Today I desired to voorkant how to calculate cloud mining profitability. I had a latest comment on my article: Ethereum Cloud Mining is not Profitable that I’m worried perpetuates the kleuter of static analysis that will cause someone to lose money on cloud mining.
I’m going to do my analysis for Ethereum Cloud Mining. However, this analysis will work for any coin that has enlargening mining difficulty.
Assumptions: I’m assuming the price of ETH is static. Why? Because if it goes up, that is simply a premie. If mining isn’t profitable unless the currency goes up, then one is better off buying the currency outright.
Step One of How to Calculate Cloud Mining Profitability
Very first you need to know how much the cloud mining will cost vanaf unit of hashing power. Spil of 23 April 2018 Hashflare.io is selling 100 KH/s for Two.20 USD. That is 1 MH/s for 22 USD.
Use a static rekenmachine very first. This will provide the baseline static analysis. For Ethereum I like this zakjapanner.
Spil of writing there is a network hashrate of 22595.62995398704 GH/s, a blocktime of 13.31 and one ETH going for 48.63 USD.
So with 1 MH/s I would earn 0.043093 ETH vanaf month, worth Two.Ten USD vanaf month. Multiply that by 12 and the total ETH mined (0.517116) would be worth $25.Two.
So if the price of ETH stays the same (which for the purpose of the static analysis wij will assume it will), and the network hashing power stays the same. Then the profit will be $Trio.Two after a year IF THE NETWORK HASHING POWER STAYS THE SAME. The problem with a static analysis is that network hashing power does NOT stay the same.
Network Mining Difficulty Goes Up
If you zekering with this static analysis you’ll surely lose money tho’. Why? Because the network hashing power has historically gone up and gone up A Lotsbestemming.
Ethereum Block Difficulty Growth Since 30 July 2015
Ter the very first four months of 2018 alone, mining difficulty for Ethereum has gone up overheen 200% from under 100 TH/s up to almost 300 TH/s. Which means the amount of ETH mined for anyone with immobilized hashing power will have bot diminished by overheen 66%.
Factoring ter the growth rate of block difficulty is the most significant factor when determining cloud mining profitability.
Step Two of How to Calculate Cloud Mining Profitability
Projecting how much the network hashrate will increase overheen the life of the cloud mining contract is vitally significant. You need to make a realistic estimate of how the network hashrate will increase because it will reduce the amount you get from mining each day.
The chart above shows the Ethereum network hashrate growth. Te this example, Hashflare.io contracts run ter 12 month increments. So wij need a realistic estimate of how much the hashing power (and thus mining difficulty) will go up overheen a 12 month period.
This takes some guesswork but the best indicator is the past.
The August 2015 hashrate of 55 GH/s to the August 2016 hashrate of Trio,811 GH/s represents a 6,800% increase. This wasgoed the very first 12 months of the Ethereum network coming online so I think this number is too high.
Te 2016 the Ethereum network hashrate went from 511 GH/s to Five,700 GH/s. A 1,015% increase.
From April 2016 at 1752 GH/s to April 2018 of 20,300 GH/s wasgoed a 1,058% increase.
So I based on 2016 I think a 1,000% increase te hashing power is a good conservative guesstimate. That means the hashing power would be around 230,000 GH/s by April of 2018.
So then wij go after step 1 again using the static rekenmachine. Using the 1 MH/s and a network hashrate of 230,000 GH/s. The monthly ETH mined would be 0.004233 worth $.21.
Step Three of How to Calculate Cloud Mining Profitability
So at this point wij have a projection of how much wij’ll get from mining te the very first month. And how much wij’ll get ter the last month. Thesis are just a projections based on a static analysis and a guesstimate of where mining difficulty will be ter the future.
But the amount mined doesn’t hop down from the very first month to the last month. The amount mined is leisurely and steadily decreasing.
I think a exponential decay monster fits the gegevens better but for the sake of ease I think a linear monster will suffice.
I also think a simplified method works because the cloud mining rates I’ve seen are not close to what they would need to be for mining to be profitable.
