Crypto mining profitability guide
If anyone is serious about cryptocurrency mining, they’ll have to learn how to maximize their equipment and their invested resources. Not knowing which equipment is profitable and how to optimize its use may end up with you having a negative balance. On top of that, not knowing the mining profitability of your rig might make you spend a lot more money without a cause or overestimate your earnings. This guide will try to show how to calculate the profitability of your mining setup as well as which tools to use to increase your profits.
Factors affecting mining profits
Many factors influence the outcome of a person’s mining profitability. The most significant factor are undoubtedly the cryptocurrency’s price, mining algorithm, the hardware that a person utilizes to mine crypto as well as the total hash rate of the network.
Choosing a cryptocurrency to mine
Mining cryptocurrencies involves solving complex mathematical algorithms by utilizing computational power. There are many consensus algorithms out there, but we will list the most popular ones.
SHA-256 consensus algorithm
The SHA-256 algorithm uses brute computational power to process the cryptographic equations. Bitcoin was easily mined with the CPUs and GPU cards that are used in regular PCs before it was popular. However, as the years progressed, and the market matured, mining hardware ended up evolving to keep up with the increasing mining difficulty. At the moment, Bitcoin is mined purely by using ASIC miners.
Scrypt consensus algorithm
The scrypt consensus algorithm uses a substantial amount of RAM as well as parallel processing to generate cryptocurrencies. This means that you can use GPUs to mine them instead of CPU, which is required for the SHA-256. Scrypt-based ASICs are quite unpopular at the moment, which brings the mining difficulty at a lower level than what it currently is with Bitcoin.
Mining profitability calculators
Many websites can be used to calculate the mining profitability for a specific coin. They take into account the mining equipment you use, power consumption, electricity cost as well as and other details. More straightforward calculators with fewer factors are available for free, but so are much more advanced ones, with features such as:
Hash rate,
Power consumption,
Power cost,
Mining difficulty,
Block reward,
Cryptocurrency price in USD.
Mining profitability can be calculated for various time-frames: hourly, daily, monthly as well as yearly.
Conclusion
Mining is a great way to earn cryptocurrencies passively. On the other hand, you need to take various factors that can affect mining profitability into consideration. Having an accurate prediction about all of the factors can be quite tricky, especially when some factors are out of your control. Be careful and do all of the calculations before investing in cryptocurrency mining gear.
