Is Mining Cryptocurrency Profitable?

Let's take a look, remove any assumptions, and see if mining cryptocurrency is actually profitable.

This is an analysis of one of the ways to use GPUs to mine cryptocurrency in early 2018, and its profitability. If you're looking for different ways to earn passive income, then mining cryptocurrency may be for you.

Is mining cryptocurrency profitable or an opportunity worth missing?

I was first made aware of bitcoin sometime around 2011 and dismissed it as nothing but nonsense that the underground internet community used for dubious transactions. I will never dismiss anything, no matter how ridiculous or unimportant it appears, ever again because of this painful lesson.

Again in 2014 cryptocurrency was brought to my attention via a project an acquaintance wanted to work together on. The project never amounted to anything, but one guy on the team mentioned how he had previously mined Bitcoin, but that it was no longer profitable. I took his word for it and didn’t bother looking any further into it.

On a side note, that guy is now very much retired!

They say the third time's the charm for good reason. There was no way you could have lived through 2017 without hearing about cryptocurrency. My friend's grandma was even buying bitcoin. I could no longer ignore the astronomical returns and hearing about the technology that is supposed to be changing the world already.

Getting Started

I began trading in my Coinbase account that had sat idle for so long, having fun trading the volatility these currencies offer. I wanted to learn more about how Bitcoin and other currencies worked, and finally see if mining would be profitable. I had always heard mining wasn’t profitable, and the online calculators seemed so inconsistent, that I didn’t know what to trust or where I should start. I'm always looking for new passive income ideas, so I decide enough was enough, I needed to find out if it was worth it or not.

A friend of mine decided he’d be willing to risk the amount to get started and give it a try. My fairly risk averse nature still had me skeptical, so I waited to see his returns before I dove in. Well what I saw sold me, so I built my 6 GPU mining rig shortly after. I’ll give you a parts list at the end if decide you’d like to build one yourself.

Is mining cryptocurrency profitable?

The short answer: it depends.

I’ve been mining for about 5 months now and tracking the progress as I go. I was looking for a very hands off, passive, non technical way to do this. For this reason I decided to use Nicehash. It’s not technically mining, but rather, selling my computing power so that others can mine via the Nicehash platform. The incremental difference in what I could earn mining vs selling processing power didn’t seem worth my time to fiddle with additional software platforms. For this reason, Nicehash seems like the easiest beginner approach.

I realize this isn't the maximum ROI I can get out of my equipment, or for mining, but I want to test ideas that most people could easily implement. There are many different ways and platforms to mine cryptocurrency, but after weighing my options, such as scaleability, simplicity, value, and return,  I chose 6 GTX 1080 GPUs.

Setting things up

My initial start up cost was $4,540.67, which I financed using Chase card 0% credit card. My out of pocket expense on this is currently just the monthly credit card payments. This is partially offset buy earning on the balance owed that I talk about here in Earning the float. Creative financing is something I enjoy looking into for almost any purchase I make. Prices are constantly changing, but you can likely currently build my same rig for less than I did.

After setting up the rig I decided to keep my fees low by mining into the internal Nicehash wallet, and then transferring into my Coinbase wallet for free. If the earnings were any larger I’d be hodling offline in a Trezor or a Ledger Nano hardware wallet. I realize the idea behind Cryptocurrency is to not be centralized, but in this instance I’ve decided to keep a small amount at Coinbase for simplicity.

The numbers

So let’s get into the data. Looking at the chart below, as of this writing, I’ve grossed $2,050.25 from my rig. This is if I had converted my Bitcoin into USD on the day it was earned. I track it this way, as this is my cost basis for tax purposes.

Current USD value of these mined earnings is roughly 14% less than had I sold the day each amount was earned. This is due to the fluctuation in Bitcoin price, as the current Bitcoin price is lower than the average price when earned. I'm hodling long term. Next stop 0 or 1mm I'll be participating. 

Not too bad for a set it and forget it kind of situation. No PITA tenants. No large overnight trading risk. No hours of content creation. Pretty sweet gig if you ask me. Let's dig a little deeper. But first, here's a bar chart.

I started mining mid January with only 2 GPUs and added a total of 6 within the first two weeks. So January is a bit of a throwaway month since the data is not consistent. I included so that you can see my YTD earnings. February is a more accurate starting point.

One thing to note, is the rate of earnings in January. I was raking in the digital gold much faster in January, even with less GPUs. This is due to a number of factors; primarily the difficulty level to mine, the price of the currencies I was supplying computing power for, and the demand to buy computing power to mine.

I initially was measuring the energy usage with a Kill A Watt electricity usage monitor, but it fried, and stopped working within the first month of use. Instead of replacing it, I just used our historical power bills and estimated the difference YoY and MoM. Our power bills looked to increase about $165 a month when the rig was running full time. Our cost of power changes MoM, but it averages about .17 per kWh. Here's our electric bill for reference.

Reducing the gross earnings by the electric expense show the monthly net income below.

What are the returns

Not too shabby if you ask me. The current gross and current net should be relatively accurate below. I annualized it by using the current days mined, 164, and the current YTD numbers. I suspect the annual returns to be less than projected unless crypto rallies a bit.

Pretty enticing returns right? Well before you start looking high and low for GPUs to mine with take these pros and cons into consideration. These returns could change drastically in either direction, and have since I started.

If you'd like to see the daily returns you can download and view them here. Note, some days I missed recording that day. The missed day was added to the day recorded. Some days have 2-3 days of earnings, but are easy to tell by the gap in the date. I'm committed, but not perfect.

Pros

About the most passive thing you can do to earn money. You don't need to talk to anyone; go anywhere, or really do much of anything after it's set up. Just sign in once a day and empty your wallet, or let it build up and remove whenever.

