March 28, 2024

The relevance of cryptocurrency mining for 2020: income and laws

The relevance of cryptocurrency mining for 2020: income and laws

Mining income is almost impossible to predict - it depends on too many variables: pricescryptocurrencies, block rewards, block time, network hashrate (capacity), its complexity, electricity cost, cost and capacity of mining equipment, farm maintenance costs, etc.

The cheaper the electricity, the higher the profit,writes RBC Crypto. The cost of electricity depends on the region and equipment. For example, in Russia - from 1 to 8 rubles per 1 kWh ($0.01–0.1), on average 3.5 rubles/kWh, in the world - from $0.02 to $0.30. An average farm with 8 video cards costs about $100 per month. In addition to electricity costs, large farms also incur set-up, rental, staffing, cooling and maintenance costs.

According to BitCluster calculations, electricitytakes up at least 85% of all miner expenses, maintenance, depreciation, rent, etc. - 15%. At the same time, there are economies of scale - per 100 devices and per 1,000 comparable costs for security and rental premises. For example, according to BitCluster calculations, renting, security and maintenance of a farm with 3 containers with 192 devices each will cost approximately 320,000 rubles. Costs for a farm twice as large may remain the same or slightly exceed RUB 400,000.

You can calculate the profitability of a particular farm withusing special calculators. For example, WhatToMine, NiceHash, ASIC Trade, CryptoCompare. For the calculation, you must indicate the equipment, its cost and the price of electricity. Calculator data can vary by 30-40%, often the profitability is higher than the actual one.

Today it is cheaper to build a farm than in 2017-2018years. Back then, video cards were in short supply and sold at inflated prices. Today the excitement around them has passed and assembling a mining farm is no longer a problem. But will it be profitable?

How has BTC mining changed after halving?

On May 11, a plannedhalving - the reward for the mined block was halved, and new coins began to appear twice as slow. Halving occurs every four years. After previous halvings in 2012 and 2016, Bitcoin grew 120-fold and 130-fold, respectively, within a year.

This time, some analysts also predicteda sharp increase in the price of military-technical cooperation. For example, Canaccord Genuity analysts hoped for Bitcoin to rise to $20,000 after the halving, Pantera Capital CEO Dan Morehead expected $42,000, Morgan Creek Digital founder Anthony Pompliano expected $100,000, and anonymous Twitter analyst PlanB expected $425,000.

However, panic in the market interfered with the plans due tocoronavirus - prices collapsed in March. The recovery was very fast, helping miners pay their expenses and not operate in the red, but there was no “native moon.” After the halving, the BTC rate continued to grow, which provided profits even for small miners with outdated equipment. The fall of the ruble has played into the hands of Russian industrial mining - they bear expenses in rubles and sell cryptocurrency for dollars. As a result, according to Dmitry Shuvaev, director of development at BitCluster, the drop in revenue was no more than 10-15% and did not last long.

The BTC rate reacted weakly to the halving - since May itincreased by 25%. Hashrate behaved differently. Immediately after the halving, it fell by 25% - some miners turned off their equipment due to a decrease in profitability. When BTC began to rise in price, they began to connect back and the hashrate began to grow. From the end of May to September it increased from 90 to 125 EH/s. The complexity of the network also increased: from 16.1 T in May to 17.55 T. The decrease in the block reward was partially offset by an increase in commissions: from $0.5 in April to $2.5-$6 in the summer.

The relevance of cryptocurrency mining for 2020: income and laws

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Over the year, the network capacity has grown by 55%. The difficulty of mining BTC today is at a record high between 120 and 130 EH / s. This suggests that many new mining capacities have been added to the network. The jumps in 20-40 EH / s show the inflows and outflows of miners switching to other currencies.

Miners are lucky that despite the recession anduncertainty caused by the pandemic, cryptocurrencies quickly recovered from March lows. Thus, from the March minimum of $ 5,000, the BTC rose to $ 11,000 and retains hope for an upward trend. ETH has risen in price by 330% over the year, most altcoins also show excellent growth rates. The rise in prices has a positive effect on the profitability of mining and the payback of farms.

How much can you earn now on mining BTC in Russia?

