Mining cryptocurrencies used to be a viable choice for making profits in the past. But crypto entrepreneurs have swayed away from this method of acquiring crypto. They now buy bitcoins or other cryptocurrencies and sell them for a higher price instead.
With large mining operations dominating the landscape, mining has become an increasingly difficult venture to partake in. Some may even think of it as a defunct way to acquire crypto.
However, with the recent bull run, a lot of us are asking ourselves – is crypto mining still worth it in 2021?
In this article, we will try to answer that exact question. We will consider equipment and running costs, and how to determine the profitability of your mining farm.
Before we begin, let’s go through some basics of cryptocurrency mining.
What is cryptocurrency mining?
Mining is the process of validating transactions on the blockchain by using computing power. To do this, high-powered computers (miners) solve increasingly difficult math problems and create new data blocks of transactions.
In exchange for their efforts, miners are rewarded with new coins created through the process. This is known as a proof-of-work (PoW) consensus mechanism.
Today, mining rigs have evolved into two main categories:
- ASICs – which are expensive, specialized computers that can be used only to mine cryptocurrencies.
- GPU Rigs – Computers that contain one or more graphic cards where GPU power is used to mine cryptocurrencies. The more cards, the higher the computational power will be.
Keep in mind that certain cryptocurrencies like Bitcoin are mineable only with ASICs, while others like Ethereum can only be mined with GPUs (ASIC resistant).
What to consider when mining cryptocurrencies?
. When trying to calculate mining profitability, there are three main aspects that you need to consider:
There are several criteria to watch out for to increase your mining revenue:
- Mining Difficulty – as more miners join the network, the difficulty to mine new coins increases. If your hardware computing power (hashrate) can’t keep up, you will be mining at a loss.
- Coin switching – cryptocurrencies are a volatile asset and their price fluctuates by the minute. Miners often switch to a different coin to optimize their revenues.
- Running Costs
Maybe the most important of all three pillars in cryptocurrency mining is the operational expenses you will be facing on a daily basis. This mainly includes the costs of electricity in your region, as mining rigs are power-hungry machines.
There are also additional expenses to consider like mining pool fees, cooling fees, mining software fees, and maintenance costs.
- Investment Costs
The required equipment is the initial paywall to start cryptocurrency mining. For example, a top of the line ASIC miner can cost anywhere between $1,000 and $3,000.
Older ASICs might be cost-friendly but their inefficiency will diminish your profits considerably.
Building a GPU rig can be a more democratic venture for beginners as they are cheaper and more versatile solutions.
So is mining still profitable in 2021?
The answer to this question cannot be answered by a simple yes or no. Making profits from mining depends on a combination of all the factors previously stated.
Let’s illustrate this by a couple of examples using the calculator found on CryptoCompare:
Bitcoin mining for individual investors is rarely worth it anymore because of the highly competitive mining sphere.
Here’s an example of a $1500 initial investment:
- Coin Mined: Bitcoin
- ASIC : $1500
- Hashrate: 85TH/s
- Power draw: 3000 watts
- Electricity Cost: $0.12 per kWh
With these parameters, the calculator gives us a projected profit of around $350/year. Even in this bull market, you would need short of 4 years just to break even with your initial investment making this an extremely risky venture.
The other option is to invest in a GPU rig. GPU mining can be quite profitable if done right.
Let’s consider the same initial investment of $1500.
- Coin Mined: Ethereum Classic
- GPU Rig : $1500
- Hashrate: 170 MH/s
- Power draw: 1000 watts
- Electricity Cost: $0.12 per kWh
The results are much more appealing, with over $1000 per annum. Your investment should be returning profits in just over a year.
To summarize, if you avoid ASICs, you can still make profits with a mining farm. For the average consumer, it would be unrealistic to try and compete with Bitcoin mining giants.
However, mining alternative cryptocurrencies with a GPU can still be quite profitable. Make sure you do your due diligence and use tools like BetterHash to calculate your profitability and stay on top of the competition.
Worth noting that there’s a new generation of GPUs just around the corner. Combined with the ongoing cryptocurrency bull market, it might be just the right time to start a mining farm.