Factors That Affect Mining Profits
This is the key factor. The cryptocurrency mining boom was mainly a result of the explosive growth in cryptocurrency prices throughout 2016–2017. The higher the price, the higher the mining profit.
Reward For a Found Cryptocurrency Block
Most cryptocurrencies have a built-in mechanism to reduce miner rewards after a certain period of time. In Bitcoin, this is called ‘halving’, because the reward is reduced by half.
The more coins per block, the higher the mining reward.
Block Time of the Cryptocurrency Network
The more frequent the blocks, the higher the mining reward. For example, with Bitcoin, 144 blocks are found daily, whereas with Ethereum it’s 270 blocks per hour!
Cryptocurrency Network Hashrate (Difficulty)
The higher the hashrate (that is, the more competitors a miner has), the lower the mining rewards.
If you forgot about the importance of this factor, please read this article. Luck is directly related to mining rewards. Some are just more lucky than others. But remember that time will put everything in place – you can’t fool probability theory.
What is the future of mining in 2019 and beyond?
Let’s take a look at the mining of the two major cryptocurrencies of the world – Bitcoin (BTC) and Ethereum (ETH).
For one found Bitcoin block, a miner gets 12.5 BTC + transaction fees for transactions within the block. For an Ethereum block, a miner gets 3 ETH + transaction fees (unless it’s an uncle block). This year rewards in both networks remained the same, so we won’t take this factor into consideration. Block find time in Bitcoin and Ethereum doesn’t change very often, so we can ignore this factor. As you know, our world is imperfect, and luck can be an important factor for mining, just like a casino. However, in general, mining luck is always assumed 100%, that is, an ideal world. So, for now, we won’t consider this factor either.
In the end, we are left with cryptocurrency price and cryptocurrency network hashrate (the number of competing miners). Let’s take a look at Bitcoin and Ethereum.
Bitcoin Mining in 2019
Bitcoin recently turned 10 years old. There was a time when few people knew of its existence, but in the last two years, its popularity has grown significantly. Even older generations are talking about Satoshi Nakamoto, and the BTC price is shown on the home pages of various news websites.
Let’s take a look at the price.
Until 2011 BTC price was always under $1.00. In 2013 it exceeded $1,000, but then it went down. In 2015, BTC started at $200 and then went up with leaps and bounds, which caused an increase in the number of miners.
Let’s look at the Bitcoin network hashrate chart.
In 2017, Bitmain and other hardware manufacturers earned excess profits thanks to the production of their ASIC miners for Bitcoin mining. People were willing to buy the Antminer S9 at any price. At one point the cost of a single device exceeded $5,000.
Antminer S9 is still one of the main BTC mining devices. Sure, Bitmain has since released S15 with twice as much power and slightly higher energy consumption, but their share is still very small. So let’s assume that in the world there are only S9 devices. How many of them are in operation right now?
The Antminer S9 has a hashrate of 14 Th/s.
In 2011, the Bitcoin network hashrate was just 1 Th/s, which means that with such device you would be ten times more powerful than the whole network.
In 2013, hashrate corresponded to ten Antminer S9 devices.
In 2015, it was 400,000 Th/s, or 30,000 S9 devices. This is when mining on an industrial scale began and everyone started mining Bitcoin – it wasn’t exclusively for geeks anymore.
By the end of 2017, the network hashrate reached 14,000,000 Th/s, which corresponds to over 1,000,000 S9 devices.
Hashrate reached its peak at the end of August 2018, stagnating afterward.
If you want, you can check out changes in Bitcoin hashrate yourself here. It’s quite interesting.
In the cryptocurrency world, everything is transparent. You can always view what happened historically; which transactions were executed, how many blocks were mined on a certain day, and much more. All historical data relating to blocks, transactions, hash rate, etc. can be found individually. It’s amazing.