According to BitCluster calculations, at the current levelhashrate, the break-even point for VTS mining in Russia is about $6,000 with the price of electricity up to 3 rubles, the world average is $5,000-$6,000. If the price of an asset drops below, mining it will become unprofitable. At current prices, BTC miners still have a fair margin of safety.

According to Dmitry Shuvaev’s calculations, profitabilitydevices for mining VTS S17 - 73Th/s about 8,000 rubles/month, and the payback period is 15 months. Old devices, like Antminer S9, are now operating at a loss. For them to be profitable, the price of military-technical cooperation must rise to $15,000.

How will Ethereum mining change after the update?

Since the beginning of the year, ETH has grown three times, and commissions have increased 20 times. Therefore, mining Ether is still profitable. Since the beginning of the year, the hashrate has increased from 141 TH/s to 241 TH/s, which means new miners are connecting to the network.

Philip Modnov, CEO of LAZM noted that due toWith the upcoming transition to Ethereum 2.0, which should take place before the end of the year, interest in Ethereum has grown and become much higher than in Bitcoin mining equipment - “everyone urgently needs Ethereum mining machines.”

Marat Mynbayev, crypto investor, founder of AmirCapital, said that the rise in the ETH rate led to a sharp rise in prices for video cards, and on many cloud mining platforms, contracts for the production of ETH were completely sold out.

The relevance of cryptocurrency mining for 2020: income and laws

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In Ethereum 2.0 mining will not be - it will be replaced by staking. Payment processing will go to validators. They delegate their coins to masternodes (freeze them for a certain period), for which they will receive a part of the reward. The more coins are frozen, the higher the income. No ASICs or powerful video cards are needed for staking - a laptop is enough. For the network, this is less energy-intensive than mining, and for validators, it is an opportunity to receive passive income for generating coins (From 21 to 5 percent in the first year before deducting equipment and energy costs, which will be 5-20%. Taking into account the price jumps for ETH , staking will not necessarily be consistently profitable).

After the update, Ether miners will be forcedbecome ETH stackers or start mining other altcoins. It is likely that the majority of existing ETH miners will choose the second option, and new players—those who have not invested in energy infrastructure or mining hardware—will take up staking. One of the major altcoins that could benefit from the departure of PoW miners from Ethereum is Ethereum Classic (ETC). It also runs on the Ethash algorithm and the developers of the coin have no plans to switch it to PoS.

It is assumed that both networks are ETH 1 at first.0 and ETH 2.0 will work in parallel, but in the future the existing ETH network will be integrated into ETH 2.0 as one of the shards (parts of the network). Therefore, Ether mining will not disappear overnight. The transition may take years. During this time, miners can manage to pay for more than one generation of devices.

What altcoins to mine?

Dmitry Shuvaev believes that in the long termIn the long term, mining BTC is more profitable than mining any altcoins. The latter have too much volatility - the rate can skyrocket and also fall rapidly in a short period of time, and it is easier to carry out a 51% attack on them, which is impossible with Bitcoin.

But if you want to try to make money on anothercoin, the most universal advice is to mine only the first 20 coins by capitalization. As a rule, these are time-tested and relatively reliable projects. And many altcoins that look promising today may fall tomorrow, preventing the equipment from being repaid.

Marat Mynbaev noted that some of the mostprofitable altcoins right now are Ethereum, Ethereum Classic, Monero and Litecoin. For example, the profitability of mining on an Nvidia GeForce 2080Ti video card is now about $150 per month when its cost is $500. ZCash, DASH, GRIN, RavenСoin, Bitcoin Gold, Dogecoin are also popular among miners now. When choosing an altcoin for mining, consider not only profitability, but also the possibility of withdrawing funds to fiat, as well as liquidity on exchanges.

Is it time to upgrade your equipment?

Mining VTS is profitable only on new equipmentgenerations. Dmitry Shuvaev recommended buying devices of the new generations S17 or S19 for mining BTC - with a power of 75 TH/s and a consumption of no more than 2.5 kW. Their break-even point under current conditions is around $6,000. If the market situation is favorable, this safety margin may be enough until the next halving. If at some time the new equipment starts to operate at a loss, then after recalculating the complexity it will again become a profit. If your equipment does not meet these specifications and you cannot afford to mine in the long term, you will have to either turn off the miners or update the devices. Dmitry Shuvaev does not recommend using old-type devices, such as Antminer S9 - they are not profitable now.

