What factors affect the profitability of mining?
Cryptocurrency mining is a complex process, where profitability depends on a variety of technical and economic factors. This article explores key aspects, including the inaccuracies in predicting profitability, as well as the impact of network fees, mining difficulty, cryptocurrency rates, and hardware specifications.
The factors influencing mining profitability can be divided into two categories:
- Cryptocurrency market conditions. These are factors that cannot be influenced. You cannot control the number of miners globally, the difficulty of coin mining, or cryptocurrency exchange rates.
- Performance and configuration of your equipment. These factors can be influenced. For example, you can add a second graphics card or connect an additional ASIC to double your profitability. Alternatively, you can upgrade your processor, replacing the older Ryzen 5 3600 with a newer, more powerful Ryzen 7 5800.
The more people learn about mining, the harder it becomes to mine cryptocurrencies.
In an ideal world, coin prices would increase proportionally with difficulty to maintain the same level of profitability. But we live in a harsh reality 😤.
How Does the Cryptocurrency Market Influence Profitability?
Competition Among Miners ⛏
Miners earn rewards by finding the correct hash for a block of transactions within the blockchain. New blocks are generated at fixed intervals, such as 10 minutes for Bitcoin or 60 seconds for Ravencoin.
Depending on the network rules of a coin, the reward for mining a block can be fixed, decrease with each block mined, or decrease after a set number of blocks — this process is called halving.
In early 2024, the reward for mining a Bitcoin block was 6.25 BTC, but by the end of the year, it had decreased to 3.125 BTC. This reduction to 3.125 BTC directly lowers profitability unless Bitcoin’s price increases.
If you were the only miner in the entire Bitcoin network globally, you would receive 3.125 BTC every 10 minutes. However, once another miner joins, each of you would start receiving only 1.5625 BTC.
Thus, the more miners participating in cryptocurrency mining, the lower the earnings for each individual miner. However, the total reward across the network remains unchanged.
Imagine there’s a pizza on the table, and you’re alone in the room — it’s all yours! But if a second person enters, you’ll each get half of the pizza. If two more people join, the pizza will need to be divided into four pieces. Miners share the pizza, and the more participants, the smaller the slice each one gets. 🍕
Calculation Difficulty — Network Difficulty ➗
Earlier, we have mentioned that blocks are found at fixed intervals.
But how is this achieved? After all, the more miners join the search, the faster new blocks should theoretically be found.
That's correct. To prevent this from happening, the network automatically increases calculation difficulty when there are too many miners. This adjustment maintains a steady emission rate — the creation of new coins.
The higher the calculation difficulty, the less efficient your hardware becomes, which results in reduced profitability.
For instance, the Bitcoin network's difficulty is so high that even the most powerful GPUs barely produce any significant income. This is why specialized ASIC miners are used for Bitcoin mining.
Network difficulty directly impacts the number of mined coins:
Difficulty Increase: If network difficulty rises by 15%, miners using the same hardware will mine 15% fewer coins over the same period.
Difficulty Decrease: Conversely, a reduction in network difficulty—such as due to a drop in the network’s overall hash rate — leads to an increase in the number of mined coins.
Cryptocurrency Exchange Rates 📈
Until now, we’ve discussed only the technical principles of cryptocurrency operations and mining. These principles determine how many coins you will earn through mining.
However, buying coffee with Bitcoin or Monero isn’t yet universally possible. Cryptocurrencies often need to be exchanged for fiat money like dollars, euros, and other currencies.
The exchange rate depends on the market capitalization of the cryptocurrency. Capitalization is influenced by factors such as the coin's popularity, investor interest, adoption rate, and numerous other factors.
Thus, profitability in dollars also depends on the exchange rate of the mined cryptocurrency.
For example, imagine a coin is priced at $10. You have two of these coins, which you can sell for $20. If the price doubles tomorrow, you will still have two coins, but now you can sell them for $40.
Cryptocurrency exchange rates are unpredictable and constantly fluctuate. A coin might lose value suddenly or unexpectedly become the most valuable cryptocurrency in the market. When you store your savings in cryptocurrency, their dollar value will continuously rise and fall based on the exchange rate.
