If you’re planning to get involved in cryptocurrency mining, it’s crucial to work out how profitable your operation could be. There are several variables, but one of the most important is your mining hardware’s hash rate.
By ensuring you have a good knowledge of hash rates and use a hash rate calculator, you’ll be in a strong position to make good decisions about your mining business or hobby.
What is hash rate?
Hash rate is the speed at which a cryptocurrency mining machine operates – it’s essentially a measure of the miner’s performance. Hash rate is usually measured in hashes per second, and the higher the hash rate is, the faster your mining hardware can mine crypto.
Let’s imagine a machine has a hash rate of 55 hashes per second. This means it will make 55 “guesses” per second when it is trying to solve a block on the Bitcoin network.
Why is hash rate important?
Since a higher hash rate means a miner can mine crypto faster, it also increases your chances of receiving block rewards. Currently, the Bitcoin block reward is 12.5 Bitcoins per block, although it is due to fall to 6.25 in 2020. It halves roughly every four years to try to ensure Bitcoin doesn’t suffer from intense inflation.
However, hash rate isn’t the be-all and end-all when determining how profitable mining can be. You also need to think about how much power your mining equipment consumes. If you take your miner’s hash rate and divide it by its power consumption, this will give you an indication of how efficient it is.
What is a hash rate calculator?
A simple way of determining how profitable your mining operation could be is to use a hash rate calculator. Also known as a mining profitability calculator, it enables you to enter information on your mining hardware’s hash rate, how much power it consumes, the cost of your electricity, and any mining pool fees you pay. Other information is entered automatically, including the current Bitcoin difficulty, Bitcoin block reward, and Bitcoin price.
The hash rate calculator will then show your estimated expected crypto earnings. This could be on an hourly, daily, weekly, or yearly basis. Some calculators show how many days it will take you to break even.
Is cryptocurrency mining profitable?
There are a lot of variables to consider when determining whether crypto mining is for you – and that’s the beauty of a hash rate calculator. You can change the parameters to simulate potential future scenarios – perhaps you expect the price of Bitcoin to increase, or you’re planning to change to a cheaper electricity supplier.
Bitcoin mining in particular could prove to be more of a headache than it’s worth. In the past few years, people have started mining Bitcoin on an almost industrial-sized scale, and this makes it difficult for small or hobbyist miners to compete. It tends to be the case that only those with specialised, high-powered machinery can mine Bitcoin profitably.
However, you can increase your odds of solving a block by joining together with other miners in a pool. Whenever a block is solved, pools reward individual miners according to their contributed hash rate.
Other considerations
The price of Bitcoin is extremely volatile, and if it drops significantly, this will reduce your profitability. Likewise, mining difficulty can also change, and this will have an impact on the overall network’s hash rate in the future.
A lot of calculators don’t take into account your upfront set-up costs, such as the cost of the mining hardware and cooling fans. For Bitcoin mining in particular, it could take months or years to break even.
Nevertheless, by using a hash rate calculator, you can go into cryptocurrency mining with a pretty strong understanding of how much you could earn from your venture.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.