However, throwing out old devices is also notworth it. Philip Modnov, noted that Bitfury B8 and Bitmain S9 still feel confident on the LAZM site, not to mention the new servers. The expert believes that it is still possible to breathe life into obsolete equipment in the medium term (up to a year), but if you want to make money on mining in the future, it’s time to actively update the park for long-term work.

"Industrial miners with a total cost ofin terms of kWh less than $ 0.032, such as our site, continue to work with past generations of computing equipment without throwing it away. But the rest are forced to turn off their capacities, unable to upgrade the equipment to a more modern one due to the unavailability of the price / time criteria. As a result, we see the migration of equipment between sites in search of better conditions ", - said Philip Modnov.

He noted that the high price bar, whichkeep producers, does not give a good payback at the current moment and hinders development. According to Philip Modnov, the outdated equipment will be disconnected in principle by the end of the year and the beginning of the next one if new modern computers are switched on in the network.

Tatyana Maksimenko, representative of the crypto exchangeGarantex also noted that having old mining machines, including such popular ones as the Bitmain S9, is no longer so profitable. She expects that previous generations of computing machines will migrate from more energy-expensive sites to less expensive ones. This has already happened after previous halvings - mining farms in some European countries stopped working or moved to more profitable locations.

Legal uncertainty with mining in Russia

One of the main problems of mining in Russia islack of legislative regulation of the industry. In July, the bill “On Digital Financial Assets” was adopted, which comes into force on January 1, 2021. The law defines the concepts of digital financial assets and digital currencies, recognizes cryptocurrencies as property, and allows the issuance of tokens and their trading.

But the document did not define how they will be regulatedthe turnover of cryptocurrencies by individuals, their taxation and the mining industry. It is expected that these issues will be reflected in separate bills, most likely in the draft law "On digital currency", which is scheduled for consideration in the fall. How much will be allocated to mining is not yet clear.

Until then, Russian miners are in grayzone, they do not formally violate the law, but it is not clear how to pay taxes, and banks do not want to mess with cryptocurrencies. As a result, they leave Russia or use exchangers, withdrawing cryptocurrency from the country.

To solve this problem back in November 2019RACIB proposed to the Bank of Russia to launch a regulatory crypto sandbox - the National Mining Pool (NMP) project. He had to bring mining out of the gray zone and create conditions for taxes from it to flow into the Russian budget.

But at the end of August, the central bank refused RAKIB inthe launch of the IMP. The regulator believes that such a project carries high risks of money laundering and is generally at odds with the state's approach to regulating digital assets. RACIB asked the Central Bank to argue its position, but has not yet received an answer.

In 2020, mining can no longer be treatedhow to make easy and quick money. These are medium-term investments with a payback period of 2-3 years. Home mining BTC is almost dead. Now this is an industry for those who are not chasing instant returns and are inclined to long-term investments. Such players can hope for their small but stable profit, because Bitcoin mining will in any case remain profitable in the long term.

Cloud mining &#8212; optimal format for cryptocurrency mining

For the vast majority of usersThe best option for mining bitcoin in 2020 remains cloud mining, due to the flexibility of contracts and more favorable working conditions than mining on your own equipment.

Cloud mining is a model of earningcryptocurrency, which creates groups (mining pools), with one goal: to generate more income, in comparison with conventional distributed mining, due to the management of equipment by a contractor who solves all issues related to technical and software components.

TOP-3 reliable cloud mining services according to Mining-Cryptocurrency.ru:

Service Rating Detailed overview
IQ Mining (Editor's Choice!) 9.5 Read the review
HashFlare 7.1 Read the review
Genesis mining 6.8 Read the review

The criteria by which the score is given in our rating:

  • Profitability and profitability– we calculate the payback period, clarify the reality of mining.
  • Prices and commissions– we take into account the validity of tariff plans and compare them with competitors.
  • Deposit / withdrawal, discounts, reliability– we analyze reviews, test the correctness of accruals and withdrawals.
  • Convenience of the platform and site– we evaluate the functionality, errors and failures when working with the service.
  • Features of the company– unique services and useful services, period of work on the market.
  • final grade– the average number of points for all indicators determines the place in the ranking.

The full rating of cloud mining services can be found here.

The relevance of cryptocurrency mining for 2020: income and laws

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