Titan’s Mining Guide (TMG) #6 — Calculating your mining revenue
We’ve addressed every topic, from selecting and acquiring your mining hardware to downloading and choosing your software and a mining pool. Now, it’s time to evaluate your output, calculate your expenses, and project your profitability.
Introduction to profitability
Bitcoin mining profitability is a very complex matter. There are many factors and variables that can affect your profitability and your revenue.
Additionally, you should also consider a fundamental question: Why are you mining? Maybe you just want to stack sats. In that case, reducing costs and maximizing your output may not be a priority. However, if you need your revenue to pay for your mining operation, you may want to make the most out of it. To do so, you may want to calculate your expenses and revenue and reduce risks as much as possible.
That said, you’ll have to consider the cost of electricity and hardware, the hashrate your miners can produce, the mining difficulty of the network, your mining pool’s parameters, the price of Bitcoin, and a long etcetera. Moreover, most of these factors are variable, not fixed, so you’ll have to stay on top and keep an eye on them to stay updated.
Let’s dive into each one of these factors so you can better understand what to expect from your mining operation.
Network’s variables
On the network’s side, you’ll have to pay close attention to several factors that will affect your mining performance. These are:
Network’s total hashrate
The amount of hashrate currently working on the network, provided by all machines mining that specific coin — Bitcoin, in this case. The more hashrate, the more competitive mining will be, and thus, the harder it will be to earn revenue. This brings us to the second variable.
Mining difficulty
How hard it is to mine a block. This metric adjusts automatically and proportionally to the network’s hashrate every 2016 blocks, which is roughly two weeks. The more hashrate comes online, the higher the difficulty will be.
Block time and rewards
How often do miners solve blocks, and how much of a reward they earn when they do. The first tends to revolve around ten minutes, varying only temporarily until each difficulty adjustment. The second is predefined and halves every 210,000 blocks, roughly every four years.
Price
Last but not least, Bitcoin price will be critical to determine your revenue. It’s not the same to mine 1 BTC at $50,000 than at $10,000. The price of Bitcoin by the time of your profit-taking will determine how much revenue you will have made in dollars.
Pool’s variables
If you’re going to mine through a mining pool — which is very likely if you’re reading this guide — , you’ll also have to consider different aspects of the pool of your choosing that will impact your operation. We’ve addressed this in the previous chapter, but as a reminder, these variables are:
Pool fees
How much of your mining revenue will the pool operators keep as a fee. Many pools have many different fee structures, so you should investigate this before joining one.
Pool rewards system
How each pool calculates and distributes the rewards among all its miners. These systems can affect how much and how often you will be able to collect mining revenue.
User’s variables
Finally, some factors from the user end will also affect your mining operation’s profitability. These are:
User hashrate
How many hashes your mining equipment can produce. Generally, the higher your hashrate, the more revenue you’ll earn. Remember that mining pools reward users for their submitted shares rather than their hashrate. However, those tend to be proportional (the more hashrate a user has, the more shares they can submit to a pool).
Electricity costs
Probably the most essential expenditure you’ll have to make when mining is paying electricity bills. These depend on your hardware setup and your geographical location. If you have that information, it is straightforward to calculate.
Calculating electricity costs
Most ASIC miners include information about their energy consumption, which is of great help in calculating expenses. There are also several devices for measuring electricity usage.
Once you get the electricity your mining equipment consumes in watts, you’ll have to consider the electricity price. Of course, these vary according to your location and could determine the profitability of your operation entirely. If you’re in a city where electricity is costly, you probably won’t be able to cover it just with your mining revenue.
Let’s say that you own a Bitmain AntMiner S19 Pro, which consumes 3250W. Let’s also say that the cost of electricity where you want to mine is $0.1kWh (kilowatts per hour). That said, you can calculate how much running your S19 all day long will cost you using the following formula:
- First, you need to convert watts to kilowatts: 3250W = 3.25kW.
- Now, you have to calculate how many kilowatts per hour you’d use in a full day: 3.25kW x 24 hours = 78kWh per day.
- Finally, you’ll need to calculate how much those kWh will cost you, given your location’s energy prices: 78kWh x $0.1 = $7.8 a day.
These numbers vary in each case and can also be reduced, for example, by installing dedicated solar panels, which can produce 250 and 400W per hour at optimum performance.
Mining profitability tools and formulas
There are many formulas and calculations you can do to calculate your expenses, revenue, and profitability. Some are very complex and advanced and will lead you to a very accurate result. Others are simpler and easier to do, but you will end up with a broader estimated margin of what you can make.
Fortunately, if you have the user data — hashrate and electricity costs — and your pool’s data — fees and payment system — , many valuable tools and websites can help you calculate and estimate your profitability.
Most mining pools offer their own calculation tools. You’d only have to input your hashrate and your energy expenses to see how much you could — approximately — make mining with that pool.
Final considerations
In this guide, we tried to do a complete overview of all the different aspects of mining from A to Z. However, as you can see, this is an industry in constant change and evolution. A few years ago, GPU mining rigs were the most common method for mining cryptocurrency, even Bitcoin.
Now, mining rigs can barely keep up with ASICs, and as we said in the previous chapters of this guide, they won’t serve you well if you’re trying to mount a professional Bitcoin mining operation.
The point is you need to stay on top of things and always keep an eye on on-chain analytics, new hardware releases, and new technology developments that could potentially change the game regarding Bitcoin mining.
We hope that you enjoyed this series and that it will help you take the leap to finally start your Bitcoin mining journey.
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