Is Bitcoin Mining Profitable or Worth it in 2017?

The early days of Bitcoin mining are often described as a gold rush.

Satoshi Nakomoto’s invention of Bitcoin, “a peer-to-peer electronic cash system,” opened up an entirely new frontier, not just of freedom but of occasionally outrageous profits.

Those with a strong interest in such things, namely cypherpunks, cryptographers, technically-minded libertarians and assorted hackers, were first to stake their claim.

But is there still gold in them thar hills?

The fact is:

Bitcoin mining has grown from a handful of early enthusiasts into a cottage industry, into a specialized industrial-level venture. The easy money was scooped out a long time ago and what remains is buried under the cryptographic equivalent of tons of hard rock.

The sad truth is:

Only those with specialised, high-powered machinery are able to profitably extract bitcoins nowadays. While mining is still technically possible for anyone, those with underpowered setups will find more money is spent on electricity than is generated through mining.

In other words, mining won’t be profitable at a small scale unless you have access to free or really cheap electriciy.

We’ll explain this situation in depth but first, you need to know a few basic technical terms from the world of Bitcoin mining:

Block:

A group of Bitcoin transactions, chosen from the mempool (the list of all currently pending transactions) and recorded by a miner into the ever-growing record of blocks known as “the blockchain.”

A new block is created on average every ten minutes.

Proof of Work Hashing:

This is the cryptographic work which miners perform in order to find the solution which allows them to define a new block.

PoW hashing ensures the proper function of the Bitcoin blockchain. Miners compete to solve a cryptographic “puzzle,” known as a hash.

There are no shortcuts in this process, which can only be solved with raw computational power.

By correctly hashing the current block, miners prove their investment of work and are rewarded with a certain number of newly-created bitcoins.

Block Reward:

The number of newly-created bitcoins, awarded to whichever miner creates a block.

This number was initially set to 50, halved to 25 in late-2012, and halved again to 12.5 in mid-2016. The next halving event expected is around mid-2020.

This halving process will continue in this fashion, halving the block reward approximately every four years / 210,000 blocks, until all 21 million bitcoins are created.

Achieving the block reward is the only valid way in which new bitcoins can be created; by miners according to the code’s rate and limit.

Hashrate:

Hashrate is the measure of a miner’s computational power.

The higher their relative power, the more solutions (and hence, block rewards) a miner is likely to find.

Initially measured in hash per second (H/s), due to the increasing speed of mining hardware. H/s was soon commonly pre-fixed with SI units as follows:

  • Kilohash = KH/s (thousands of H/s), then
  • Megahash = MH/s (millions of H/s), then
  • Gigahash = GH/s (billions of H/s), then
  • Terahash = TH/s (trillions of H/s), and even
  • Petahash = PH/s (quadrillions of H/s).

In early 2017, Bitcoin’s collective hashrate reached nearly 4 Exahash. This represents a tremendous investment into mining hardware, the R&D of such hardware, and electrical expenditure.

Difficulty:

With hashrate shooting up over the years, it would seem blocks would be found by miners ever more rapidly.

Bitcoin’s Difficulty measure is what prevents this from happening. It adjusts to hashrate to ensure that blocks are found roughly every 10 minutes.

Note how closely Difficulty matches Hashrate in the 2 charts above.

When total hashrate rises, the Difficulty of POW hashing adjusts upwards – and the inverse also applies.

Difficulty auto-adjusts every two weeks (or 2016 blocks).

BTC / XBT exchange rate:

The current fiat price of Bitcoin; critical for calculating profitability.

W/xHash/s:

Watts per hashrate per second. Electricity is the major on-going cost of Bitcoin mining. The price paid per Watt will greatly influence profitability.

Mining Pool:

Unless you command a tremendous hashrate, your odds of solving a block by yourself (i.e. “solo-mining”) are extremely low.

By banding together with other miners in a so-called pool, your combined odds of solving a block rise proportional to the pool’s total hashrate.

Whenever they solve blocks, pools reward individual miners according to their contributed hashrate (minus commissions and the like).

Calculating Mining Profitability

With these terms in mind, it’s possible to calculate the current profitability (circa March 2017) of Bitcoin mining for your circumstances.

Note:

The future profitability of mining cannot be reliably predicted.

This is due to the ever-changing nature of the Difficulty modifier and the BTC price, in particular.

To begin, we must select a suitable ASIC mining rig. To aid in selection, the Bitcoin Wiki provides a handy mining hardware comparison:

Although Bitcoin Wiki doesn’t list many models as currently shipping on from their manufacturers, all these mining rigs (and more) are available for resale as new or used.

The AntMiner S9 is a modern mining rig which offers a good hashrate for its power consumption.

It’s pretty much the cutting edge of mining tech so we’ll select it for our example.

The S9 is available for roughly $1800 up to $2400 from Amazon, or about $1365 from BitMain, shipping excluded. Power supply units will add another $120 or so to the price.

Next, we need to enter the S9’s specs and cost, as well as other info such as power cost and pool fees, into a suitable number-cruncher.

