Bitcoin mining in 2020: is it possible to make money on it now?

How to start mining the first cryptocurrency, taking into account all the costs of electricity, equipment maintenance, rental of premises and security. Why halving BTC practically did not affect the business of miners, and is …

How to start mining the first cryptocurrency, taking into account all the costs of electricity, equipment maintenance, rental of premises and security. Why halving BTC practically did not affect the business of miners, and is it worth getting involved with the mining of altcoins

Mining income is almost impossible to predict – it depends on too many variables: cryptocurrency price, block reward, block time, network hashrate (capacity), its complexity, electricity cost, cost and capacity of mining equipment, farm maintenance costs, etc.

The cheaper the electricity, the higher the profit. The cost of electricity depends on the region and equipment. For example, in Russia – from 1 to 8 rubles per 1 kWh ($ 0.01–0.1), on average 3.5 rubles / kWh., In the world – from $ 0.02 to $ 0.30. An average farm with 8 graphics cards costs about $ 100 per month. In addition to the electricity bill, large farms also require setup, rental, personnel, cooling and maintenance costs.

According to the calculations of BitCluster, electricity accounts for at least 85% of all miner's expenses, maintenance, depreciation, rent, etc. – 15%. At the same time, economies of scale work – for 100 devices and for 1,000 comparable costs for security and rental of premises. For example, according to BitCluster's calculations, renting, guarding and maintaining a farm with 3 containers for 192 devices in each will cost about 320,000 rubles. The cost of a farm, twice as much, may remain the same or slightly exceed 400,000 rubles.

You can calculate the profitability of a particular farm using special calculators. For example, WhatToMine, NiceHash, ASIC Trade, CryptoCompare. For the calculation, you must indicate the equipment, its cost and the price of electricity. Calculator data can vary by 30-40%, often the profitability turns out to be higher than the actual one.

Today it is cheaper to build a farm than in 2017-2018. At that time, video cards were in short supply and sold at inflated prices. Today the excitement around them has passed. Building a farm is no longer a problem. But will it be profitable?

How has VTS mining changed after halving?

On May 11, a planned halving took place on the bitcoin network – the reward for the mined block was halved, and new coins began to appear twice as slow. Halving takes place every four years. After the previous halvings in 2012 and 2016, bitcoin has grown 120 and 130 times, respectively, during the year. This time, some analysts also predicted a sharp rise in the price of military-technical cooperation. For example, analysts at Canaccord Genuity hoped for Bitcoin to rise to $ 20,000 after halving, Pantera Capital CEO Dan Morehead expected $ 42,000, Morgan Creek Digital founder Anthony Pompliano expected $ 100,000, and anonymous Twitter analyst PlanB expected $ 425,000.

However, panic in the market due to coronavirus intervened in the plans – prices collapsed in March. The recovery was very fast – it helped the miners pay the costs and not work in the red, but the "tuzemun" did not happen. After the halving, the MTC rate continued to rise, which provided profit even for small miners with outdated equipment. The fall of the ruble played into the hands of Russian industrial mining – they incur expenses in rubles, and sell cryptocurrency for dollars. As a result, according to Dmitry Shuvaev, director of development at BitCluster, the drop in revenue was no more than 10-15% and did not last long.

The MTC rate reacted poorly to halving – since May it has grown by 25%. Hashrate behaved differently. Immediately after the halving, it fell by 25% – some miners turned off their equipment due to a decrease in profitability. When VTS began to rise in price, they began to connect back and the hash rate began to grow. From the end of May to September, it grew from 90 to 125 EH / s. The complexity of the network also increased: from 16.1 T in May to 17.55 T. The decrease in the block reward was partially offset by an increase in commissions: from $ 0.5 in April to $ 2.5— $ 6 in the summer.

Bitcoin network hashrate chart for the last year according to data. Over the year, the network capacity has grown by 55%. The difficulty of mining BTC today is at an all-time high between 120 and 130 EH / s. This suggests that a lot of new mining capacities have been added to the network. The jumps of 20 & minus; 40 EH / s show the inflows and outflows of miners switching to other currencies.

