Could I Mine Bitcoin and Turn a Profit?

Large Scale Mining

When people find out that I’m connected to digital currency mining the first question they often ask is the one above. Sadly, as an individual, the answer is no. It would cost you roughly $200 to get started, and $1.74/day, yes, it’s a money pit right now, to call yourself a Bitcoin miner. Oh, and you’d probably drive your family crazy with all the noise. Here are the economics behind Bitcoin (BTC) mining at this moment.

Today, and today is important because all the numbers below are very fluid, a new Bitcoin block is mined every 11 minutes and produces a block reward of 12.73 BTC. This includes additional fees that are earned in the process. Using the following formula, we can see that roughly 70 BTC are earned hourly:

(12.73 BTC / Block) * (1 Block / 11 Minutes) * (60 Minutes / Hour) = 69.44BTC / Hour

24 hours / day * 69.44BTC / hour = 1,666.56 BTC / Day

At this moment in time, the total computational power working to mine BTC is 82,030 Peta Hashes per second or to convert it to more standard units that are 82,030,000 Tera Hashes per second. One of the most affordable and efficient miners available now is the Bitmain Antminer S9K, which retails for $101, but after import taxes and shipping from China, expect it will run you $200. This box produces 14TH/sec, so if you put one of these online, you’d represent 0.0000001707 of the total capacity right now. Multiply that by the daily BTC reward, and you could earn 0.0002344 BTC a day. With BTC trading at $7,608USD, that would mean you could earn $1.78USD/day before mining pool fees and the cost of power. Pool fees often run at 5%, so this brings your earnings down to $1.69USD/day. The S9K miner draws 1.19KW, so at $0.12/KW, this means it requires $3.43/day in electricity, so you’d be out of pocket $1.74/day.

If we were to calculate things back a bit, we would find that if BTC were trading at something over $14,633/BTC, we would be breaking even.

If we ever want to earn back our $200 capital investment, we would then assume a six-month return, the industry rule of thumb in mining today for ASIC rigs. This would require earning at least a $1/day after costs, so that would require that the price of BTC remain at or above $18,900.

Now one could adopt the famous “mine and hold” strategy, meaning that you hold onto every BTC you earn, and then sometime six months or more in the future when BTC is trading above $18,900 if you were to sell you’d at least break even.

It should be noted that in May of 2020, Bitcoin will go through a halving event and rewards for each block after that will be cut in half, and at that point, the price of BTC is expected to climb significantly. So mine and hold could pay off in spades.   

One final thing to consider, these BTC mining rigs are essentially two 5.25″ fans blowing air over hundreds of chips, so they are noisy and hot. They are 1200W space heaters that happen to produce a little BTC. So if you do want to venture into this market as an individual, you should consider doing it in a sound-proof room and then venting the heat to someplace useful, perhaps grandma’s room, she’s always cold. 

*Note: This numbers were on November 21st when this piece was first written. Since then Bitcoin has gone from $7,608 to $6,632, so its now even less profitable.

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