CoinWarz.com offers a good mining profitability calculator, which automatically fills in the current BTC price, Difficulty and block reward info. Note that the Hardware Costs field does not seem to influence the final calculation.

Scenario 1: Big Chinese Miners

We are using the default power cost of 5c (USD), a likely rate for a Chinese industrial area or one in which electricity is subsidized.

To determine your own power cost, check worldwide electricity prices or your utility bill for the exact price.

The 0% Pool Fee assumes a mining farm large enough to run its own pool. Smaller pools will generally offer lower or even no fees, but keep in mind they will seldom find blocks.

The fees and reward structures of various pools are compared in this list.

Once all the necessary info is entered, hit Calculate for the profitability result:

An excellent result! At this rate, the S9 unit would pay for itself within a year as well as make about $600 in profit! As a large miner would be able to negotiate a lower unit price on each S9, we can assume they’ll research profit even sooner.

Scenario 2: An American Hobby Miner

Before getting too excited about your potential mining profits, let’s recalculate them using the average residential Power cost per kWh in the USA (~12.5c) and a typical pool fee of 1%.

The result:

It’s not looking so great now.

At a Bitcoin price around $1150, it appears that the average American home miner makes only $1348 a year, assuming difficulty and price hold steady. In other words, the unit will pay for itself within a year.

However:

This is a dangerous assumption! Bitcoin’s total hashrate – and thus its difficulty, has been consistently rising since the early years, sometimes jumping by double digit percentages within a month!

Therefore, any calculations should be regarded skeptically, as likely best-case scenarios.

Sources of Unexpected Profit Loss:

Difficulty Spikes, Price Crashes, Equipment Failures, Power Cuts, Shipping Delays & More!

Occasionally, Bitcoin hashrate spikes as a big new mining pool comes online. This happened in early 2016:

It’s quite possible that even some big, corporate miners found their profit margins under threat from the resulting steep spike in competition. Indeed, in mid-2016, Swedish Bitcoin mining firm KnCMiner declared bankruptcy.

The home miner really has no chance to compete in such a challenging environment, unless they have access to free or extremely low-cost electricity…

Also bear in mind that the rate of obsolescence in Bitcoin mining hardware is quite fast! New, more efficient mining hardware may be released at any time, although we are reaching the technological limits of improved efficiencies.

If (pre-)ordering any such equipment, be aware that potential manufacturing, shipping, customs or other delays could end up being very costly as difficulty rises or price falls during the interim.

There are plenty of other things which can wrong, for example:

  • hardware failures,
  • power outages,
  • network disconnections &
  • price crashes.

Such downside risks must always be factored into any sound business plan.

Conclusion

The average home miner will struggle to be profitable or recoup the cost of mining hardware and electricity.

Profitability is highly unlikely given the current circumstances.

The situation may improve in future once ASIC mining hardware innovation reaches the point of diminishing returns.

That, coupled with cheap, hopefully sustainable power solutions may once again make Bitcoin mining profitable to small individual miners around the world.

This would also greatly improve the decentralization of the Bitcoin network, hardening it against legislative risk.

 




23 Comments


  1. Hi there

    I would like to start mining however I know nothing about this. Is it something to invest in or not?

    I am going to purchase two rx580 8gb cards. I have an unlimited power source. What must I do ?

    Thanks a lot


  2. I think this is sound advice on who can actually make a profit from mining.
    The variables truly are so unpredictable that what was profitable yesterday may very well be a loser today. You can get unlucky because it just isn’t possible to predict when your cryptos will rally or fall. But I can tell you that the price of the coin you mine, be it now or in the near future, is the key when deciding which to mine. You have to choose wisely whether you are going to fork out alot for gear and then pay for all that electricity.. only to find that your gear now sucks.. or just let a mining company handle all the stressful parts, at a guaranteed optimal performance level which will maximize mining rewards.
    I felt it was a no brainer after I read up on cloud mining. I went for it after calculating ROI and that is precisely what I got. And I can see that it was a better investment than I had originally anticipated due to recent rallies in the coins I mine.
    I keep adding hashpower as I go, whenever I have some fiat to burn.
    And here is one thing about hash power; your rewards gain some serious momentum once you reach a certain threshold. Mining with a too low hashrate might actually cost you money with certain coins.

    Now, if you are like me, if you see both BTC and Ether heading for the heavens, then what better investment is there? Because BTC in particular is sound money! It is backed by actual work and can’t be made out of thin air like fiat.
    Ether will certainly have a nice rally in the upcoming months and year, it is being adopted left and right by new startups – and now even Putin is poking his nose in the crypto space, acknowledging ETH and blockchain’s tremendous potential.
    It may be because it brings the best of BTC and leaves the worst behind, enabling a smooth transit for all the companies that are building the foundations right now.

    The crypto era has officially begun and you definitely don’t want to stand by not knowing what all the commotion is and missing out on the wealth being created.