Bitcoin network hashrate chart for the last year according to data. Over the year, the network capacity has grown by 55%. The difficulty of mining BTC today is at an all-time high between 120 and 130 EH / s. This suggests that a lot of new mining capacities have been added to the network. Jumps of 20-40 EH / s show the inflows and outflows of miners switching to other currencies.

Miners are fortunate that despite the recession and uncertainty caused by the pandemic, cryptocurrencies have quickly recovered from their March lows. Thus, from the March minimum of $ 5,000, the BTC rose to $ 11,000 and retains hope for an uptrend. ETH has risen in price by 330% over the year, most altcoins also show excellent growth rates. The rise in prices has a positive effect on the profitability of mining and the payback of farms.

How much can you earn now on mining BTC in Russia?

According to BitCluster's calculations, at the current hash rate, the break-even point of BTC mining in Russia is about $ 6,000 at an electricity price of up to 3 rubles, on average in the world – $ 5,000- $ 6,000. If the price of an asset drops below, mining it becomes unprofitable. At current prices, BTC miners still have a hefty margin of safety.

According to Dmitry Shuvaev's calculations, the profitability of devices for mining ВТС S17 – 73Th / s is about 8000 rubles / month, and the payback period is 15 months. Older devices like the Antminer S9 are now running at a loss. For them to be profitable, the price of MTC must rise to $ 15,000.

How will Ethereum mining change after the update?

Since the beginning of the year, ETH has grown threefold, and commissions – 20 times. Therefore, it is still profitable to mine ether. Since the beginning of the year, the hash rate has grown from 141 TH / s to 241 TH / s, which means new miners are connected to the network. Philip Modnov, CEO of LAZM noted that due to the upcoming transition to Ethereum 2.0, which should take place before the end of the year, interest in Ethereum has grown and has become much higher than in equipment for Bitcoin mining – "everyone urgently needs machines for Ethereum mining." Marat Mynbayev, a crypto investor, founder of Amir Capital, said that the rise in the ETH rate led to a sharp rise in prices for video cards, and contracts for ETH mining were completely sold out on many cloud mining platforms.

Hashrate of the Ethereum network according to Coinwarz.

Hashrate of the Ethereum network according to Coinwarz.

There will be no mining in Ethereum 2.0 – it will be replaced by staking. Payment processing will go to validators. They delegate their coins to masternodes (freeze them for a certain period), for which they will receive a part of the reward. The more coins are frozen, the higher the income. No ASICs or powerful video cards are needed for staking – a laptop is enough. For the network, this is less energy-intensive than mining, and for validators, it is an opportunity to receive passive income for generating coins (from 21 to 5 percent in the first year before deducting equipment and energy costs, which will be 5-20%. , staking will not necessarily be consistently profitable).

After the upgrade, ether miners will be forced to become ETH stackers or start mining other altcoins. Most of the existing ETH miners will probably choose the second option, and new players – those who have not invested in energy infrastructure or mining equipment – will go for staking. One of the main altcoins that could benefit from the withdrawal of PoW miners from Ethereum is Ethereum Classic (ETC). It also works on the Ethash algorithm and the developers of the coin have no plans to transfer it to PoS.

It is assumed that at first both networks – ETH 1.0 and ETH 2.0 – will work in parallel, but in the future the existing ETH network will be integrated into ETH 2.0 as one of the shards (network sections). Therefore, ether mining will not disappear overnight. The transition can take years. During this time, miners can manage to recoup more than one generation of devices.

What altcoins to mine

Dmitry Shuvaev believes that in the long term, BTC mining is more profitable than mining any altcoins. The latter have too much volatility – the rate can skyrocket and also plummet in a short period of time, and it is easier to attack them with 51%, which is impossible with Bitcoin. But if you want to try to make money on another coin, the most universal advice is to mine only the first 20 coins by capitalization. As a rule, these are time-tested and relatively reliable projects. And many altcoins that look promising today may fall tomorrow, not allowing the equipment to recoup.

