This is a guest post written by my friend Alexander Grupp. He is the author of a new book about Bitcoin and Blockchain called The Bitcoin Saga, coming out on the 25th of November 2018. An English version will be released during December 2018. Very insightful and funny person, I’m looking forward to his book and I’m especially glad, that he took the time to write about a topic, that I have looked into but I’m definitely not an expert on: Mining. Here is his article:
You’ve heard about mining and read up on it a bit, but you don’t really know if it’s worth getting into it? That thoroughly depends on the country you live in, but apart from that, there is more to take into consideration.
I am mining at home. In Germany. Now, if you are from Germany yourself, you might’ve heard that it is not profitable. And that is true. No, seriously. The energy costs are way too high, compared to the profit you get from mining coins.
Bitcoin itself definitely isn’t worth mining. Unless you have a massive rig at home with 20 Nvidia 1080Ti cards, you probably will never find a block. And if you do, the energy costs will be astronomical.
I am mining low-cap shitcoins. Currently, I am mining $TUBE because the CryptoNight algorithm is pretty good for my AMD RX570 card (a topic I will dive in later in this post). However, I am not mining them to make a great profit right now, I mine them to get the coins “free” without exchange fees or price fluctuations. Without exit-scams from exchanges and if you account for energy consumption it is usually still cheaper than market buying.
The goal is to hold them into the next bullrun and make money this way. So it’s not passive income, it’s a goal for the future, as I stated here:
So what do you gain from mining at home? Passive income. Anyone who is interested in gaining financial freedom will inevitably come across passive income. And mining fits this criterion very well. Once you set up your mining rig you virtually won’t have to do anything and it keeps mining 24/7. You might want to check occasionally if the coins you mine are still worth it or if you might switch to another coin.
Sadly, it isn’t immediate passive income because – as I stated – right now the prices are too low to sell your mined coins and make money, err… Bitcoin out of it. You are going to plan for the future this way.
So you might check your local energy provider if mining a small two-card rig will set you back a lot. I am currently slightly in the negative with the coins I mine, but a small rig is affordable to run.
Passive income in the future?
You might be thinking: “Yeah, but if prices for Bitcoin & Co. go to meet moonbases again, I surely will make enough profit for my personal mining to be worth mining Bitcoin? I want Bitcoin!”
This is a fallacy. When the price for Bitcoin rises, so will the mining-difficulty. Let’s be real, you won’t be the only one jumping into mining if that’s the case. Which means the difficulty for mining Bitcoin will rise and thus the chance of finding a block will minimize for your homegrown mining-rig again.
So it really is best practice to mine altcoins privately. Small marketcap altcoins, which are currently cheap or bottomed out and easy to mine, especially for your cards.
I won’t dive too deep into this, but depending on the algorithm the coin is using, your AMD or Nvidia cards might be more or less profitable. This is a deep topic on mining algorithms, there is a website called https://whattomine.com/ where you enter your graphics card, your power consumption, and your hashrate. A rough (!) estimate what hashrate which card is capable off can be found here: https://www.buriedone.com/hashrates.html
If this is all too complicated or too much of a hassle for you, don’t worry, there is hope. There is a program called “Honeyminer” (https://thecryptogerman.com/honeyminer) which you can download for free and just start mining anywhere you are, with one click, for free and easy. This application is the easiest way to get into mining, but you won’t be able to choose which coins you mine. It will be a mixture, chosen by the Honeyminer people. You will be paid in Bitcoin though. But, they obviously charge a small commission for their service.
It’s just not as lucrative as doing it yourself, but way easier.
It really is just one click:
(screenshot from honeyminer.com official website)
If you want to mine on your own and you choose to do so at home, you need a multitude of hardware and programs. Considering the hardware, you could just use your standard PC. But you have to be willing to keep it running 24/7 and you won’t be able to use it while it mines. So either you stop mining everytime you do anything on your PC, or you get a second mining PC. This is true for Honeyminer as well, it will use 100% of your PC’s power while running.
I personally had an old PC lying around and just bought a RX570 from AMD. Put it in said PC and dove into it. Now, at first, setting up your mining rig is not easy, even though hiveOS makes it as easy as possible. And I would definitely recommend you use hiveOS. It is free and it doesn’t matter how big your rig is. You can move it onto a USB flash drive and just have it running from there. No installation whatsoever. You log into it via web. Which means you will have to register on hiveOS first, obviously.
Now is it worth it?
I am gonna give you some numbers which will make it clearer. The RX570 was around $200 when I bought it (new). You could get a used one right now for about $140 on eBay. With this card, you can get anything from 4 to 8 $TUBE coins a day. With $TUBE sitting at 4 cents currently, that’s about 32 cents a day. In which case you would need 440 days to break even on your RX570 purchase. Not counting energy costs.
Sounds great, right?
Hell, no. But this kind of math is flawed because it only accounts for the current bear market. What if we enter a bullrun or even a small price increase? Let’s say $TUBE will be worth 20 cents. Which brings you to $1,06 a day, making the RX570 worth it in under 100 days. Not counting energy costs.
But what if $TUBE gets to $1? Which is totally possible next bullrun. Then you will make 8 bucks a day. $800 in 100 days. You could buy more graphics cards to make even more money out of it. Passive!
For mining there is a rule: bear markets are for buying gear, bullruns are for reaping the passive profits.
The hardware is dirt cheap right now because a) Nvidia stocks plummeted and b) miners sell their stuff because it isn’t profitable. So just like buying the blood with your coins, you should buy the hardware-blood as well. Prices for graphics card went through the roof the last bullrun, as did the mining difficulty. You don’t want to spend $300 bucks on a RX570 next time we reach for the stars. Because, considering basic math, that will lengthen your time to break even.
Mining is the most profitable in cheap energy countries. But even if energy is a luxury in your country, mining can be worth it, if you plan long-term and/or if you buy the hardware cheap right now. But as always with financial markets: the people playing the long game are usually the ones who end up sitting at the beach, making money while sipping on their Mojito.