Mining profitability in fiat currency is directly tied to the cryptocurrency’s exchange rate:
Bitcoin Price Increase: A rise in Bitcoin’s price boosts profitability. For instance, 0.01 BTC mined at a $30,000 exchange rate yields $300, while at an $80,000 exchange rate, it would yield $800.
Bitcoin Price Decline: A drop in price reduces profitability. If Bitcoin’s price falls to $20,000, the same 0.01 BTC would only yield $200.
The situation for altcoins is similar:
Increase in Altcoin Price Relative to Bitcoin: If mined altcoins can be exchanged for more Bitcoin, your profits increase. For example, if the exchange rate rises from 0.0001 BTC to 0.00015 BTC per altcoin, your earnings grow.
Decline in Altcoin Price Relative to Bitcoin: A fall in an altcoin’s price against Bitcoin leads to lower profits.
Network Fees 💸
Transaction fees are another critical factor impacting profitability. Every operation within the network—be it transferring coins from your wallet to an exchange or from a mining pool to your wallet—requires a network fee.
The higher the number of users simultaneously sending coins, the higher the network fee. Consequently, more coins might be needed to complete a transaction.
- High Fees: During periods of high network activity, transaction fees increase, boosting miners’ income. For instance, during times of heavy demand, when fees range from $50 to $100 per transaction, miners can earn substantial profits by including such transactions in a block.
- Low Fees: Conversely, during periods of low network activity, fees decrease, reducing miners’ revenue from processing transactions.
How Does an ASIC or Computer Affect Earnings?
Profitability on Kryptex directly depends on the power of the mining hardware (ASIC, GPU, or CPU). The more powerful and modern the model of the ASIC, graphics card, or processor, the higher the income will be.
Equipment manufactured before 2016 is unlikely to generate earnings on Kryptex. Older processors and graphics cards lack support for the mathematical instructions required for mining revenue.
The performance of the hardware, measured in hash rate, has a direct impact on profitability:
- High Hash Rate: Devices with a higher hash rate can perform more calculations. For example, an ASIC with a hash rate of 120 TH/s will be more profitable than hardware with a hash rate of 60 TH/s.
- Low Hash Rate: Weaker hardware is less efficient. As the network's overall hash rate increases, competition intensifies, and miners with lower hash rates earn less.
ASIC
ASICs are highly specialized devices designed for mining. Powerful and efficient, these machines operate on specific algorithms, limiting the range of coins they can mine.
On ASICs, Kryptex allows mining Bitcoin and its forks (Fractal Bitcoin, eCash, Bitcoin Cash), Ethereum Classic (ETC), KASPA, Alephium, Radiant, and many other coins.
For Bitcoin mining, we recommend models with a hash rate of at least 80 TH/s to ensure they remain relevant for a long time. For example, the Bitmain Antminer S19 is a great option.
If possible, it is always better to invest in newer and more powerful models. Technology constantly evolves, and each year ASICs become more powerful, subsequently increasing network difficulty. As we know, the higher the network difficulty, the lower the earnings from your ASIC.
CPU — Processor
On a processor, Kryptex mines coins using the RandomX algorithm, which requires 2MB of L3 cache per computing thread. The larger the L3 cache, the more cores can be utilized, leading to higher profitability.
For example, the Intel Core i9 9900K processor has 8 cores, 16 threads, and 16MB of L3 cache, meaning only 8 cores will be used for mining. Additional threads will not increase profitability.
Processor frequency has minimal impact on performance. Overclocking processors is not recommended as it increases heat and power consumption, while the hash rate gains are negligible.
On average, AMD processors are more efficient for mining than Intel processors.
This article explains how to boost mining profitability on a processor by 20–50%.
GPU — Graphics Card
Mining on graphics cards relies on their primary advantage — fast video memory. The faster the video memory, the higher the income the graphics card generates.
The memory size doesn’t directly impact the hash rate. However, some algorithms have minimum memory requirements. For instance, it’s impossible to mine Ravencoin on graphics cards with less than 6GB of memory.
