The economics of cryptocurrency mining in Australia
Energy and equipment costs, along with price volatility make the mining question a tough nut to crack.
While bitcoin trading can be a pathway to making a few bucks – or losing them depending on how the markets are faring – there are still many people who are mining bitcoin.
But the economics of mining bitcoin are changing. The are three main components you need to consider when diving into the world of cryptocurrency mining.
- The value of the currency you're mining at any given moment.
- The energy cost of mining.
- The cost of mining equipment.
In a sense, it's no different to the economics of mining a mineral or creating some other commodity that is traded.
The value of bitcoin, or any alt-coin, can be tracked by following activity on one of the many cryptocurrency exchanges that operate. The challenge is that coins can shift in value quite markedly.
For example, bitcoin is currently trading at about US$7400 – down from highs approaching US$20,000 in early 2018. And intraday values can shift by several percentage points in both directions, depending on the actions of large traders, sometimes known as whales, regulatory announcements or even just rumours.
The amount of energy required to produce a single bitcoin is significant – between 21,000KWh and 49,000KWh depending on your equipment and who you ask. When we last looked at this, the electricity cost to produce a single bitcoin was between US$6,720 and US$15,680.
With market prices for bitcoin at the lower end of that scale, you'll need to look at the economics closely. And, as energy prices vary significantly in Australia, depending on where you live and whether you enjoy time-of-use tariffs, where the energy price varies depending on what time of day you use electricity, then you may find it's worthwhile but only if you activate your mining kit at the right time.
Of course, if you use renewable energy and have a battery, then the equation shifts again. But the cost of that equipment will impact your business model.
Different coins require different types of computing power. For example, it's hard to mine the highly-competitive bitcoin with anything except specialised ASIC mining gear, or a horde of powerful GPUs (Graphics Processing Units), as those processors are more efficient than general purpose processors. As a result demand for GPUs has increased globally resulting in both scarcity of supply and higher prices.
On the other hand, other cryptocurrencies like Monero can be mined using fewer and less-powerful regular GPUs so more people can get into mining it without any specialised equipment. This is why it's the coin of choice for many types of cryptojacking malware.
Other coins are less competitive still. Ravencoin, for example, is collecting a following of everyday miners who like it for its unique algorithm and lack of high-powered competition.
Bringing it together
The question of whether it's worth mining bitcoin, or any other cryptocurrency, is challenging. While the purchase and amortisation of hardware are fixed, and energy prices are stable, the fluctuating market prices for crypto-coins remains a wild card.
Based on today's values, mining bitcoin looks like a marginal proposition. But other coins may be a better proposition. If you already have a regular PC sitting idle some of the time, then using it to mine coins at times when the prices are higher and your energy costs are lower could be worthwhile.
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