Take the amount wij think wij’ll mine ter the very first month. Ter this case .043093. Then take the amount wij’ll think wij’ll mine te the last month, .004233. Subtract the very first from the last. Then divide that by 11.
From that point you take the beginning value of .043093 subtract the decay amount .003943 to get the 2nd months value of .039149. You do this again until you get to month 12. By summing up each month’s value wij get 0.283956. Multiply that by the price of ETH of 48.63 USD and wij get $13.80.
The contract te this example cost 22 USD so this would not be profitable if the network hashing power goes up by 1000% (spil it did ter 2016) and the price of ETH stays the same.
You’d end up losing $8.Two.
Okay, what if the network hashing power only goes up 500% so it goes up to 135,600 GH/s after one year? You’d mine about .Trio ETH worth $14.66. You still lose.
What if the network hashing power only goes up 100% to about 45200 GH/s? You’d mine about .387 ETH worth less than $Nineteen. Loser.
What if the network hashing power only goes up 35% to 30,500 GH/s. You’d mine about .45 ETH worth $22.88. Petite winner.
If Network Hashing Power Goes Up You Begin to Lose
So what I hope this shows is that if the hashing power goes up, which ter the case of Ethereum (and I suspect most coins spil well) the amount of coins mined will druppel and the profits will be eroded.
If you believe network hashing power will proceed to go up then use this method to determine if mining is even worth a closer evaluation: use the static mining profitability zakjapanner. Use the amount of ETH mined and the cost of the mining contract to see how much you’re effectively paying vanaf ETH.
For example Hashflare.io is selling 1 MH/s for 22 USD for a year. That would yield 0.043093 ETH vanaf month x 12 would be 0.517116 ETH for the year mined if the network hashrate stays the same. So the cost vanaf ETH would be 42.54 USD. With ETH trading at 48.63 USD that is only a 14% discount overheen a year.
Unless you’re going to get ETH (or whichever other coin) at a significant discount using the static calculation (say 40-50% below spot price). It’s not worth it.
But the Price of ETH is going to dual!
Superb! Then buy ETH directly. Lets say the price of ETH does dual te a year. It goes from 48.63 USD today up to $97.26. You could have bought $22 worth of ETH (.45 ETH) and the $22 worth of ETH would now be worth $43.76.
With a 1000% network hashrate increase you’d have only mined 0.283956 which would be worth $27.61. Unless the mining is profitable with the price of ETH immovable, you’re better off possessing the presently directly even if the price of the currency goes up.
At what price would cloud mining be worth it?
Spil of today 23 April 2018, based on a 1000% increase te hashing power overheen the next year I would not pay more than around $7 for 1 GH/s of hashing power.
Based on my projections that would yield about 40%. Given the risk and volatility ter cryptocurrencies I would need to see that zuigeling of terugwedstrijd for it to be worth the risk to mij.
With 1 GH/s costing 22 USD, if the network hashing power stays the same I would still only make about 15%. Given the history of network hashrate increases that isn’t worth it. I can get 12.95% on BitBays will no market risk.
Hashflare.io is nowhere close to $7 vanaf GH/s. Genesis Mining offers 1 GH/s for Two years for 29.99. Who knows where the network hash rate will be ter Two years.
Some People Optie Cloud Mining is Profitable
I have read testimonials from people who think cloud mining is profitable. My main question would be is it profitable because the underlying cryptocurrency went up, or because the mining itself wasgoed profitable? Ter other words would you have bot better off just possessing the cryptocurrency directly?
Superb article. How would this logic apply if you were to build your own equipment and had free electro-stimulation spil opposed to buying a contract with an existing mining company?
I’ve never run any mining equipments myself. However, if you add up the cost of the equipment and divide it by the hashing power, it would need to be less than what you calculate is the value you’d be willing to pay.
So for example, back ter April 2018 I said I wouldn’t be wiling to pay more than $7 for 1 GH/s for ETH. So if I could build a equipment for $700 that would have 100 GH/s of hashing power it would be worth it.