Initially, mining was the first obvious method to profit from cryptocurrencies, apart from speculation. A mere decade ago, the number of blockchains suitable for mining was just a handful, around 3-5, but now their number has soared into the hundreds. We've delved deep to bring you the 5 most current and promising mining options.
Cryptocurrency mining involves verifying blockchain transactions by solving complex cryptographic puzzles. Miners compete to find the correct combination first, ensuring the network's consensus for adding new blocks. Successful miners (those who first crack the puzzle) earn rewards in the form of new coins.
Despite a decline in mining profitability, new miners keep entering the PoW blockchain space.
The reward for mining halves every 210,000 blocks in an event known as a "halving," occurring roughly every four years. The upcoming halving in April 2024 will further reduce the mining reward to 3.125 BTC per block.
As of January 2024, the average cost to mine one Bitcoin, accounting for electricity and other expenses, hovers around $46,291. The most cost-effective countries for Bitcoin mining include Lebanon, Iran, and Syria, part of the Asian region. To illustrate, the cost of mining one Bitcoin in Lebanon is $266, in stark contrast to $10,700 in Ukraine.
While it's possible to mine solo, the odds of successfully mining blocks are significantly lower compared to pool mining. Sharing computational power with thousands of other miners in a pool to earn a proportional part of the pool's rewards is generally more efficient and profitable.
In contrast to Bitcoin's 10-minute block mining time, Litecoin only takes 2.5 minutes. Additionally, while Bitcoin employs the SHA-256 hash function, Litecoin uses Scrypt, which is simpler and less demanding in terms of computational power.
Mining difficulty, which escalates as more miners join the network, is measured in H/s (hashes per second) and helps estimate the probability of mining success. As of January 2024, Litecoin's hash rate is at 898.30 TH/s.
Given that Litecoin won't experience a halving for the next three years, as opposed to Bitcoin's imminent halving, mining LTC could prove to be more profitable than BTC. Bitcoin's value is expected to rise following its halving event, which might also positively influence Litecoin's price.
Although Zcash operates on the PoW consensus algorithm similar to Bitcoin, it differentiates itself by employing the Equihash hashing function instead of Bitcoin's SHA-256. Additionally, while Bitcoin measures hash rate in H/s (hashes per second), Zcash uses Sols/s (Solutions per second) as its unit of measurement.
Let's analyze the profitability of mining Zcash with these parameters:
Assuming the use of a single ASIC device, the calculated monthly profit is approximately $25.07.
Unlike Bitcoin and Litecoin's halving model, ETC's block reward decreases by 20% every 5 million blocks. As of January 2024, the mining reward per block is 2.56 ETC, with the next reduction to 2.048 ETC expected around February 19, 2024.
Following Ethereum's shift to Proof-of-Stake (The Merge), some ETH validators switched to mining ETC, increasing its network hash rate and the difficulty of mining a block.
Using the PoW consensus algorithm and Scrypt hash function, DOGE allows for the use of the same ASICs as Litecoin for mining.
The time to mine a single block is one minute, with a difficulty of 16.04 M and a reward of 10,000 DOGE per mined block.
Despite a decline in mining profitability, new miners keep entering the PoW blockchain space.
Bitcoin Mining Profitability from 2015 to 2024. Source: statista.com
Coinmarketcap data shows there are 182 Proof-of-Work-based blockchains. Mining most of these is more likely to be loss-making rather than profitable. Nevertheless, certain cryptocurrencies offer potentially profitable mining opportunities for long-term gains.
Bitcoin (BTC)
Bitcoin stands as the original and primary cryptocurrency, operating on the Proof-of-Work consensus algorithm. Since its inception in 2009, mining rewards have diminished from 50 BTC to the current 6.25 BTC, yet mining Bitcoin remains a lucrative activity.
The reward for mining halves every 210,000 blocks in an event known as a "halving," occurring roughly every four years. The upcoming halving in April 2024 will further reduce the mining reward to 3.125 BTC per block.
As of January 2024, the average cost to mine one Bitcoin, accounting for electricity and other expenses, hovers around $46,291. The most cost-effective countries for Bitcoin mining include Lebanon, Iran, and Syria, part of the Asian region. To illustrate, the cost of mining one Bitcoin in Lebanon is $266, in stark contrast to $10,700 in Ukraine.
Cost of mining one Bitcoin across various countries. Source: coingecko.com
To start a mining setup, one would typically follow these four steps:
- Purchase specialized mining equipment (ASICs), like the Bitmain Antminer S19j Pro.
