How Do You Calculate Mining Profitability?

How Do You Calculate Mining Profitability?

Mining for cryptocurrency may or may not be profitable for you, but the good news is that you can easily run the numbers.

Mining profitability is will primarily depend on the hashrate (mining speed) of your mining hardware, and the amount of energy it takes to run the hardware. Mining software usually comes with system monitors that will tell you with a fair degree of accuracy what the numbers are, and several online calculators exist to help as well. The cost of energy is the main concern, many miners will seek to be near the cheapest sources of energy, such as a hydroelectric plant in Sweden or countries with energy subsidies such as China.

It is important to consider that the difficulty of solving the blocks automatically increases over time as well. So, if you’ve done the math and believe purchasing a mining rig with a certain hashrate will allow you to start making a net profit by the time a few months have passed, remember that the hashes will be harder to solve by then. As such, the time required to recoup your initial investment cost (the mining rig) may become longer and longer.

If you are using a computer that is also sometimes used for other functions, this may complicate the math, but it can still be done. It is possible to get creative with the process, such as a mining operation in New York that used the heat generated by mining computers to supply a heating system for a building. Some may ask why all of the energy is necessary just to operate a mining operation that does nothing but validate transactions in a somewhat convoluted and inherently difficult manner.

This all has to do with the proof of work required for the system to make sense. It is intended that mining will come at some cost to the miner, which prevents criminal entities and hackers from being able to cheaply and easily manipulate the system. Mining is increasingly done in partnerships with other miners, called pools, to increase the chances of receiving steady returns on mining efforts. Pools calculate the “shares” of a miner based on the hashrate that the miner has contributed to the overall efforts of the mining pool.