Bitcoin mining analysis
If you're like me, with the recent surge in Bitcoin you may have considered cloud mining as an alternative to buying it at market price. Even better, these contracts are generally lifetime meaning you make a one time investment and then you get paid as long as it's profitable. What's not to like? Bitcoin mining analysis the thing though: Ask yourself seriously, because it's your money you're spending and you should understand the expected returns you might be getting from it.
Just because it's a lifetime contract doesn't mean it's guaranteed to pay out forever, particularly in this case because of maintenance costs and other factors which I'll get to below. Before I start though quick bitcoin mining analysis I do own a small handful of mining contracts, but this analysis is completely and entirely my own thoughts on the bitcoin mining analysis. This advice is not intended to be any kind of endorsement which I'm sure will be more apparent further down. So let's look at one of the more reputable mining sites out there, Hashing We could pick any number of mining sites, but I'm going to focus on them since they're among the more well known ones.
Just know that this analysis could apply to any site and not just them. Anyway, Hashing24 is fairly popular and well-known mining contractor because they're a legitimate business always a plus and generally speaking they have quick payouts, good rates, and low maintenance costs. You could also use Hashing24's own mining calculator which is probably a little more accurate in this case:.
If you want you can even consider the next difficulty increase to see how the next series of payouts will look:. Overall it seems pretty promising right? The ROI might take a little longer but at least it's still going to be made back within a few months.
End of story, right? The problem with these calculators comes down bitcoin mining analysis two factors that we already know about: Specifically, the problem bitcoin mining analysis that these two factors aren't actually correctly accounted for in most mining calculators. See, the thing is that most of them only account for those factors as they currently are, not as how they'll change in the future or impact bitcoin mining analysis return over time.
So how do we understand the impact? Well, we're going to need to figure out what these factors bitcoin mining analysis look like over time.
We will want to know expected difficulty changes over time as well as the maintenance costs. From bitcoin mining analysis we can calculate our expected income and ultimately posit whether or not cloud mining may actually be worth the investment. Let's start with block difficulty, since that's easier to calculate. According to BitcoinWisdom, the current difficulty is ,, That's great, but how do we calculate difficulty changes over time? Fortunately BitcoinWisdom provides a bitcoin mining analysis table of difficulty changes over the past couple years:.
Of course we can't predict what the exact difficulty changes will be, but we can base our calculation on past averages to at least get an idea. Since we bitcoin mining analysis the average increase over time, I calculated bitcoin mining analysis averages for both every entry in the table goes back to Aug 22 and then just Using the rate, we get average difficulty increases that look something like this:. Now that we have the average difficulties over time, we can start calculating expected gross Bitcoin mining analysis earnings, maintenance costs, net BTC income and ultimately total earnings.
Unfortunately however here's where things get a little tricky. I based my expected BTC income calculation off the code on BitcoinWisdom, but the problem is that this doesn't match what Hashing24 actually pays out. This discrepancy only increases as you input higher hash rates. Hashing24's mining calculation is bitcoin mining analysis behind a separate network call so I couldn't just read their code to figure out how they calculate it, and all the other mining calculators I could find more or less calculated earnings in the same way.
And, even if I did know how Hashing24 ran their calculations, there's no guarantee I'd be able to replicate it since they could be taking their own historical data into account in some way. To counteract this, I didn't change the expected BTC calculation but instead tweaked the maintenance deduction to achieve similar net BTC income that Hashing24 reports. This means that the daily gross BTC calculation will be off from what Hashing24 reports, but the net income should still be about the same in fact it was slightly higher when I did some comparisons, which means my numbers might be more "ideal" than what you'd actually be getting.
It's also worth noting that even if this was accurate my estimates could still be a little off regardless since as per the nature of Bitcoin mining these are only expected returns based on probability, not an actual reflection of what you'll be getting.
The point is that it's averaged over time. So if we bitcoin mining analysis the expected daily gross BTC income, maintenance fees, and net income we get a table that looks like the following.
