What the profitability of mining depends on

Beginning coin miners want to understand what the profitability of mining depends on. Knowing the aspects of blockchain pricing will help you make a decision about starting a career in cryptocurrency. You need to break down all the factors that affect the returns.

The main factors affecting the profitability of mining

Profit is influenced by 5 parameters. For example, the speed of the Internet connection is reflected in the number of bounce rates. You can install productive equipment to increase the income.

The main factor in measuring the power of the equipment is hashrate. This is a measure of the efficiency of the installed equipment, which is calculated in hashes per second and is denoted as “H/s”.

A miner may encounter additional complexities. For example, the quality of the equipment or the ping of the local network. You should familiarize yourself with them in more detail. Some parameters can be influenced, and others are the movement of the global trend.

Equipment

The profitability of coin mining is affected by the power of the equipment. The installed components form the hash rate of the miner.

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The income is also affected by the number of installed graphics cards. For example, if one GPU brings 1000 rubles of profit, then an additional one will double the yield to 2000. To simplify the use of ASIC – equipment under certain hashing algorithms.

It is necessary to monitor the state of the equipment. Worn components create a percentage of failures due to incorrect calculations. You can check video cards through third-party applications. For example, AIDA64 or FurMark. Additional requirements are listed in the table.

Competitors

The profitability of mining depends on the distribution of rewards in the blockchain network. For example, if the miner of cryptocurrency is the only one in it, then he gets all the income.

Mining can be compared to the principle of dividing a cake. The larger the person, the smaller the share of the yield.

When choosing a coin, it is important to consider the popularity of the cryptocurrency among miners. The more hashrate is used by other participants, the less everyone’s contribution in proportional measure. This is because the network increases the complexity of the algorithms as the number of coin miners increases.

Internet connection quality

The quality of the internet connection affects the bounce rate. For example, if the ping is high, the result of calculations takes a long time to be transmitted to the server and may become irrelevant. Disturbances in data transmission are called redirects.

To check the speed of the Internet connection, you need to use the Speedtest service. You need to make several measurements during the day. If the values deviate greatly, it means that the local network is unstable.

What else depends on the profitability of mining

Profit from coin mining can depend on the exchange rate of cryptocurrency. The peculiarity of digital assets is high volatility – frequent price fluctuations. When exchanging a mined coin, it is worth taking into account the quotes.

Pricing is influenced by the capitalization of cryptocurrency (the total number of invested funds) and the number of coins in circulation. You also need to consider the presence of a mechanism for burning the digital asset. Some developers thus reduce issuance and increase demand:

1. A certain amount of coin is transferred to a non-existent wallet address.
2. The transaction is considered failed and the cryptocurrency is destroyed.
3. Since the capitalization remains the same, the rate increases.

It is also necessary to take into account the cost of electricity. In some regions of Russia, tariffs are increased. For example, it is unprofitable to engage in the mining of digital assets in Moscow, where the price for 1 kilowatt is from 6 rubles.

In addition, it is worth taking into account the commission on the withdrawal of cryptocurrency in fiat. The quotation indicator is volatile and depends on the demand for the digital asset.

Risks of investing in mining

In any investment business projects, there are risks. In addition, you need to know whether the planned project is relevant. This applies to cryptocurrency as well.

Digital assets belong to highly volatile assets. Over a short period of time, the coin’s rate can change by 10% or more. This creates the risk of unfavorable quotes when exchanging to fiat.

In addition, there is a risk of equipment failure due to unforeseen circumstances. For example, video cards can burn out due to power surges during bad weather conditions.

Ways to increase the efficiency of mining

The profitability of mining depends on the factors that can be directly influenced. Several general recommendations can be distinguished:

• Installation of a stable Internet connection. In case of failures in the network, it is necessary to change the provider and choose a tariff plan with the same speed throughout the day. The most stable network is a connection via GPON.
• Selection of devices. You need to buy new equipment. It is not recommended to buy components for mining on the secondary market.
• Choice of region. The cheapest electricity is in the Irkutsk region – 1.42 rubles per kilowatt. Expenses for utilities may be higher than the profit from mining.
• Coin selection. It is not necessary to choose a coin during the peak of its popularity. In conditions of high competition, the profit of each miner decreases.

Conclusions

You can use any of the above methods to increase profitability. There are also factors that are unrealistic to influence.

At the time of a fall in the rate of cryptocurrency, it is desirable not to sell the mined coin. It is better to wait for the stabilization of the cost.

It is important to monitor the serviceability of the equipment. Overvoltage in the power grid can affect several devices at once.

Frequent questions from users

📢 Which processor should I choose: AMD or Intel?

On average, good results are produced by AMD. It is important to take into account the characteristics of a particular model.

⚡ How to increase hash rate without buying additional components?

There is a correlation in the income, which is interrelated with the device and the chosen algorithm. To raise the hashrate, you need to clarify which search method is suitable for the miner’s devices.

🔥 Does overheating affect the yield?

Yes. When the equipment overheats, the defense mechanisms of the components are activated, causing the performance to decrease. It is important to install a cooling system for hashrate stability.

📌 Is it profitable to mine Bitcoins?

Yes. Bitcoin is the most popular digital asset among miners as of December 18, 2022. It’s worth considering network congestion when planning to mine cryptocurrency.

✨ What is halving?

It is a reduction in the reward for adding a block by a factor of 2. This process occurs once every 4 years. It is necessary to specify when it was carried out last time in the selected blockchain.

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Author: Saifedean Ammous, an expert in cryptocurrency economics.