Hello viewers, welcome back to another video.
With bitcoin and other cryptocurrency prices skyrocketing again, crypto mining is all the rage
suddenly. And we are sure you get suggested a lot of articles and videos on how you’re missing out
on something huge if you are not a home miner of cryptocurrency already.
But, are you? Well the short answer is NO.
a BIG no. and here's why. But first, what exactly is crypto mining?
In the most basic terms, you use a computer (or computers) to solve cryptographic
equations and record that data to a blockchain. Miners verify the hashes of unconfirmed blocks and
receive a reward for every hash that is verified. The process is computationally intensive, requires
state-of-the-art hardware and many more things. For example, in case of bitcoin,
these transactions provide security for the Bitcoin network which in turn
compensates miners by giving them bitcoins. Sounds not so complicated right? Right?
Actually, it is. There are some conditions attached.
Miners can profit if the price of these cryptocurrency exceeds the cost to mine
them.
With recent changes in technology and the creation of professional mining centers
with enormous computing power, as well as the shifting price of bitcoin itself, many already
exisitng individual miners are asking themselves, is it still profitable and worth it?
And in today’s video, we discuss some of their valid concerns.
Let’s start! There are several factors that determine whether
building your own crypto mining rig is profitable like cost of the electricity
to power the computer system, price of the computer system, and most importantly
difficulty in providing the service.
This difficulty is basically measured in the hashes per
second of a valid transaction. For all of you who don’t know what hash rate is. It basically
measures the rate of solving the problem— the difficulty varies with miners because since
the network is designed to produce a fixed level of coins every ten minutes, increased number of
miners in the market only lead to increase in difficulty level as level has to remain static.
Now lets discuss what are the other major factors that might push you to not
pursue building your own mining rig 1) Electricity costs can be significant
: Crypto mining is remarkably energy intensive. That has been made
clear so far by many experts. Research shows that Bitcoin energy consumption
has now reached levels roughly equivalent to that of Sweden.
Elon Musk, who openly vouch
for cryptocurrency on every platform, as of this week, has abandoned his plan of
accepting Bitcoin for Tesla purchases after the company received a lot of criticism for the
environmental damage created by Bitcoin mining. 2) Etherium 2.0 launch impact on Etherium Miners :
The current version of Ethereum also known as Ethereum 1.0 runs on a Proof of Work (PoW)
model requiring physical computing power and electricity to generate blocks on the Ethereum
blockchain. Experience shows the PoW model is complicated and expensive, reducing the
efficiency of the network in general. Enter, Ethereum 2.0 , that is designed to work
under the Proof of Stake (PoS) model, which is a decentralized system that guarantees improved
security, energy efficiency and scalability. Basically an upraded and better version to
Ethereum1.0 . And one of the defining features of ETH2.0 is that it relies on validators i.e
decentralized miners thereby making the jobs of ETH1.0 miners go extinct.
Given how popular
ETH coin is for home mining, the impact will be tangible and long lasting.
3) Electronic waste problem: We are familiar how a bitcoin network works. All
participating mining machines are basically just competing with each other to generate a new
block for bitcoin’s underlying blockchain. And this is directly proportional to mining
machines’ computational power. Since its all a game of generating hashes efficiently,
the hardware used should be of top notch. The more computations per unit of energy, the more
profitable a machine can be. This has led to a rat race to develop more efficient mining hardware
thereby resulting in more electronic waste. Generally, mining equipments are expected
to become obsolete in roughly 1.5 years. This would follow from Koomey’s
law, and the observation that only the most cost-efficient machines can
remain economically viable for mining. Continuous increasing energy (cost) efficiency
of these newer iterations of mining devices ensures that older ones will inevitably
become obsolete on a regular basis. Less efficient mining devices will be always
be pressured out of the market sooner or later, as they simply cannot compete with newer (more
cost efficient) machines.
For ASIC mining machines there is no purpose beyond the singular
task they were created to do, meaning they immediately become electronic waste afterward.
4) Increase in Capital equipment cost: The total costs for miners
can be divided into two heads: Operational costs (mainly electricity which was
discussed earlier) and capital equipment costs. Regarding Capital equipment costs, Industry
experts predict GPU prices will continue to rise, which will leave little to no
profit margin for crypto miners. There’s no doubt that cryptocurrency boom has
made mining an incredibly profitable endeavour in last few years, even as the difficulty of
mining continues to increase exponentially. Only few years ago it was possible to build
a mining rig with a single computer but now it requires large operations with hundreds
of computers networked and pooling processing power to solve hashes more effectively and
efficiently.
Additionally, regular CPUs do not have the dedicated memory capacity to
process hashing algorithms quickly enough. GPUs, on the other hand, have built-in dedicated
memory that makes them ideal for mining. Which probably explains the skyrocketing rise
in demand and price of GPUs for quite some time. Miners rush to purchase every GPU available
in the market as quickly as they can. Even lower-tier graphics cards, and many stores and
retailers have had to establish measures to prevent single users from buying out their supply
For example, Nvidia’s GeForce GTX 1070 had a suggested price of $690 in Jan. 2021, and
Nvidia’s GeForce GTX 1070Ti, for example, is out of stock already.
5) Climate and other variables: To be able to successfully build a mining rig,
climate does matter a lot.
Some setup allows for the miners to run safely and successfully in
ambient temperature environments of up to 30°C, depending on how many miners you
are operating within the unit. But environments that are regularly warmer
than this will struggle and will either require additional climate control equipment (which starts
to impact the viability of mining profitably) or a more industrial setup at higher cost and
certainly not suitable for residential premises. Lastly, when it comes to crypto mining, it’s
not just the BTC market value that is volatile and needs to be considered, total network hash
power, mining difficulty, volume of transactions and transaction fees paid constantly change too.
As more and more miners come on to the market, and with ever increasing hash rates, the total
hash power of the global network will increase. The current Bitcoin reward is
at 12.5 BTC per block mined, until the next reward halving
(it halves every 210,000 blocks, which is expected in about 2 years time) and
blocks are mined on average every 10 minutes. Therefore, this proves that if everything else
stood still, as the global hashrate increases, your share of the reward, as a
cyrpto miner would decline over time. Well when we think about all these factors and
consider how much it takes in todays economy to setup a mining operation, have a home
ownership in an ambient environment with reasonable electricity costs and not to forget
the ability to make adaptions, it is definitely not that profitable in current times to build
crypto mining rig at home.
It can certainly be done but it’s harder compared to initial days.
One can rather simply invest in the right crypto currency and make more returns by
holding of their rewards in a down cycle and extracting them as close to peaks
as possible, to maximise their return. With this we have come to the end of our video
and we hope that you have enjoyed it thoroughly. We have tried to provide what was essential to
say and we hope that we haven’t missed out on any essential information. Let us know about your
views on mining rig in the comment section down below and do not forget to subscribe to watch more
amazing videos like this. See you in the next one..
