Bitcoin Mining in 2018: Is the Juice Worth the Squeeze?

2017 has been ablaze with investors and opportunists making money from bitcoin in every way imaginable. While some buy to hold and some trade between cryptocurrencies, others are still mining new coins.

Bitcoin Mining Profitability – USD/Day per THash/s

Although mining is considered highly lucrative by those who know how to do it, the cost-to-reward ratio has dramatically increased over the last few years. While the number of bitcoins mined per day in 2011 would fetch over $20,000, nearly eight years later, miners in December 2017 make just 93c per day from the same amount of hash power, as illustrated in the table below.

Source

What Has Changed?

As the development of bitcoin’s blockchain progresses, the calculations that need to be solved become more complex. Additionally, the more miners there are, the more competition there is to solve the equation, as the first machine to solve the arbitrary equation is credited with the payment.

To the layman, this means that bitcoins become harder to mine as time progresses, offering a smaller reward for a greater amount of time and resources.

The answer to whether or not it will be worthwhile in 2018 largely depends on the type of entity mining it, be it an individual or a company, as well as the reasons for mining bitcoin or another cryptocurrency. A small-time hobby miner will notice his luck steadily dwindling, whereas a larger firm is prone to make a substantial profit from cryptocurrency mining.

Hobby Miners and Commercial Mining Farms?

For starters, many hobbyists tend to focus on bitcoin itself, adding maybe one or two other cryptocurrencies to their mining portfolios. On the other hand, commercial cryptocurrency mining is light years ahead and astoundingly more sophisticated.

One such miner is Jamie Woodruff, the owner of a mining warehouse in the North West of England. Instead of mining just one, or even a few set cryptocurrencies at any one point in time, Woodruff has created a computer program to analyze the most profitable coin to mine based on the ratio of the digital currency’s value against the computational power required to mine it.

“The algorithm finds the most profitable coin and switches over to it,” explains Woodruff. “We’re constantly making the most profit we can.”

According to him, through the computing live trading data received every few milliseconds, he has increased the efficiency of the warehouse by 43 percent in a fortnight. Once the digital currency has been mined, his strategy is not to store the coins in their original currency. Instead, all are converted to bitcoin or ether, which offer stable alternatives and are far easier to convert into fiat currency.

As well as knowing how to mine cryptocurrency, the location is also important – but not as important as it used to be, according to Dr. Garrick Hileman of Cambridge University. “The fact that the price has gone up so much has made it profitable to mine Bitcoin in the UK,” he says, explaining that mining is no longer limited to areas with low-cost electricity such as Iceland, China, and Siberia.

Darren Bradley from a Bitcoin mining company called Powerhouse Network has a similar opinion. “You’re talking about the difference in maybe $50 or $60 in profit per month, per machine, between here and a very cheap country like China,” he says.

By his calculations, one high-end bitcoin mining machine can generate up to $850 per month, even after electricity costs have been taken into account. The drawback is that quality mining machines can retail for as much as $3,500, so you need to be prepared to make the initial investment if you plan to be serious about mining.