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Receive BitcoinsNumerous ASIC Scrypt Miners have already been purchased and their shipping dates are fast appropriating, but are these powerful mining machines worth their cost?

By now there’s a good chance you’ve already looked at purchasing yourself one or two asic scrypt miners to replace your CPU or GPU mining rig. If you haven’t you can learn more about them here. They’re less expensive, don’t take up near as much space and won’t send your power bill through the roof, but is it profitable?

[divider]CCN[/divider]

With the expected increase in difficulty for many of the altcoins out there, can you realistically expect any return on investment or will you end up with an expensive paperweight? Are you better off purchasing altcoins rather than mining them? What does Litecoins stagnating price yet increase in difficulty mean for miners? There are several questions you should ask yourself before purchasing your asic miner.

  1. How many coins do I expect to mine before my rigs become obsolete?
  2. Can I purchase the same amount of coins I expect to mine with the money I otherwise would have spent on purchasing the rigs?
  3. What if the difficult increases at a much higher than predicted rate?
  4. What if the value of the altcoin(s) you’ve chosen to mine goes down?
  5. What if their value goes up?

The first two questions are easy to calculate. Using a mining calculators – this one. CCN interviewed the co-founder of CoinFinance.com, a website that has useful features including a mining calculator and currency converter. If you plan on using a multipool you can expect slightly better numbers, but this is still a good place to being. Using these tools you should be able to calculate the amount of coins you expect to mine, and if you can expect a positive ROI.


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Assume you have $20,000 to invest in an asic scrypt miner and here are your specs.

  • 1.2 Gh/s mining power
  • 5.4Kwh power consumption
  • Energy cost of $0.11 a Kwh
  • 1.5% Pool Fee
  • Free rent and internet
  • Stable power and internet – no down days
  • You are mining Litecoin exclusively

What are some of the variables you should consider?

  • Where will be the difficulty level by the time your miner arrives?
  • What rate can I expect the difficulty to increase at based of previous increases data and what happened to Bitcoin’s difficulty when asic mining started?
  • What might be the value of Litecoin by the time I’m ready to sell?

chartgoWhile you can’t know the answer to these questions, that doesn’t mean we can’t make some educated guesses and calculate estimated ROIs in several different scenarios. Using excel combined with a mining calculator I was able to produce these projections.

If you haven’t turned a profit in four months, there is little chance you are ever going to. Setting the difficulty at 21772 gives time for your asic to be shipped, arrived and set up as many asics are still only preorders with promised shipping dates.

Looking at this chart, we can see that the mining difficulty will greatly determine how many coins you are able to mine, and so the question of ROI is that of difficulty increment and Litecoins value.

chartgoroi

In short, the graph confirms what we already know, but gives us some numbers to work.

  • If difficulty increases at a fast rate, you will need to see a large jump in the coins value to get a positive ROI
  • If the coin difficulty stays low but the price does so also, you can expect a small ROI
  • A jump in price and slow climb in difficulty would produce a high ROI and the reverse would produce negative ROI.

What can possible miners hope for then? Can you make money mining? Looking back on history, we can see that when asic mining came out for Bitcoin, there was a huge leap in the difficulty for awhile before leveling back out. The truth of the matter is that the difficulty can double, but it takes an equal amount of hasing power to be added for this to happen.

It would take double the hasing power to increase for the difficulty to increase by double. The current network hash rate for Litecoin is 400,792 MH/s, or 400.792Gh/s and the entire scrypt base network hash rate is 1.573+ Th/s as of June 29th, 2014. A miner with 1.2G/h mining power would only represent a .0029% increase in difficulty for Litecoin, but a hundred of these units would be nearly a 30% increase in hashing power and a thousand of them would be near 300% increase.

chartgohasrate

It’s not crazy to think the entire network hashrate will double, and with multipools we can expect to see this hash rate divided among the most popular coins, with Litecoin taking a large portion of this – right now Litecoin makes up 25.477% of the total network hashrate.

Yes, you can turn a profit, but with the imminent increase in difficulty, your profit is more than likely too small to make the risk worth it. At the current rate of Litecoin ($8.83USD) you could purchase 2265 coins with $20,000. That’s more than you’d expect to mine if the difficulty increased at a rate of 9% or even 8%.

But let’s not forget mining is one of the best way to be apart of the system and that it is what keeps cryptocurrency decentralized and working. The best thing for investors is a mix of proof-of-work and proof-of-stake investing. In the end, you have to ask yourself two question. How much faith do you have in cryptocurrency and how risk adverse are you?


Carter Graydon is not promoting nor invested in any ASIC Mining companies nor cryptocurrencies mentioned. Information provided in this article is not intended to constitute an invitation or an inducement to engage in any investment activity .

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Posted by Carter Graydon

A UNC Chapel Hill graduate, blockchain enthusiast and analyst. I have a background in programming and IT, strong studies in econ, stats and game theory. Currently working as a Social Media Director and pursuing my MS in Online Marketing - busy!