You get to participate in the growth of technology. As an investor I'm always looking at where we're going, not just where we're at. If you decide to venture into cryptocurrency mining or trading and actually try to understand the technology, it's pretty amazing. Blockchain and cryptocurrency are something I want to be a part of and continue to learn more about. I feel like anything you can do to better understand this technology, the better equipped you'll be to adapt to the future in many different industries.

Diversification - Cryptocurrency is still fairly new. It has the potential to be worthless or grow significantly. Doesn’t hurt to have something other than cash to be able to transact with. It may be a long shot but it also could turn into something great.

The returns are pretty nice on paper. As you can see the rate of earnings has slowed, but YTD return still beats many asset classes. Will it stay that way, is the question though.

Cons

You need to be able to build a computer if you decide to use the parts I did. There are companies that will sell you pre-built rigs if you don't feel comfortable building your rig. I would highly recommend taking the time to learn how to build a computer if you decide to mine though. It can be a pain, and require the help of a few friends or Google search to sort our the bugs. But it's worth it. You'll have the pride of ownership so to speak. It's also a skill that won't go to waste anytime in the near future.

All mining rigs produce heat. It will heat any room it’s in significantly. If you live in a tiny apartment good luck. If you're in a relationship, I sure hope you have the skills necessary to sell this idea to your significant other. Gives a new meaning to being hot tempered.

If the heat doesn't frustrate your cohabitant, I'm betting the view of monstrosity sitting in the living room will not jive with their Feng shui setting they had imagined. Don't even attempt to put it in the bedroom. That will only be welcomed if you don't have heat and it's 30 degrees in your home. You don't even realize how much of a favor I'm doing for you here.

It’s noisy. My rig isn’t crazy noisy like some Asic miners are, but it’s loud enough to have to turn up the TV a few notches. Find your typical household fan and turn it on medium. It’s about that loud. As I write this, Ana just turned on a hairdryer. The mining rig is thankfully not as loud as a hairdryer.

I'm personally not a fan of the Asic miners, as they tend to be much more limiting and can only be used for mining. GPUs are easier to sell or use for other things, such as gaming or 3D videos. Maybe I can get a friend to do a guest post why he thinks Asic's are the way to go. To each his own.

You should have airflow. You really should have a vent or cracked window available to help reduce the heat the rig produces. Don't even think about putting it in a closet and calling it a day. That's a recipe for disaster in more ways than one.

Your electric bill will rise. This is obvious, but this will likely get the attention of your electric company. My buddy got a letter from his electric company showing how he used about twice as much his neighbors. I'm not sure if they were trying to use peer pressure as a tactic to get him to reduce his consumption, but they're watching. 

Using more power is bad for the environment. I don't make a point to hug trees on my free time, but I'm also not keen on being wasteful in any way. We're using significantly more electricity than we used to, so much so, that I'm looking for sustainable alternatives in the near future. Will keep you posted on this.

Technology is always changing. The mining difficulty changes. The price if the cryptocurrencies being mined is volatile. There is real risk here that you won't be able to make back your initial investment in a multitude of ways. These GPUs won't last forever, nor will they always mine at a profitable rate. The income is highly volatile in many ways.

Is it worth it

Would I do it all over again? I'm not entirely sure. I'm still in a bit of a wait and see period. I have no intentions of selling my rig or scaling up anytime soon. I definitely learned a ton since having it, and enjoy seeing what others are trying.

From a pure investment perspective it's still a bit too early to tell. With the price of Bitcoin and many alt currencies significantly off their highs the profitability has dropped quit a bit. If the markets rally a bit I'd feel a little better about this investment. If cryptocurrencies moon, then I may look to scale. By that time everyone else will as well. This could be a great buying opportunity in the currencies, and the right time to get another rig going, but who really knows. I'll give it a few months and reevaluate my course.

Here's a parts list of my rig:

• MB - Here
• GPU - I have 3 of these and 3 different ones. This GPU seemed to work the best and stay the coolest out of the 4 I have. Currently selling for less than I paid. -  Here
• PSU - I choose to run two of these instead of one large one - Here
• CPU - Here
• 4GB Memory will work; currently using 8GB - Here
• PCIe splitters  - Here
• PCIe power splitters - Here
• PSU splitter - Here
• Power switch - Most people forget this - Here
• GPU risers - Here
• Flash drive - Here
• SSD - You can run a smaller size but this is the size I have - Here
• Rack - Here
• Zip-ties - Here

I'm throwing in our wallet address in the spirit of cyrptocurrency. If you found value in this and would like to support the website feel free to send some good crypto vibes our way. If you found this useless, feel free to tell us that as well in the comments below. I'm always looking for better ways to add value here.

• BTC     3LtegHctZwPbfEPeceTNzCPZhA2Gc1W6X5
• BCH     qqkdzv8xtpnsj4efvepe98zazmkgf3u2zgs0xye9yf
• ETH     0xACE1a80494c2CCf941ee5A54bc3cF6726816c075
• LTC     MVUnTNQLvkjQ5TanS6QBhSumnBJXbAtTPc

If you're new to cryptocurrency and want to try it out, sign up for Coinbase. We both get $10 of Bitcoin if you buy or sell $100 of digital currency.

Are you mining cryptocurrency in anyway? Do you think it's worth trying? Let us know what you've tried in the comments below.

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This is not financial advice in any capacity, as no one contributing to this blog at EMK is a licensed financial advisor, attorney, or certified public accountant, and no portion of the blog content should be construed as financial, legal, or accounting advice. Please consult a licensed professional before making a financial decision. 

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