If you are really into cryptocurrency mining and want to profit from it, then you need to learn how to maximize the performance of your hardware and invested resources. Without knowing what equipment to buy and how to optimize it, you can suffer losses in the long run. Moreover, if you do not calculate the profitability of cryptocurrency mining, you may end up spending too much money or overestimating your profits. In this article you will find information on how to calculate mining profitability and what tools you will need to increase your profits.
Factors that affect the profitability of cryptocurrency mining
There are many factors that can affect mining profitability. The most important of these are the price of the cryptocurrency, the mining algorithm, the equipment used for mining, and the total hash rate.
Currency
Cryptocurrency mining is a process that involves solving complex mathematical algorithms. It is a proof-of-work consensus algorithm that rewards the miner with digital currency. There are currently two proof-of-work hashing algorithms that are widely used in cryptocurrencies: SHA-256 and Scrypt. There are also other coins that use different protocols, but in this article we will only focus on the two main ones. Obviously, the most popular currency among miners is bitcoin . If you want to learn more about bitcoin mining, read our article on Bitcoin mining. Bitcoin mining - everything you need to know .
SHA-256
SHA-256 is an algorithm that uses tremendous power to solve mathematical calculations. In the beginning, bitcoin could be mined using CPUs and graphics cards (GPUs) that are used in regular PCs. However, over the years, mining hardware has evolved to follow the increasing difficulty of bitcoin mining, leading to the development of specialized processors known as "Application Specific Integrated Chips" (ASICs). Currently, Bitcoin is only mined using this type of device.
As the Bitcoin mining difficulty grows, new ASIC models are created that are more efficient and faster, and this in turn creates a technological race. This means that even recently manufactured chips can quickly become unusable.
The most popular cryptocurrencies based on the SHA-256 algorithm are:
- Bitcoin
- Bitcoin Cash
- Bitcoin SV
- Bitcoin Diamond
- Unobtanium
Scrypt
Algroytm Scrypyt uses a significant amount of RAM and parallel processing to mine cryptocurrencies, which means you can use GPUs for mining. Currently, devices based on the Scrypt algorithm are not so popular, so the level of difficulty in mining individual cryptocurrencies has not yet reached such a high level as in the case of Bitcoin.
The most popular currencies that use the Scrypt algorithm are:
- Litecoin
- Dogecoin
- Afro
Cryptocurrency mining equipment
There are two ways a mining system can be created:
DIY excavator
It requires the use of your PC along with multiple graphics cards (GPUs) that can be mounted on a rack. The advantage of home-made systems is that both CPU and GPU can be used at the same time without affecting performance.
ASIC
ASICs are independent devices equipped with a USB and / or Ethernet port and are manufactured to be ready for use immediately after connection. ASIC equipment is typically more expensive than an in-house assembled excavator, and is mostly American or Chinese-made, meaning interested miners from other countries must import them first. Nevertheless, there are many companies on the Polish market that specialize in selling ASIC excavators.
ASICs are much faster in calculating algorithms and require much less power as they are devices that are designed to specialize in mining cryptocurrencies.
The performance of an excavator can be calculated by taking the ratio of the number of hashes it can perform in a second and dividing it by the power it consumes:
Hash speed / energy consumption = mining efficiency.
e.g. the profitability of the Antminer S9 excavator, whose hashing speed is 12.93TH / s, and the energy consumption of 1350 W is:
12.93 TH/s / 1350 W = 0.00957778
Profitability calculators
There are many websites that calculate mining profitability for specific cryptocurrencies taking into account: equipment used, energy consumption, costs and other details. There are also simpler calculators with fewer factors, as well as much more advanced ones that also take into account factors such as hash factor, energy consumption, energy cost, pool fees, mining difficulty, block reward, and cryptocurrency price in USD. Profitability can be calculated for different periods: hourly, daily, monthly and yearly.
When you first encounter cryptocurrency mining, you may be overwhelmed by the amount of detail as there are many factors influencing the profitability of mining.
CryptoCompare is a calculator that has default values ??for many factors, but allows you to adjust the hash rate, energy consumption, cost per kWh, and mining pool fee. With these values ??you can estimate your daily, weekly, monthly and yearly profits. However, this calulatore does not calculate future changes of difficulties, which leads to overestimation.
CoinWarz is a calculator similar to CryptoCompare, but also has the ability to adjust difficulty, block reward, BTC price in USD, and the cost of purchasing an excavator.
There are also calculators that take into account price fluctuations and difficulties.
My Crypto Buddy offers customization like the aforementioned sites, but also has the ability to make monthly price changes and difficulties. Based on these inputs, a chart of your potential future income will be generated that will allow you to observe changes in profitability.
It should be noted that when it comes to Bitcoin, most calculators are based on a different hash rate increase.
According to BuybitcoinWorldwide Bitcoin hash rate increases at 0.4527678% per day. This means that if you buy 50 TH / s excavators, your total network share will drop daily relative to your overall hash rate.
Most calculators, however, show profits that are actually much more inflated than real ones because they don't take growth rates into account.
Summary
Cryptocurrency mining can be a great way to passively earn money. However, with various factors that can affect profitability, it is quite difficult to accurately forecast your earnings - especially since there are certain factors that are beyond our control.