- Set up a Bitcoin wallet.
- Install mining software such as BFGMiner, CGMiner, or EasyMiner.
- Join a mining pool, for example, Slush Pool, Antpool, or BTC.com.
While it's possible to mine solo, the odds of successfully mining blocks are significantly lower compared to pool mining. Sharing computational power with thousands of other miners in a pool to earn a proportional part of the pool's rewards is generally more efficient and profitable.
Litecoin (LTC)
Being a fork of Bitcoin, Litecoin operates almost identically to its parent network, with modifications in token supply, block creation speed, mining complexity, etc.
In contrast to Bitcoin's 10-minute block mining time, Litecoin only takes 2.5 minutes. Additionally, while Bitcoin employs the SHA-256 hash function, Litecoin uses Scrypt, which is simpler and less demanding in terms of computational power.
Mining difficulty, which escalates as more miners join the network, is measured in H/s (hashes per second) and helps estimate the probability of mining success. As of January 2024, Litecoin's hash rate is at 898.30 TH/s.
Litecoin hash rate from 2017 to 2024. Source: coinwarz.com
Litecoin's halving, which occurs every 840,000 blocks (about every four years), last occurred in August 2023, reducing the mining reward to 6.25 LTC per block. The next halving is expected in July 2027.
Given that Litecoin won't experience a halving for the next three years, as opposed to Bitcoin's imminent halving, mining LTC could prove to be more profitable than BTC. Bitcoin's value is expected to rise following its halving event, which might also positively influence Litecoin's price.
Zcash (ZEC)
Zcash is one of the early cryptocurrencies to use the zero-knowledge proof technology, zk-SNARK. This feature enables users to execute transactions without disclosing specific details like the sender's address or the transaction amount.
Although Zcash operates on the PoW consensus algorithm similar to Bitcoin, it differentiates itself by employing the Equihash hashing function instead of Bitcoin's SHA-256. Additionally, while Bitcoin measures hash rate in H/s (hashes per second), Zcash uses Sols/s (Solutions per second) as its unit of measurement.
Let's analyze the profitability of mining Zcash with these parameters:
- Mining pool: Viabtc holds 65.6% of the network's hash rate, with a 2% commission.
- ASIC model: Antminer Z15 Pro Zcash 840KSol 2650W.
- Location: Ukraine, where the cost of electricity is $0.07/kWh.
Assuming the use of a single ASIC device, the calculated monthly profit is approximately $25.07.
Zcash Mining Profitability in January 2024. Source: whattomine.com
With the ASIC model priced at $3800, the break-even point for mining Zcash is estimated at 12.6 years, under consistent conditions of ZEC pricing and electricity costs. Note that increasing the number of ASICs could reduce this time frame.
Ethereum Classic (ETC)
Ethereum Classic, born from a 2016 hard fork of Ethereum, is the original blockchain, with Ethereum being the offshoot. This hard fork was prompted by the intention to reverse the DAO hack and return the stolen funds.
Unlike Bitcoin and Litecoin's halving model, ETC's block reward decreases by 20% every 5 million blocks. As of January 2024, the mining reward per block is 2.56 ETC, with the next reduction to 2.048 ETC expected around February 19, 2024.
Following Ethereum's shift to Proof-of-Stake (The Merge), some ETH validators switched to mining ETC, increasing its network hash rate and the difficulty of mining a block.
Mining Difficulty of Ethereum Classic. Source: coinwarz.com
Although the current mining difficulty of ETC is 1.98 P (four times higher than before The Merge), mining ETC is still considered profitable. To begin mining, one would need appropriate software such as GMiner or NBMiner and join a mining pool.
Dogecoin (DOGE)
Dogecoin was originally created in 2013 as a fun alternative to Litecoin, featuring the Shiba Inu meme dog as its mascot. However, the asset gained prominence, partly thanks to Elon Musk's mentions.
Using the PoW consensus algorithm and Scrypt hash function, DOGE allows for the use of the same ASICs as Litecoin for mining.
The time to mine a single block is one minute, with a difficulty of 16.04 M and a reward of 10,000 DOGE per mined block.
Dogecoin Mining Difficulty from 2017 to 2024. Source: coinwarz.com
DOGE is highlighted as a top cryptocurrency for mining, particularly due to the potential rise in its value, spurred by speculations about its use for payments on social media platform X, which might significantly increase the coin's price.