Overclocking video memory increases hash rate and profitability. Learn how to overclock your GPU safely in the article "How to Overclock Your Graphics Card for Mining".
Number of Graphics Cards
The performance of multiple graphics cards adds up.
If one GPU earns $10 per day, two identical GPUs will earn $20 per day, and so on.
In a standard home computer, you can install 2–3 GPUs depending on the motherboard. If you want to install more, you’ll need special tools like risers and frames for mounting multiple graphics cards.
For instance, a single GeForce RTX 3060 12GB mines at a speed of 45 MH/s on the Octopus CFX algorithm. Five such GPUs can achieve a combined speed of 225 MH/s.
It’s preferable to mine with similar or identical graphics cards. While mixing AMD and NVIDIA GPUs in one system is possible, it can lead to instability if you’re unfamiliar with the setup intricacies.
Internet Stability
Remember the frustration of receiving a failing grade for a completed homework assignment simply because you forgot to bring the notebook to class? Mining operates similarly—you not only need to solve a task but also submit it on time. In this case, it's not internet speed that matters but latency (ping). ⏳
- Less than 60ms — perfect!
- 125–180ms — a risk of losing up to 5% of profitability.
Profitability cannot be calculated considering ping. If your actual earnings differ from estimated profits while connected via Wi-Fi or a 3G/4G modem, try switching to a wired connection.
To check ping, you can run the following command in the terminal:
ping xmr.kryptex.network
Connect mining rigs directly to the router via cable and avoid Wi-Fi and 3G/4G connections whenever possible.
Computer Stability
In full-performance mode, Kryptex utilizes 100% of your computer's processing power. Under such intensive operation, previously unnoticed system weaknesses may surface. This can lead to actual profitability being lower than the predicted profitability provided by Kryptex.
If you notice any of the following issues:
- Your computer freezes or restarts unexpectedly;
- Your processor or graphics card overheats;
- GPU load fluctuates;
- Profitability varies and remains unstable.
…take these steps to ensure your computer is ready for mining:
- Disable overclocking. If mining becomes stable after this, it means you need to lower the frequencies and reduce overclocking settings.
- Check your power supply unit (PSU). A computer may behave erratically if the PSU lacks sufficient power. Use a power calculator to estimate peak consumption. Keep in mind that older PSUs may have degraded performance over time.
- Monitor temperatures. When overheating occurs, your computer may throttle or shut down the GPU and processor power levels to prevent burnout out 😳. Use tools like MSI Afterburner or OpenHardwareMonitor to track system temperature sensors.
Stability of Calculations
If your hardware is pushed to its limits, computational errors may occur. For example, a card might incorrectly calculate that 2+2=5. All solutions are verified on the pool's side — incorrect solutions are not recognized or paid for.
Kryptex cannot account for losses caused by faulty calculations. After extreme overclocking, Kryptex may display higher profitability, but your actual profitability could plummet drastically.
Inaccuracy in Profitability Predictions 🎚️
Predicting mining profitability is not an exact science; it’s an attempt to analyze past data. Profitability calculators and forecasts rely on the current cryptocurrency price, network difficulty, transaction fees, and hardware specifications. However, they cannot account for unforeseen changes:
- Exchange Rate Volatility: Sudden shifts in cryptocurrency prices can drastically alter profitability, either positively or negatively.
- Network Difficulty Changes: Difficulty levels may rise or fall faster than anticipated.
- Unforeseen External Factors: Regulatory changes, new technologies, and even force majeure events can impact profitability.
It is impossible to accurately predict mining profitability over a long term. Calculators and forecasts can serve as valuable tools for analyzing the current situation but should not be treated as absolute truths.
Mining profitability depends on various factors, including cryptocurrency prices, network difficulty, hardware hash rate, transaction fees, and prediction inaccuracies. To minimize risks, it’s crucial to monitor market dynamics, use reliable equipment, and be ready to adapt to changes. Happy mining! 🚀
🚑 Need Help?
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- Support via email: support@kryptex.com.
