A friend and I bought a Bitcoin mining rig a few months ago. We knew very well that there was a good chance that we would not end up making a profit, but the technology was so intriguing, we had to give it it a go.
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After 5 months, it became clear that we weren't going to make our money back. That was when ETH still looked like it might go back up to R10 000.00 per ETH. But with ETH now dwindling at R3000.00 per ETH, and the rig making 0.6 ETH per month, we are looking at bringing in R1800 each month. R1800 isn't bad, but the problem is, it costs us R1400 for electricity each month. So essentially, the rig is barely making R400 a month.
So based on these calculations you would probably agree that mining is a complete waste of time. However, another article got me thinking. Maybe the biggest problem is that we went with the GPU mining option. GPU stands for "Graphics Processing Unit". The same graphics cards used in computers for gaming are used in these GPU mining rigs. But GPUs mining rigs are not the only types of mining rigs you get.
Another way to mine is using an ASIC miner. While a GPU rig uses graphics cards to mine, ASIC miners use a special microchip designed specifically for the purpose of mining. There are various pros and cons for both and would be completely different conversation altogether. For now, I am just going to see if I can do the math myself and see if ASIC miners are a better option.
Our R90 000.00 rig (6 x R570's GPUs and 6 x RX470's GPUs) generated 0.6 ETH per month. Let's compare the values from the article, firstly with how our current rig is doing so we can make sure these are reliable values, then secondly with each other to see if we would have been better off with ASIC miners.
These are the stats taken from the article:
- Avalon 821
Price: R9 999.00
Profit per day: R36.11
- 6 x RX 570 Mining Rig
Price: R55 499.00
Profit per day: R33.28
According to these stats, you could make 33.28 x 31 = 1031.68 per month with 6 cards. So roughly double that, ie. R2063.36 if you have 12 cards. That is very close to what we are currently earning with our mining rig. I think it's safe to trust these values, at least as a preliminary estimate. So let's see how an equivalent ASIC mining setup would perform.
An equivelant ASIC mining setup to our rig would be 2 x Avalon 821's. That would set you back R20 000.00. Which is R70 000.00 less than what we spent on our mining rig. Not only would the Asic miners cost almost 80% less, but I'd be earning slightly more than I would be able to earn with the GPU rig. That's purely based on the price tag and profit per day values given. I am very tempted to buy an Avalon 821 miner to see if it can in fact earn 36 x 31 = R1116 per month, but let's really look at the numbers:
- For an investment of R10 000.00 (1 x Avalon 821)
- You can get a return of R1119.41 (R36.11 x 31) per month
- Electricity use is estimated at R700 per month (if it's using half of what our current rig uses)
- That means you make an actual profit of R419.41 per month
- If it cost you R10 000, and you earn R419.41 per month, you could pay it off after 24 months.
24 Months is a very long time, especially in the world of crypto. We initially thought we'd make our rig's money back within 12 months. That already felt too long. If you don't make your money back within 12 months, there is a good chance something better than your hardware could be released which could potentially make your hardware obsolete or significantly impact your profits.
So far it's still a "no" from me with regards to mining crypto. The only thing that might change my opinion and make me consider buying one, is if the electricity use is significantly less. If electricity is only R200 a month, it would mean you would make an extra R500, bringing the total to R919.41 per month. In which case you could break even after 11 months. 11 months sounds a lot more attractive than 24 months, especially if the upfront investment is only R10 000 and not 11 times that amount.
So the real viability in this lies in the electricity required. The only way to confirm that is to buy the product and plug in a watt meter. Its specs say that it uses 1200 Watt, which is 66% of what our current rig uses. We pay about R1400 per month for the rig's electricity. So the Asic miner's electricity would probably work out to R933 per month. If it does in fact cost R933 per month for electricity, then you only make R186.41. And in that case it will take you 4 and a half years to pay off the item. It makes no sense to do this if the electricity isn't extremely cheap for you.
Also remember, you are not earning in Rands. You generally earn in Bitcoin or in Ethereum (or some other crypto currency). That means your income is largely dependent on the value of the cryptocurrencies you are mininig at the time that you sell. This opens up room for a very specific type of investor with a specific strategy and risk appetite. If you are a serious supporter of Cryptocurrencies and you believe the price will double or triple in the years to come, then you might want to consider mining as a way to generate more Bitcoins for the sole purpose of selling at a much much much later date. But this is a risky strategy. Bitcoin could stay where it is now for the next 10 years, or fall down to 0, or jump to 1 million. No one knows.
With all the effort involved in mining and the small chance of making huge amounts of profits, you are better off spending your money in other ways that might be just as risky, but with a higher chance of being profitable. For example, if you are spending R10 000 to buy a mining machine that generates 0.03 BTC per month, earning you R400 profit per month, you might as well just buy Bitcoin on Luno for that amount, and put a sell order in at a price where you make R400. For example, buy at R95 000 and then put a sell order in at R100 000. If you bought R10 000 of Bitcoin at that price, you would get:
Amount To Invest / Price Per Bitcoin
= 10 000 / 95 000
= 0.105263 Bitcoin
If you then put in a sell order for R100 000.00, you would make:
Amount of Bitcoin Bought x Price Per Bitcoin
= 0.105263 Bitcoin x 100 000
That gives you a profit of R 526.32.
And nothing is stopping you from doing this multiple times each month. Of course this is very risky and it will take you time to learn to do. But my point is that it would still make more sense to do this than to invest in mining. (If you are interested in learning to trade Bitcoin, I highly recommend starting here.)
In conclusion, I doubt I'll take a chance on buying any crypto mining gear ever again. But if, for example, I had to get access to my own free wind turbine or hydroplant, then I'd consider throwing in a few Avalon 821's, as the free electricity will make it profitable. But I cannot think of any other scenario where I would ever bother with mining crypto ever again. That might change in time, but right now, there is just no way.