In this article Bitcoin mining profitability Calculator, we will give an understanding to calculate the cost of bitcoin mining and the various factors Bitcoin mining profitability depends on.Towards the we are giving some hints on how to increase bitcoin mining profitability
The Bitcoin Industry has progressed from just a bunch of geeks and libertarians grouped together to a whole new level of highly specialized and sophisticated business.
But herein lies another problem, the quantity of un-mined bitcoins have been steadily depleting. As the total quantity of coins is fixed at twenty one million, the implication is entering this business and still be profitable would be an uphill task.This is where the concept of bitcoin mining profitability comes into picture.
Before entering into the world of bitcoin mining, it is very crucial to do a cost benefit analysis and have a fair estimate about the overall bitcoin mining profitability expected.
Bitcoin mining profitability depends on a range of factors discussed below. With the increase in the amount of competition and hence difficulty, bitcoin mining profitability analysis is apt to know if you have the financial capability to mine and have an estimate about breaking even.
Bitcoin mining Profit = value of coins mined – cost of mining
Table of Contents
Cost of Bitcoin Mining
Cost of bitcoin mining majorly depends on:
1. Bitcoin Mining Algorithm
2. Bitcoin Mining Hardware cost
3. Mining Efficiency : hash rate
4. Cost of electricity: energy consumption
1. Bitcoin Mining Algorithm
To earn a reward, miners need to provide Proof of work which is gotten via solving complex algorithmic puzzles. Proof-of-work backs up your claim for having spent electricity and time solving for a given block.
This is essentially the whole mining process – solve complex algortithm, get proof of work, earn reward. There are many options for hashing of algorithms but the most popular ones are Scrypt, SHA-256 and X11. These have a handy role in determining the mining profitability.
a. SHA 256:
This algorithm is all about brute force. In the beginning, we had CPUs and GPUs which were used to mine. Later on, with the increase in the complexity of the bitcoin algorithms and competition, special processors known as ASICs or Application Specified Integrated Chips came in use. Even now, with the rapid increase in the difficulty level, even the recently designed chips can become old pretty quickly.
This was the first time that ASICs and GPU mining rigs, having many powerful graphics processing units, were set together. It is used by many currencies like Litecoin
c. X11 Mining Calculator:
This is a hybrid of GPU/CPU with the basic aim of trying to slow down the percolation of ASIC miners. Other variants include X5, X6, X12 etc. Darkcoin or Dash is its most famous coin.
2. Bitcoin Mining Hardware
There are three basic types of mining equipment available,
a. CPUs or GPUs: These are the 1st generation miners and are today the least powerful and least costly. They have become redundant today and need extra hardware to make sure they can handle all the processing needed. CPUs are normal processors on a desktop or laptop while GPUs use graphic cards and are much more powerful than CPUs. GPUs have the capability to employ brute force and do the necessary work to calculate the hashes required to solve the blocks. Some famous examples are ATI and Nvidia. They are costly as well but necessary for hashing. GPUs are helpful when you’re working with multiple cryptocurrencies as they can work with all of them. However, you may need to have a motherboard which is capable of accepting many boards
b. FPGAs: Field programmable gate array – these are better than a CPU/GPU. They are totally customizable and can process high volumes. The only flipside is they can work with only one type of cryptocurrency and hence would have to be bitcoin specific for mining it.
c. ASICS: these are the best yet and work with a high speed, low electricity and specifically for bitcoins. The speed is very high- like that of a super computer. Vendors include Butterfly Labs, KnCMiner, Avalon, CoinTerra etc. ASICs are easier to deal with in terms of the power supply as they use less power and come with adaptors
When making a rig, you should consider the power requirements of all the components taken together. It is always better to have some excess capacity too for emergencies, especially in the case of GPUs.
Lastly, using second hand hardware is not recommended. The mining world is already tough even with a brand new rig. A second hand rig would only make things worse. You might end up shelling out more than you earn.
3.Bitcoin Mining Efficiency
Hash rate: This is the number of calculations the system performs every single second. Its measured in megahash, gigahash, terahash,petahash etc per second. So the faster your hashing power, the more number of calculations done and more chances of finding the solution. But to get a fast hash rate translates into higher cost. In terms of the machine needed. You can check out websites like Bitcoin wiki page’s Mining Hardware Comparison for an idea of the hardware’s hashing power.
Mining efficiency = number of hashes in a second / power consumed
4. Electricity consumption
All the heavy duty computation used in mining leads to a lot of consumption of electricity. In fact, your electricity bill can make up a huge proportion of your total cost and affect your profitability.
For these reasons, it is imperative, while deciding on the hash rates and hardware, to check out their energy consumption pattern. You can use the energy efficiency ratio, which basically tells you how many hashes are run per joule of energy consumed.
So for example if your hardware has a 1 Ghash/J for energy consumption, it basically means that it can run 1 billion hashes using 1 joule of energy. (1 Joule = 1 watt per second).
Also, the power supply unit should be as efficient as you can afford. If the efficiency is low, the unit would end up supplying less energy but drawing more.
Lastly, along with all the points mentioned above, a lot of patience and perseverance is essential for succeeding in this game.
Calculating Bitcoin Mining Profitability
There are apps and websites to check the likelihood of reaching profitability. You can input your expected hashing power, electricity costs, and current difficulty levels and get the expected profits.
Coinwarz is a good example. This site automatically fills in the difficulty level, bitcoin price and block reward respectively. All that needs to be entered is the hash rate, power used, cost of power, pool fees if any, and click on calculate. Typically, the results include
• Days taken for one block mining – solo
• Days taken to mine one BTC
• Days taken break even
These bitcoin mining profitability calculations are tentative and keep changing with the change in variables involved.
How to Increase Bitcoin Mining Profitability
1. Electricity: Countries with artificially low prices for electricity have become a mining hub. Eg: Iceland. Also, China is a great example with about 60% mining pools working from there.
2. Join bitcoin mining pools: if you cannot spend much on equipment, the next best thing is to minimize the overall cost by joining a pool.
3. Get good quality equipment
4. Maintenance of equipment: ensure the rigs get ample ventilation and air so as to avoid overheating. There have been cases where DIY rigs have been built up using beer cases to enable air flow
5. Minimize downtime : get the best power supply money can buy, use a UPS to ensure your power is uninterrupted as any issue with that would mean you losing out on you money
6. Reconfigure your machine a bit to start mining as soon as it starts automatically
7. Keep a checkout on the hidden costs: importing equipment charges in the form of customs and delivery charges
8. Electricity cost should include running the various ancillary equipment like fans, A/C etc
9. Cost of accessories like cables, wires etc
10. Understand the difficulty level is only set to go up as time goes by and volatility is the norm rather than the exception. So keep additional capacity/ cash for unexpected emergencies
In the present scenario, bitcoin mining profitably is easier said than done and it is very easy to get discouraged looking at the extraordinary craze and competition but with forbearance and funds, all is possible.
I hope this article has given you a good understanding in Calculating Bitcoin Mining Profitability and how to improve bitcoin mining profitability.Please don’t forget to give your valuable feedback in the comment section below.