Marat Mynbayev noted that some of the most profitable altcoins now are Ethereum, Ethereum Classic, Monero and Litecoin. For example, the profitability of mining on the Nvidia GeForce 2080Ti video card is now about $ 150 per month at its cost of $ 500. Among miners, ZCash, DASH, GRIN, RavenСoin, Bitcoin Gold, Dogecoin are now also popular. When choosing an altcoin for mining, consider not only profitability, but also the possibility of withdrawing funds to fiat, as well as liquidity on exchanges.

Is it time to upgrade your hardware?

Mining VTS is profitable only on new generation equipment. Dmitry Shuvaev recommended buying new generation S17 or S19 devices for mining BTC – with a capacity of 75 TH / s and a consumption of no more than 2.5 kW. Their break-even point under current conditions is about $ 6,000. If the market situation is favorable, this margin of safety may be enough until the next halving. If at some time the new equipment starts to operate at a loss, then after recalculating the complexity, it will return to a plus. If your hardware does not meet these characteristics and you cannot afford to mine in the long term, you will have to either turn off the miners or update the devices. Dmitry Shuvaev does not recommend using old-style devices such as the Antminer S9 – they are not profitable now.

However, you shouldn't throw out old devices either. Philip Modnov, noted that Bitfury B8 and Bitmain S9 still feel confident on the LAZM site, not to mention the new servers. The expert believes that it is still possible to breathe life into outdated equipment in the medium term (up to a year), but if you want to make money on mining in the future, it’s time to actively update the park for long-term work.

“Industrial miners with a total cost per kWh of less than $ 0.032, such as our site, continue to work with past generations of computing equipment without throwing it away. But the rest are forced to turn off their capacities, unable to upgrade the equipment to a more modern one due to the unavailability of the price / time criteria. As a result, we see the migration of equipment between sites in search of better conditions, ”said Philip Modnov.

He noted that the high price bar held by manufacturers does not provide a good payback at the moment and hinders development. According to Philip Modnov, the outdated equipment will be disconnected in principle by the end of the year and the beginning of the next year if new modern computers are connected to the network.

Tatyana Maksimenko, a representative of the Garantex crypto exchange, also noted that having old mining machines, including such popular ones as the Bitmain S9, is no longer so profitable. She expects previous generations of computing machines to migrate from more power-priced sites to less expensive ones. This has already happened after previous halvings – mining farms in some European countries stopped working or moved to more profitable locations.

Legal uncertainty with mining in Russia

One of the main problems of mining in Russia is the lack of legislative regulation of the industry. In July, the draft law "On digital financial assets" was adopted, which will enter into force on January 1, 2021. The law defines the concepts of digital financial assets and digital currencies, recognizes cryptocurrencies as property, and allows the issuance of tokens and their trading.

But the document did not define how the circulation of cryptocurrencies by individuals, their taxation and the mining industry will be regulated. It is expected that these issues will be reflected in separate bills, most likely in the draft law "On digital currency", which is scheduled for consideration in the fall. How much will be allocated to mining is not yet clear.

Until then, Russian miners are in a gray zone, they do not formally break the law, but it is not clear how to pay taxes, and banks do not want to get involved with cryptocurrencies. As a result, they leave Russia or use exchangers, withdrawing cryptocurrency from the country.

To solve this problem, back in November 2019, RACIB offered the Bank of Russia to launch a regulatory crypto sandbox – the National Mining Pool (NMP) project. He had to take mining out of the gray zone and create conditions for the receipt of taxes from it to the Russian budget.

But at the end of August, the central bank refused RACIB to launch the IMP. The regulator believes that such a project carries high risks of money laundering and is generally at odds with the state's approach to regulating digital assets. RAKIB asked the Central Bank to argue its position, but has not yet received a response.

In 2020, mining can no longer be treated as easy and quick money. These are medium-term investments with a payback period of 2-3 years. Home mining BTC is almost dead. Now this is an industry for those who are not chasing instant returns and are determined to work for a long time. Such players can hope for their small but stable profit, because Bitcoin mining will remain profitable in the long term.

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