    Also, if you want to invest in cloud mining I got a single coupon which I think I’ll share here for a bit of a discount: 809fKo
    That one is only good for Genesis Mining but I couldn’t tell you how long it is good for, though.


  3. one s7 is not going to make you a profit the difficulty is to high its going to make $3 a day electric will be 1 dollar a day
    and an S9 after paying electric cost and it may fail after a few months as the chinise warranty is useless so not worth it anymore as you maight get $10 a day off an s9 then you wil need 3 to 4 dollars a day for electric why bother
    as they are $2000 each on ebay as the dealers have all of them the chinise suppliers bitcom have no stock till sept 2017
    game over i think
    thx
    steve


  4. If my hash rate is low, can I join a pool and still make money?

    Does that mean I just get a smaller portion of the reward?

    Or is there a threshold? Meaning if my hash rate is too low I’ll never get a reward?


  5. I found a great way to mine at home using just my computer and my GPU. Just use Minergate.

    You just need to create an account on their webpage, download the miner-gate app, and boom your all set!

    h type and watch the market value for a good time to cash them in… Remember when Bitcoins weren’t worth much and they were easily mined…


  6. To those thinking of buying multiple miners such as the S9, remember each of these will pretty much require its own electrical circuit. For example on 120VAC 1400 watts is nearly 12 amperes.

    So if you’re thinking of getting 34 of them, in the U.S. where homes typically get a 240VAC feed, you’d need a home with over a 200 ampere service to power all that.


  7. Hi, very interesting.. im new to all that.. My electricity is at maximum 0.09 cad and more often around 0.055 cad..
    I guess i could make a bit of money from what i read around..
    Couple question:
    1: Is there a easy system i could buy if im not much tech guy?
    2: is there possibility to mine other crypto with most system?
    3: how much can i expect to make if i invest in a 1000$ system? Worry to not make money back fast enough…

    Thanks for your post


  8. I rent office space with a flat rate electricity fee. I’m thinking of putting my miner there. The only issues I might deal with is the noise level (may disturb people in adjacent offices), and heat.. (which might be solved by having box fans run 24/7 to combat the heat generated by the miner. Any suggestions on how to decrease the noise level and heat?


  9. hi what do you suggest 3 s7 or 1 s9? are 3 s7 equal in strength to 1 s9? also 3 s7 seem cheaper and I read that they make less noise. Can you give me your opinion in which is better option?

    Another question I used your calculator and wanted to see how much I would need to make 2 BTC a month. Lets say I invest 17000$ into hardware and it gives me 34 s7 units which would eqaul around 160.82 TH/s more or less.

    Your calculator gives me 2 BTC per month what is what I was intrested in. Is that correct calculation at this exact moment? I am not interested in profits and how much pool fees will cost, electricity, just making around 2 BTC per month. How much investment into hardware do I need for that to happen?

    Is investment above around 34 s7 enough to make that happen? I guess I also can’t mine alone if I want 2BTC per month so I would have to be part of a pool.

    I’d be interested to recieve your thoughts about my comment, thanks.


    1. It’s very hard to say. As the BTC price and network difficulty change, it can greatly affect your earnings. If you want to calculate profits in BTC, then you may be better off just buying BTC instead of mining.


  10. So I have free energy for at least the next three years BUT I have a noise constraint. My electricity is free with no cap (so long as I don’t trip circuit breakers) but I can’t be too noisy as I live really close to others and I can’t disturb their studies and sleep and whatnot, is it even worth the investment, if I’m willing to drop upwards of 1K? If it is worth what equipment should I look into gettting and which currency should I mine?


    1. You may want to try the Antminer R4, it is supposed to be more quiet than the S9.


  11. Hi.
    If i buy 100 antminers s9. Should i go to pool or not? I mean, what ia the hashrate limit to be sure, you can go alone, without any pool?


  12. Hello, new in the miners world,

    I have a question:

    I want to buy a Antminer S9, my KWH is around 0.16 cents

    what you Preference with a 14 TH, hashing and 0,16 cents of kost for kwh

    do I need to go in a POOL or SOLO?

    greatz
    Patrick
    from Holland


  13. Hello,

    I have access to unlimited energy (i.e. live in a condo with parents that pay flat maintenance fee) and also have access to unlimited internet (no cap on data through provider). Is mining worth it for me? I am willing to partner. Would any antminer suffice or the higher end models would be beneficial?

    Please let me know.


    1. Ozzy, possibly, but no way to be sure. If you run up a crazy bill, could cause some red flags.


  14. Hey Odhiambo, in what country you are?


  15. Hi ,

    I have access to free power . If interested In a venturing partnership kindly get in touch.

    Regards,

    Odhiambo.


  16. Nick. Plz contact me

    Maybe we can work together with your energy situation.
    ?

    Plz reach out

    Kindcorp

    Chris


  17. welcome, so i wanna start mining near future and i have free energy how many i want and for me its not be risky yeah ?
    im just searching investor for my farm ….


    1. Hi Nick,

      If you have extra energy then just get whatever hardware you feel comfortable with

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