How Profitable is Mining Today and Is It Worth Investing in It?
After the Ethereum shift to the proof-of-stake protocol, many people believe that proof-of-work with its mining activities is dead. However, is it correct?
What Is a Proof-of-Work Algorithm?
Even though the term Proof-of-Work (PoW) is not new, it became popular thanks to Bitcoin. That’s why we will explain how it all works on the Bitcoin example.
In the Bitcoin blockchain, miners solve complex computational puzzles to verify transactions and confirm blocks on the blockchain. To do so, they perform some amount of work. It requires energy, time, and equipment. Altogether, these factors amount to impressive sums.
So, mining costs. Is it still profitable now, during the crypto winter?
It looks like yes, at least for well-performing pools. So, for each block, a successful miner is rewarded with 6.25 Bitcoins which is over USD 120,000 at the moment of writing. If you are mining in a pool, you will get your share depending on the hashrate you are contributing to the pool. It seems that with these numbers, mining must be profitable.
But what do the numbers say?
According to asicminervalue, the situation for Bitcoin miners is not that bright. The best result is USD 3,16 per day if you join Antminer.
Other pools? Working with some of them will result in losses if you calculate expenses for equipment, pool fees, etc. If you join Antminer with cheaper equipment, you will also be losing rather than earning.
It looks like right now, Bitcoin mining is not the most profitable activity. However, it may become such when the coin price finally grows or if the mining difficulty drops in the network. For now, though, the mining difficulty in the network is increasing.
It means that miners can hope only for the end of the crypto winter and the coin growth in value rather than for the mining difficulty to drop.
What about other coins though?
Ethereum Merge and Its Impact on Mining
As you may already know, the Ethereum merge impacted mining heavily. Ethereum was mined previously. After the merge, mining activities in the network became impossible.
Where did miners go?
Some of them left mining. Others have switched to other coins where mining equipment is compatible. If you have a look at the mining profitability and difficulty in the Ethereum Classic network and check how these graphs changed after the merge, you will understand where the majority of hashing power was moved.
Source: https://www.opace.co.uk/crypto/faqs/future-of-crypto-mining-pow-post-ethereum-merge/
So, the merge has impacted Ethereum Classic and, possibly, other coins that can be mined with equipment used for ETH mining.
All this data doesn’t look promising. But indeed, does PoW have any future?
PoW Is not Only About Getting Rewards
If you remember, the initial idea of PoW is not earning rewards or creating new coins. The initial idea is securing the network. And if you remember how PoW blockchains work, you will get the idea.
PoW exists to prevent network participants from performing malicious activities. Also, the number of blocks that can be added to a blockchain is predetermined for a specific period. So, in the Bitcoin blockchain, one block can be added every 10 minutes. If there are many miners, the hashrate increases, computational puzzles can be solved faster, and thus, the blocks can be added faster. To prevent this from happening, the network increases mining difficulty.
And on the contrary, if miners leave the network, the hashrate drops. The network decreases the mining difficulty in a way to enable miners to add one block every 10 minutes. In other words, miners will spend fewer resources to mine one block, and the mining profitability increases.
So, Is Mining Profitable?
Yes, it is if you choose the right coin, the right mining equipment, and the right mining pool. However, you shall remember that investments in mining aren’t going to be paid off within the next couple of years at least. So, learn the coin you are going to mine, calculate all your expenses, and then only you can decide.
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