Note that the maintenance cost column is a reflection of the actual maintenance cost Hashing24 might report. The "cost" I used in my deduction is just calculated as part of the cell formulas. Don't worry about the "BTC price est.
In order to calculate expected earnings at each difficulty, we just multiply by the bitcoin mining analysis difficulty period which for Bitcoin is 14 days. That will result in bitcoin mining analysis like the following table:.
It means that this mining thing will still pay out after a few months then, yeah? You remember that "BTC price est. Here's what that same table looks like if you assume Bitcoin mining analysis stays the same until Bitcoin mining analysis. So you can see that the price bitcoin mining analysis Bitcoin over time will affect bitcoin mining analysis much USD value you bitcoin mining analysis.
Of course that's nothing new, but there's actually something in that data that's a bit more telling. Take another look at the bitcoin mining analysis BTC - it's about 0. Remember how I mentioned the original cost was 0. If you want to see where you'll break even on BTC, unfortunately you can't.
These projections start going into the red around the end bitcoin mining analysis next year, and by then you've only made about 0. Additionally, there's one other characteristic I haven't mentioned yet. Bitcoin mining analysis how in the first table the expected BTC earnings is 0. As far as I can tell the maintenance cost is based on USD, not BTC, which means that your maintenance cost differs based on market value.
If BTC is down, expect to pay more in maintenance fees and conversely less when it's up. This is important, because it means you're getting more or less BTC simply by virtue of when it was mined, which affects how much you're able to earn.
So where does this leave us? I started doing this research because I wanted to see if mining would actually be profitable vs investing. And to be honest, I'm having a hard time convincing myself that it is.
Of course it's possible that these projections could be wrong. Maybe there will be another massive upward price swing and it'll be worth it. Or maybe the difficulty won't increase as fast or it'll hit a ceiling or even decrease. Or maybe my calculations could just be off. There's a number of assumptions here that could change or potentially be wrong. The point of thise data is mainly just to help get an idea of what an ROI bitcoin mining analysis a mining contract might be in the next couple years.
Either way, I'm not advocating that you don't buy a mining contract. I'm just saying it's a bit more complicated to figure out an ROI than just simply putting a number into a mining calculator, and it's something that's important to consider when investing.
If you think cloud mining is still worth it, then by all means go for it: Before you do buy a mining contract though, I bitcoin mining analysis one last piece of information I want to show you. Here's a table showing the expected ROI of mining based on my above calculations vs the expected ROI of investing for various price points:. So is it worth buying a mining contract or do you invest directly into Bitcoin instead?
That's something you'll have to decide for yourself, but if any of these projections hold true then my point is that you may not be seeing as much return as you could be getting. As always, it's a risk just like anything else in this space. Here's a link to my spreadsheet with the analysis, in case you want to check it out for yourself.
What do you think? Do you think Bitcoin mining is bitcoin mining analysis worth it? Or do you think my analysis is completely wrong? I'd love to bitcoin mining analysis your thoughts. I have some more topics like this I'm considering for bitcoin mining analysis write-ups, so if that's something you'd like to see more of then feel free to follow me and participate in bitcoin mining analysis discussion! Very good analysis, although I skimmed bitcoin mining analysis it, it does make sense.
I rather buy bitcoin then purchase hardware for mining or invest in mining. Yeah that was bitcoin mining analysis conclusion too, but I wanted to see what the numbers might look like hence why I did some more digging. Well written and researched. Thank you for sharing.
You are absolutely right about diminishing returns of newer equipment. I was focusing primarily on cloud mining but I think it applies to hardware mining as well. Thanks for bitcoin mining analysis it. I was looking into purchasing 1TH through Hashing24 but decided against it for the same reasons you outlined. People should look into mining some of the alt coins that are more profitable than bitcoin.
I've been mining Sia coin on my pc and getting about 1. The graphics card doesn't even break a sweat mining for them and it easy enough to roll them into bitcoin if desired. I'd heard about Sia coin, though I haven't looked into it yet. Didn't realize it was currently being pc-mined.
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