Before investing time looking into mining cryptocurrency the most fundamental question to ask is "Is it still profitable to mine cryptocurrency? The short answer “Yes”, but with a qualifier “It depends on the power of your rig, your energy costs, and the crypto network you pick”.

The purpose then of this article is outline which cryptocurrencies offer the greatest potential for profit, why the coins you pick should depend, in part, on your equipment and how different mining devices are better at hashing different algorithms.

Whatever crypto or cryptos you choose to mine, be aware that the profitability will fluctuate over time, and thus may require targeting a different cryptocurrency or hashing algorithm to maximise your return.

The reward for mining on a particular crypto network depends on factors such as:

  • the total network hashrate (which can be roughly equated to the number of miners competing to find blocks)
  • the release of newer, faster hardware
  • the cost of electricity in your location
  • the value of the block reward
  • network difficulty

Events in the real world – the coronavirus outbreak, for example – can also have a profound effect, causing delays in the production and delivery of crypto mining equipment in certain regions. Even the weather and changing seasons can play into the equation, dictating the availability and cost of hydro power. Chinese miners maximise production in the Sichuan region during the wet season, for example, when electricity is three times cheaper.

There are some pros and cons to consider when mining the major Proof of Work cryptocurrencies, and the minor ones too. While it’s not practical to analyse all of the available options, let’s take a look at the top choices.

It is a bit scary being a miner and knowing that your revenue stream is gonna get cut in half overnight – but the exchange rate will more than compensate for the reduction in bitcoin denominated revenue.

Mining Bitcoin (BTC)

Two block reward halvings have occurred since Bitcoin launched in 2009 and its third is scheduled for May 2020. To compensate for the diminished miner rewards, BTC’s price has risen considerably over the years. In the words of Hyperblock CEO Sean Walsh, “It is a bit scary being a miner and knowing that your revenue stream is gonna get cut in half overnight – but the exchange rate will more than compensate for the reduction in bitcoin denominated revenue.”

While the hashing power required to solve a block is eye-watering, bitcoin’s status as the dominant global cryptocurrency means mining remains a potentially profitable enterprise despite the fierce competition and resource costs.

More than any Proof of Work cryptocurrency, bitcoin’s status as a store of value means miners are likely to feel comfortable accruing it in the knowledge that its future value may prove to be greater than current. With other cryptocurrencies it may be necessary to liquidate block rewards quickly to avoid losing money when measured in BTC or USD terms.

Mining Bitcoin Cash (BCH)

As the largest SHA256 PoW network after Bitcoin, Bitcoin Cash attracts many of the same mining pools. Some of these mine BCH purely for financial reasons, while certain Chinese pools, particularly those controlled by Bitmain, are involved partially for ideological reasons.

A handful of mining operations have introduced a hashrate auto-switch feature, enabling miners to toggle between BCH and BTC using the same algorithm, favouring the more profitable chain. Because the difficulty adjustment for Bitcoin Cash operates a little differently to its parent chain, there will be periods when it is more profitable to mine one or the other. See the ‘Bitcoin Cash Blockchain Overview’ section of Coin Dance to determine which of the two is currently more profitable.

Mining Monero (XMR)

Monero is at the forefront of the wider societal war on privacy, its USP being that all transactions are anonymised by default via its ring signature scheme.

Monero’s block reward isn’t subject to any future halvings; rather it is subject to ‘tail emission’ which sees the reward taper off over time. It’s still possible to mine Monero using GPU and CPU, with the algorithm periodically altered to prevent dedicated ASIC miners being developed to extract XMR.

Mining Ethereum (ETH)

The second largest cryptocurrency by market cap, smart contract platform Ethereum is an attractive proposition for miners for much the same reason as bitcoin; its native token has deep liquidity, genuine utility, and tends to hold its value better than lower cap PoW coins.

Unlike the Bitcoin network, it is still possible for GPU miners to earn newly-minted Ether – but given that Ethereum is transitioning towards Proof of Stake, mining opportunities will eventually be phased out.

Mining Horizen (ZEN)

Previously known as ZenCash, Horizen was only launched in 2017 but has quickly become a favourite of crypto miners due to its regular block rewards (2.5 minutes). A privacy-focused blockchain, this hard fork of Zclassic also employs an ASIC-resistant hashing algorithm, meaning the little guys can mine with GPU just like the good old days. Just don’t expect to get rich if you’re solo mining with a handful of GPUs; even the smaller cap cryptocurrencies such as Horizen command a formidable hashrate.

Mining ZCash (ZEC)

Privacy-focused virtual currencies skew predominantly towards Proof of Work. As with Horizen and Monero, it’s possible to mine ZEC with a CPU or GPU due to its Equihash algorithm. Blocks are created every 2.5 minutes, and similar to Bitcoin, rewards halve every four years, starting from 2016.

Major mining pool Poolin currently generates a large share of ZEC hashrate, at around 34%. With ZCash due to undergo its next halving in late 2020, it may be a good time to start mining the opt-in privacy coin.

Pick your network wisely

The important thing to remember with any of the above cryptocurrencies, and the many more mineable PoW coins out there, is that profitability is not guaranteed so it’s all about weighing the odds in your favour with your setup and maintaining a watchful gaze over the market.

Just because a coin is profitable at the moment doesn’t mean it will be long-term, or even mid-term. Use an online mining profitability calculator to determine the most lucrative network and when the going gets tough and the difficulty ramps up, don’t be afraid to jump ship.

If mining crypto yourself really isn't your bag the alternative is to join a bitcoin mining pool and generating a smaller yield but without any of the technical downside.

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Apr 29, 2020
Crypto 101

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