A must-read for miners: 8 tips to help you achieve long-term mining profits

Source: Hackernoon

Translation｜First.VIP

Mining Bitcoin and other cryptocurrencies has always been an up-and-down business. Mining profits are always changing, and factors such as network difficulty, price fluctuations, and halvings are constantly changing mining income.

To complicate matters further, these factors affect each miner differently. Given that payback in mining typically takes between 6 months and 2 years, and that mining conditions can change rapidly during that time and can disrupt your calculations, we want to cover the best strategies for profiting from it.

1. If you don’t have access to cheap electricity, your mining efforts are at risk

Electricity cost is the most important factor in mining and plays a decisive role in mining revenue. Every time the price of tokens drops sharply or the difficulty of the network increases, many miners will face losses.

If your electricity and maintenance costs are high, you are one of the most vulnerable groups. Miners with cheap electricity are always in safe and profitable territory.

Now, in countries such as China, Russia, Georgia, etc., the electricity cost of many mining operations can reach $0.03-$0.04 per kilowatt. If your electricity price is much higher than this number, then you will face a high risk.

2. Keep upgrading your equipment to more energy-efficient ones

Even during bull markets, Bitcoin’s difficulty almost always grows faster than its price, which means mining revenue has generally been decreasing.

The price of Bitcoin jumped from $220 in August 2015 to $19,500 in December 2017, an increase of about 89 times.

But surprisingly, the difficulty of the network increased 120 times during the same period! This means that mining was more profitable when the Bitcoin price was $200 than when it was $19,500.

Bitcoin Price Chart vs Network Difficulty

To avoid losing out in this marathon, be sure to invest in newer and more energy-efficient equipment, using part of your profits to replace your old mining rigs.

3. Buy mining machines when the Bitcoin price falls back

The price of mining machines is highly dependent on the price of cryptocurrencies. When Bitcoin reached $3,000 at the end of 2018, the price of ASIC mining machines fell sharply, even more than Bitcoin, and this was the best time to buy mining machines. When Bitcoin jumped from $3,000 to $14,000 in June 2019, the price of mining machines increased more than six times.

4. Don’t ignore BCH and BSV

BCH and BSV mining algorithms are similar to Bitcoin's SHA256. Sometimes mining these coins is more profitable than Bitcoin. For example, at the time of writing, 1 Terahash can generate $0.175 from Bitcoin mining in 24 hours, while mining BSV can generate $0.181, an increase of 3.5%. If we deduct electricity costs from mining income, we will find that this gap is even larger. Assuming you have an S17 53 Terahash miner with a 2400-watt PSU, you will only pay $0.06 per kWh.

So, after electricity costs, a miner would generate $5.82 per day in revenue if mining Bitcoin, while mining BSV would generate $6.14 per day, a 5.5% increase. This difference is greater on older and less efficient equipment. However, given the volatility of these tokens’ prices, the most profitable coins change frequently.

Some applications will automatically switch the miner to the most profitable coin. In addition, some mining pools also support automatic switching of hashrate.

5. Pay attention to halving

In May 2020, Bitcoin will undergo its third halving, reducing mining from 12.5 bitcoins to 6.25 bitcoins. This will make many mining machines obsolete. Mining machines that are currently profitable may not be profitable after the halving, and mining machines with higher energy efficiency will suffer less losses after the halving.

However, some adventurous miners invested in cheaper equipment that consumed more energy and had a shorter payback period. These miners obtained the original capital before the halving and purchased new energy-efficient equipment after the halving - a smart but risky move.

6. Mining altcoins may be more profitable, but also more risky

Altcoins are much more volatile than Bitcoin, so before buying a miner, carefully research their prospects. It is best not to invest all your funds in one altcoin.

Some altcoins have lost 99% of their value in 2018! Some altcoins are ASIC resistant and attempt to make ASIC mining ineffective by changing their algorithms.

A reduction in the price of an altcoin or a halving will affect the mining of other altcoins that use the same algorithm. For example, several other coins such as Litecoin, Verge, Digibyte, Doge, etc. use the Scrypt algorithm, and Litecoin currently has the majority of the Scrypt hashrate.

Litecoin’s halving occurred in August 2019, and its mining profitability was halved, which would cause miners to switch from Litecoin to other coins using the Scrypt algorithm, which would greatly increase the difficulty of other networks.

I am not a fan of GPU miners and think they will become obsolete like CPUs.

While not very profitable at the moment, GPU mining is generally not as easy as ASIC mining.

7. Develop a selling strategy or convert it into promising tokens

To get the most out of mining, you need to have a clear strategy: determine when and how to sell the mined tokens and pay for maintenance costs. This requires doing coin research, analyzing futures and prices, and getting some technical analysis information.

You can choose to hold or convert your tokens into more promising currencies and sell them at a higher price at the right time to get more profit from mining.

8. Don’t be fooled by mining calculators

Many websites calculate mining profits based on hardware and electricity prices. If you have never mined before, you might be delighted by the numbers provided by these websites and calculators and think, “I’m going to make a killing!”

However, what these sites fail to tell you is that in addition to the electricity cost, there may be other current costs such as maintenance, cooling, rent, manpower, etc. Often, the hash rate and power consumption of the equipment is slightly different from what the factory says.

This discrepancy is more common with less popular brands. You can get a better idea of ​​the actual hashrate and actual power consumption by watching miner testing videos on YouTube. Also, the power loss from the meter to the device can be as high as 200 watts, depending on the distance from the meter to the device and the type of cable used.

In addition to the cost of the mining machines, there are some initial costs to prepare the infrastructure, such as cooling and exhaust, cabling and power distribution, racking, network and monitoring equipment, safety measures, etc.

The network difficulty is constantly changing and increasing at a significant rate, which directly affects mining revenue. You can check the Bitcoin network difficulty chart to see how fast it is increasing, but your mining rigs won't always be 100% active.

Miners can be offline for hours due to maintenance, network issues, pool issues, power issues, and many other issues, and I recommend you consider setting your miner uptime to less than 97% in your calculations. We have extensive experience mining on professional pools, and these miners don't have uptimes higher than 97-98%.

Create your Excel spreadsheet and take into account all the factors that affect mining. For example:

Conclusion

It’s not always easy to make a profit from mining, but that doesn’t mean it’s not worth it. If you want to or are doing it, you need to be prepared and plan for the future. Enter the market at the right time, buy mining equipment at the right time, pay attention to its risks and what to do about it. Start small, you may even need to exit along the way, sell your equipment and wait for another suitable time to enter again.

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