DISCLAIMER: These are my thoughts and opinions, in no way am I an expert on cryptocurrencies, mining or investing.
Most of you have probably become aware of the massive surge in cryptocurrency mining and how so many people are jumping into it or considering to mine altcoins in order to gain a profit or just collecting coins for thrills/interest. I myself was so interested as well that I began researching and was debating on investing $2500-3000 CAD on computer hardware and start mining myself.
All seemed well and profitable until I dug deeper taking into account what many others have have glanced over (including me) when it comes to calculating profits and mining costs. That one thing is difficulty. Essentially difficulty in terms of mining cryptocurrencies is the "measure of how difficult it is to find a hash below a given target" - Bitcoin Wiki
Currently the two coins that I and many others have been interested are Ethereum & Zcash. Once I initially heard about this surge in cryptocurrency mining and how people are making profits and money by leaving there computers on I was definitely interested. Owning a NVIDIA GTX 1070 & AMD R9 290 I decided to set-up a little miner with the spare parts I had on me. After some testing between many software miners & pools I was able to get 460 sol/s on my GTX 1070 @ 240w & 29.13 Mh/s on my R9 290 @ 305W (Watt calculations are of complete system TDP)
I have been mining for about 1 month now and have seen some payouts and received some coins but that is not really what I am here to talk to you about. I want to go over the calculation system and how others are coming up with there profitability calculations. I understand the value of these altcoins do fluctuate and vary in terms of profit at the end of the day, but my focus with this post is on mining calculators and difficulty increases.
Below I am going to be posting some screen shots of calculations of certain scenarios of those who would be looking to get into crytocurrency mining at this stage. Essentially I submitted the results of my two cards that I have (AMD for Ethereum & NVIDIA for Zcash in this scenario) into two calculators that are fairly popular on Google.
-CryptoCompare - https://www.cryptocompare.com (DOES NOT ACCOUNT FOR DIFFICULTY INCREASE)
-MyCryptoBuddy - http://mycryptobuddy.com (ACCOUNTS FOR DIFFICULTY INCREASE - estimated)
Here you can see the results of mining over 1 year with single card scenarios. In the first two photos from CryptoCompare you can see what the "potential earnings" are factoring in electrical costs. In Canada I pay $0.14 USD kW/h.
The following calculations from CryptoCompare are stating that I should be making $74.05 perMonth mining Ethereum & $72.58 perMonth mining Zcash! Sounds good doesn't it? just for one graphics card! Might as well go buy as many GPUs as I can right then my profit increases? Well not too fast. One huge thing this popular calculator misses in its calculation is difficulty increases.
In the following two calculations on MyCryptoBuddy it factors in difficulty increases (estimated) which can greatly affect your profits over time. As you can see below in the Ethereum calculations the estimated profits do differ a bit but, where it is vastly different is in the yearly projections!
-CryptoCompare estimates after 1 year with 1 R9 290 my estimated yearly profits would be $900.91.
-MyCryptoBuddy estimates after 1 year with the same 1 R9 290 my estimated yearly profits would be $36.55.
Massive change in estimation since MyCryptoBuddy actually factors in difficulty. Once again this will vary depending on value of the coin, but essentially CryptoCompare estimates you to make the same amount per day, per month & per year. THIS WILL NOT BE THE CASE IN THE REAL WORLD! The amount of coins you can actually mine over time decreases rapidly as well. With the surge and massive popularity in cryptocurrency mining, I believe it is not worth to invest money into hardware to start mining now. If you have already been mining calculate when the best time is for you to stop/continue.
It is an even worse dip for Zcash...
-CryptoCompare estimates after 1 year with 1 GTX 1070 my estimated yearly profits would be $883.03.
-MyCryptoBuddy estimates after 1 year with the same 1 GTX 1070 my estimated yearly profits would be $-93.60. I would actually be losing money if I decide to mine for a whole year on Zcash.
The difficulty is increasing exponentially and unless the value of these coins go up at the same rate, it will become increasingly more difficult to gain a profit, let alone cover the cost of the hardware/initial investment.
Just take a look at the hash rate over time for Ethereum. It has dramatically increased over the past few months. Everybody is jumping in on this phase and I fear too many people are powered by greed and see the chance to make a few $$ but haven't researched the market or future properly.
So why am I going through all this you may be asking? well I want to inform the community of the risks involved and really advise those looking to invest in hardware to mine cryptocurrencies to DO YOUR RESEARCH! PLEASE PLEASE PLEASE! Use calculators to estimate whether this would be worth it to you! Make sure to do multiple calculations on many different calculators. See what your potential earnings could be. Understand that they are all potential. The market is volatile and value increases/decreases rapidly.
Personally I am not going to invest into hardware to mine these as I would be losing way more money than I would be receiving in coins due to the difficulty increases and the amount of people flooding to buy mining hardware. Not even to mention the massive increases in costs for GPUs, the market is inflated and I am calling this one from the sidelines. Possibly going to invest more into cryptocurrencies (already have) after more research is done on my part but, I would like to end this off with a quote that really does apply to this massive surge in cryptocurrency mining, especially with all the mainstream coverage on the news & YouTube.
"If you see a bandwagon, it's too late." - James Goldsmith
TL;DR: Do your own calculations and research. Don't base your opinions based on what others are saying, not even my own! Take your own brain and figure out whether or not this is going to be good for you in the long run. Don't just see the quick short term $$ and consider how much would you be willing to lose! The cost of the parts is not factored as well in a lot of these calculations so consider that!