Looking to start mining cryptocurrencies for more profits? Stuck in a dilemma about whether you should do it or not?
You probably might be searching the web to figure out if crypto mining is profitable or not.
Here’s a short answer to this:
Crypto mining can be profitable if you earn more than you spend on mining. But it’s more than just calculating what you spend versus what you earn. Other factors impact profitability as well such as equipment costs, electricity expenses, and tax deductions.
Let’s talk about this in detail, shall we?
Is Crypto mining profitable or not?
To determine if crypto mining is profitable, we must first know how much crypto miners earn. We will mainly talk about Bitcoin and Ethereum, as these are the two most popular cryptocurrencies.
Bitcoin miners earn around 6.25 BTC as a reward for mining a single block. As of today’s Bitcoin value, 6.25 bitcoins are worth roughly 17,782.60 USD; which is not a small amount.
On the other hand, Ethereum miners earn around 2 ETH per block, plus transaction costs. Consider 3.5–4 ETFs per block, which equates to 1,327.34 USD at current exchange rates.
The above exchange rates clearly show mining bitcoin is more profitable than mining Ethereum.
But there are other factors, like expenses, operational costs, and equipment costs, that directly impact output.
Let us see how each of these factors impacts the overall cost of mining cryptocurrency
Equipment costs
Crypto mining requires specialized hardware known as rigs. The type of rig you need depends on the currency you are mining.
For instance, for bitcoin mining, an ASIC (application-specific-integrated circuit) is used. A single ASIC rig’s starting cost is $1,118, which makes mining expensive for people.
Electricity expenses
Crypto mining is a power-consuming process. However, electricity expenses depend on the location and the cost of electricity in your city. You must evaluate whether the electricity costs are affordable based on your own analysis.
Taxes
The Indian government imposed a 30% tax on whatever you earn through crypto mining. Therefore, your income is reduced by 30%, no matter whether you are mining or trading cryptocurrencies. So you must take into consideration the taxable amount as well when you are calculating profits.
Now, you know all the moving factors that make mining a costly proposition. The next step is to calculate if you can afford to spend on crypto mining. If yes, then the next step is mining. To carry out the actual mining, you’ll have to decide between solo mining and pool mining.
Solo mining vs. pool mining
Pool mining refers to joining a mining farm or mining pool. In pool mining, all the members combine their computational power to mine a block. To join a mining pool, you have to download mining software like CGMiners and Awesome Miners. This software may be free or paid.
If you use these software then along with paying for the software charges, you’ll have to share the revenue as well.
Meanwhile, solo mining is when a miner does the job on their own. To mine, you just need to set up equipment, and if you have enough knowledge, you can start mining right away.
- One advantage of solo mining over pool mining is that you keep all the income and you don’t have to share your rewards.
- Both solo mining and pooling have their perks. Solo mining is comparatively less expensive than pool mining.
- Decide on the type of mining carefully according to your needs, as this not only determines the profitability but also the effort you’ll have to put in.
Ethereum or Bitcoin: Which is most profitable?
The next thing that determines profitability is which cryptocurrency will give you the most revenue. The two factors which determine profitability are the exchange rate and market competition.
The exchange rate of Bitcoin is much higher than any other cryptocurrency, which is 17,673.70 USD. In contrast, when we talk about Ethereum, the price drops to 1,312 USD. There is a vast difference in the value of both cryptocurrencies.
Bitcoin’s exchange rate is nothing when compared to Ethereum’s, but the competition in bitcoin is more intense than in Ethereum. It’s easier to enter the Ethereum market than bitcoin.
To sum up, bitcoin is more profitable than Ethereum. It’s the best option when you want higher returns. In the case of Ethereum, returns are less but entering the Ethereum market is easier.
Conclusion
Is cryptocurrency mining profitable? The answer depends on your resources, expenses, and the type of cryptocurrency you are mining. Bitcoin is still king when it comes to profit. Ethereum is profitable but less competitive as compared to bitcoin.
In both cases, the required expenses and resources are almost the same; therefore, be selective when you are making a decision.
In a nutshell before deciding whether or not “crypto mining is profitable,” ask yourself: “Can I cover the equipment and electricity costs along with taxes when I mine? If your answer is yes, then cryptocurrency mining is profitable for you.
Now in case you want to start calculating taxes on your mined cryptos as well, KoinX is the right place to get started.
