The year 2018 showed that it is impossible to get rich quick on mining, as the market is plummeting, farms are no longer profitable, and mining pools are closing due to unprofitability. Many experts predicted the industry’s inevitable death, but mining has still lived on to 2019, and many still manage to earn on it. We tried to figure out whether one should pull the plug out of the socket or just wait out the difficult period.

How Much Does Mining Now Bring in Russia?

In 2016–2017, Bitcoin mining profitability amounted to 50% per annum, taking into account the costs of rent, electricity, and management, and in 2018, a maximum of 20−30%. Expenses for electricity amount to 85% of the total.

According to Dmitry Shuvaev, director of development for the industrial mining company BitCluster, now an average ASIC Antminer S9 brings about $60 a month. With an average electricity price of $.05/kWh, the yield of each device minus the cost of servicing the machines and electricity is $7.35−$9 per month (although at the beginning of the year, it was $12 to $15). The expert believes that mining is beneficial when the price of electricity is up to $.05 per kWh.

n November, tens of thousands of devices disconnected from the network, but after a reduction in the complexity, some of them returned. Source.

With the current hashrate level, the break-even point of Bitcoin mining (at a rate of $.045/kWh) is $2,989 per coin, and Ether, $39. If the price falls below that level, mining will become unprofitable. But if the rate drops to this level, then a massive amount of computing power will be disconnected from the network, which will provoke a fall in complexity, and, consequently, an increase in the remuneration of miners and a consistent adjustment of the break-even point to a decrease.

September calculations of Shenyu, the co-founder of F2Pool, the world’s sixth-largest crypto mining pool, by break-even points. Source.

How Will Mining of Ether Change after the Activation of the “Difficulty Bomb” and the Constantinople Upgrade?

The blockchain of Ether is on the verge of the next update stage, the Constantinople, which is scheduled for February 25 (if the date is not postponed again). Before the update, there is a so-called “ice age” leading to a gradual increase in the complexity of mining and the mining time of the block, due to which the miners receive 25% less rewards.

The main innovations of Constantinople are that the remuneration for miners will decrease from 3 to 2 ETH; transaction speeds and productivity will increase, and energy consumption will decrease; mining using ASICs will not be possible, but mining on video cards will be standardized. The update is part of the network transition from the PoW algorithm to PoS (or hybrid PoW/PoS), in which mining of Ether can become a thing of the past.

So far, the “difficulty bomb” has not led to significant changes as the network’s hashrate falls along with the complexity, and miners with video cards are leaving the race or switching to something more profitable. Everything rests only on the cost of Ether in dollars. Negative news weighs on the price, such as the vulnerability in Constantinople, the postponement of the update date, talk of smart contracts in Bitcoin, for example, Taproot (which could significantly affect the Ether). The price will rise, and miners with video cards will return and raise the hashrate and complexity, and this will continue until the transition to PoS.l has taken place.

The co-founder and head of the BitBaza mining equipment manufacturing company Artem Zverev believes that the mining strategy and the way to cover operating expenses play a significant role in accounting for the consequences of the “difficulty bomb’s” activation. The miners of the Ether, who cover the costs from the mined coins not with the help of external funds, certainly felt the reduction of the reward per block. But for those who consider mining as a medium- and long-term investment, the activation of the difficulty bomb went unnoticed, as they are waiting for the maximum values ​​of the price. The company recommended miners in the first category to begin planning and preparing for the transition of the Ethereum network to PoS by smooth and painless requalification to the second category.

Ethereum network hashrate. Judging by the reduction in complexity, millions of video cards like NVIDIA 1070 have left the network. Source.

“I see no point in mining Ether at a loss. I recommend all fans of Ether and those who believe that the future belongs to it to just buy it now, as the price is as low as ever,” as trader and miner Anton Klevtsov advised. Miner believes that after the final implementation of the Constantinople upgrade, the mining of Ether will be reasonable for a short time and only for $500 per coin. A decrease in the block reward, an artificially increased complexity, and a quick full transition to PoS will make the development of new mining equipment and support software for GPU miners meaningless. It is worth starting to get used to the fact that the mining of Ether can end forever.

Hope Rests on New Equipment

Mining in the black is now possible only on newer models of equipment with more stable and profitable indicators of efficiency and energy consumption.

More optimized models for mining Bitcoin help reduce the energy cost of cryptocurrencies, for example, Terminator T3 or Antminer S15. With the use of Terminator T3 (43Th/s), the cost of finding one Bitcoin is reduced to ~25,000 kW. A similar figure is for Antminer S9i (14Th/s) is 35,000 kW, as told by the company BitBaza. In January 2018, the Antminer S9j (14.5 Th/s) yield was 0.0006 BTC per day ($2.29). Taking into account the cost of electricity at a rate of $.045/kWh, the profit of S9j was $0.67 per day. With Terminator T3 (43 Th/s), these figures are different. Daily yield: 0.0024 BTC ($8.75). Profitability: $6.23.

Comparison of profits from mining on different equipment models according to BitBaza.

“Today, some models will be in the positive by at least one cent, even if the price of Bitcoin drops to $500. And the Antminer S9, which was popular at the beginning of 2018, is unprofitable even at $5,000 for Bitcoin,” as said by trader Anton Klevtsov.

Cost of production of one Bitcoin using different models of equipment according to BitBaza.

Whether a miner can make money on new equipment depends on the constantly changing purchase price and on when the currency was converted from Bitcoin into dollars. For example, those who bought equipment in January at $2,700– $3,000 have not yet reached a break-even point, and even the price increase will hardly help them, as the miners with new equipment will be ahead of them. But those who came in in November at a cost per device of $200 (second-hand devices such as S9, S9i, L3+ with consumption of no more than $.053 per kW/hour and a payback period of 15 to 18 months) have already paid 30% of their costs in 2 months.

It only makes sense to change the equipment if the home network can no longer withstand the total capacity of the equipment. A similar number of new miner units will not only reduce the energy consumption of the home farm a little bit but also increase revenue.

Shall I Quit?

The period of super profits in mining is over. But, despite the fall in the rate of cryptocurrencies, mining can remain a profitable business subject to certain conditions, the main of which is the use of a new generation of equipment. But even with the new explosive growth rate, no one will rush to buy up new equipment, as not everyone has yet recouped the cost of the old equipment. Therefore, all those who failed to update the equipment in time, find cheap electricity, and create a financial reserve for “dark times” are leaving the market.

If you are confident in the growth of the coin, it may be easier for you to buy it on the exchange so at least you will not have fixed costs for maintaining the farm. Mining on obsolete equipment now does not make sense since the expenditures will be higher than the profits.

Trader Gregory Polezhaev recommended mining coins from the top 20 for the long-term. With luck, users can make money on a short-term price jump or on the pumps of those coins that continue to develop the project, really bring something new (simple increases in the speed of transactions will not surprise anyone), and can find applications in real life. But even their growth will be short-lived, and it is not worth keeping coins. Mining any potential s**tcoin can be very risky since it will bring profit only on the wave of the pump, and the pump can stop at any moment.

The market is consolidating around large pools, and individual “home” mining ceases to pay for itself. The profitability of “garage mining” depends on the cost of electricity due to high prices, and it becomes impossible to cover costs under the current cryptocurrency rates. The way out of this situation is switching to a day-and-night tariff and mining at night.

Remember that mining is an investment with a recommended investment period of 2−3 years. If you plan to recoup investments earlier, it is better not to enter the market right now.