to build a smaller rig first to get a feel for it. Having mined for years, we can tell you from first hand experience that mining is not for everyone. If you’ve got kids and family, the mining rig can become a hurdle inside the house. It does gather dust, it makes constant noise, it generates TONS of heat and is overall a complete obstacle to have at home. If you live in a small place, a rig can really lower your quality of life, especially if you must sleep in the same room as the miners. We’ve got friends who built rigs at home and later wanted to rage quit and throw the whole thing out into the bin. Therefore building a pilot project just to test the waters is a great idea for newbies.

Cloud Mining

We’d like to include a short note about cloud mining. Cloud mining companies are actually mining operations which rent out some of their infrastructure in order to cover their immediate cash flow needs. As we mentioned above, there is a fixed cost involved in mining and unless you’ve got an external source of income, you’ll need to cover these costs periodically by selling cryptos. Cloud mining companies solve this by renting out some infrastructure in the form of future contracts. They agree to provide you with a certain hashrate for a certain period, paid in cash. This way the cloud miners pay off some of their fixed costs without having to cash out all the mined cryptocurrencies.

We discuss cloud mining profitability at length in a separate article. The main thing to pay attention to is the mining algorithm and network difficulty growth.

For SHA-256 and Bitcoin mining your future mining contract will become obsolete in a matter of months. You should perform due diligence to determine the ideal crypto algorithm for which cloud mining will last long enough to provide a return.

Conclusion

Mining profitability depends on, in descending order of importance :

  • Electricity cost
  • Initial investment amortized through the duration of the mining operation
  • Uptime and constance. Keeping the rig running 24×7 at optimal speed.
  • Hosting cost. (Rent, infrastructure, security, etc)

If you are able to build this infrastructure just right and keep it running 24×7 without (or with minimal) interruptions, then mining can be a great way to accumulate cryptos.

Photo Credit: Miner Photo – Courtesy of MaxPixel