So here’s our point. The number of miners has stopped growing. We are at the breaking point right now. The current Bitcoin price doesn’t support the purchase of new equipment. The Antminer S9 brings $2.24 per day while consuming 33.6 kWh. And if you pay $0.07 per kWh, you are already in the red! Of course, there are places where electricity costs $0.02 per kWh, but don’t forget that miners are currently operating globally, and this doesn’t take into account operating expenses such as maintenance, rent and so on.
If electricity costs more than $0.07 worldwide, you’d better stop mining. This has already happened in many countries. This will continue to happen as unless profitability returns.
The future of mining in 2019 will depend on the price of Bitcoin. If the price goes up, mining will continue to evolve and the number of miners will increase. If the price goes down, miners will gradually disappear.
Miners have already learned the hard way that it’s better not to invest in new ASIC miners. It’s a risky affair and you may never achieve ROI. From a business perspective, mining is too unpredictable. People with assets are unlikely to take the risk, while smaller miners believe that the payoff period should be no more than 2-3 months, otherwise there is no point in mining.
The only major players left in the market will be those who want to gain control of the Bitcoin and Ethereum networks. In 2017, we already witnessed some attempts to do so, and some of them even put the whole network at risk. There is a chance that someone will attempt more attacks.
Ethereum Mining in 2019
Ethereum is not as old as Bitcoin, but its price has changed in a similar way. At the end of 2016, it was $10. In January 2018, the price of Ether exceeded $1,000.
Ethereum price chart
Unlike Bitcoin, Ethereum is mostly mined with GPUs. But what is better – ASIC or GPU mining rig? This is the question we have discussed many times.
Ethereum network hashrate
Between late 2017 – early 2018 mining was so profitable that most GPU owners started mining Ether. GPU prices grew tremendously. A single gaming graphics card could easily bring $1.00 or sometimes even $2.00 a day.
However, just like with Bitcoin, the Ethereum hashrate stopped growing. Ultimately, it began to drop. The hashrate reached its peak value of 296 TH/s in August 2018. At the beginning of November, it dropped to 180 TH/s – 116 TH/s were gone. Let’s assume that these were NVIDIA 1070 cards. We are talking about no less than 4 million graphics cards!
Well, you may think that miners switched to other algorithms, for example, Monero. But they didn’t – look at the Monero hashrate.
By the way, Monero pool has been started recently at 2Miners.
You can check other Dagger Hashimoto (Ethash) coins or other algorithms, but you’ll see that these 4 million cards didn’t go anywhere. It seems that miners just became gamers again. Or they are just laying low and waiting for the price to rebound.
Is it possible that graphics cards switched to ZCash? No, it isn’t. Sadly, ZCash was completely taken over by ASIC miners. So it’s the other way round – graphics cards left ZCash. But there was still no noticeable growth for Ether. It means that the loss was much greater than 4 million cards.
Even Whattomine, the most popular mining calculator, moved Equihash algorithm that is used for ZEC, ZEN and ZCL mining from the GPU section to the ASIC section.
Currently, the price of Ether is around $90. So if your electricity cost is lower than $0.10 per kWh, mining can still be profitable. Higher electricity costs make mining meaningless. So if you believe in the future price growth, it’s easier to buy ETH on an exchange. Remember that electricity is not the only factor to take into consideration here. Think about the price of graphics cards and mining equipment, expenses on cooling and rent, especially if you have big mining rigs, plus the time spent on setup and maintenance.
Conclusion. Will Mining Be Profitable In 2019?
Those who bought mining equipment earlier keep mining. Today it is impossible to pay off ASIC miners or rigs in 6-12 months. There are no new miners coming to the market because prospects are questionable and risks are too high. There is no hype surrounding cryptocurrency like a year ago. The prices have been dropped significantly.
Cryptoholders, just like shareholders, wait for the so-called New Year rally (price growth). A lot was happening in the crypto world before 2018.
Cryptocurrency prices will be the defining factor in 2019 for profitability. The days of mining profitability regardless of operating expenses are over.