Individuals who mine bitcoin are rare in France. The reason: rising electricity costs and fierce competition between professionals in the sector. However, it is still possible to make money from cryptocurrency mining.
In the early 2010s, when bitcoin was still unknown to the general public, anyone could mine bitcoin from his garage using a simple graphics card, remembers Julien Gourlet, founder of Ilium, a French mining platform. Today, the sector is becoming more professional. But it is still possible for an individual to generate income through mining. Provided you optimize the profitability of your operation.
To fully understand what we are talking about, some cryptocurrencies such as bitcoin work thanks to the proof of work (Proof of Work), a mechanism that consists of securing blockchain transactions by using miners. In concrete terms, the latter mobilize computing power to try to solve cryptographic equations. When a miner manages to solve an equation, he obtains the right to validate a new block, and he receives a reward.
In the case of bitcoin, the reward is currently 6.25 bitcoin per minimum block, i.e. approximately 125,000 euros. These earnings prospects have encouraged many players to mine cryptocurrencies. But in reality, mining is not always a profitable activity.
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7 cents per kWh
The profitability of miners depends on several factors. Starting with the electricity price. Because mining is a very energy-intensive activity. A recent study showed that a single bitcoin transaction consumes approximately 2165 kWh of electricity. That’s as much as an average household in the United States would use in 74 days, says Jonathan Merry, CEO of CryptoMonday. According to him, about 75% income from the miners would be used to cover their energy costs.
For a professional mining project to be profitable, it is generally necessary to aim for a cost of electricity lower than 7 cents per kWh. However, it is difficult to reach this level in France, where the average price of 1 kWh is around 17 cents right now, explains Julien Gourlet. Result? French miners often prefer to put their suitcases in countries where electricity is cheap, such as Iceland, Kazakhstan or the United States. To lower the bill, many also turn togreen energy, which costs them less than carbon energy. In July 2021, 56% of mining activities used renewable energy, according to estimates by the Bitcoin Mining Council. Biglock Datacenter, a French mining company, consumes 95% green electricity.
Another method of the miners to reduce the cost of energy: some of them buy back the excess energy producers at preferential rates. Without being able to store it, this energy would be lost, indicates Julien Gourlet, for whom the miners knew find their place in the energy production chain in recent years, far from the image of compulsive consumers of energy that we often attribute to them.
However, if you are an individual, it is often difficult to find sufficiently affordable energy sources to ensure the profitability of your mining project. The easiest option then is often to turn to companies like Start Mining or Gwensas. For a commission of 10 15%these actors offer to host your machine in one of their mining farms, often located abroad. Thus, you have access to low-cost electricity, and you do not have to worry about the maintenance of your machine.
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Choice of material
The more computing power you have, the more likely you are to solve the equations (and win the reward). This is why the choice of the machine with which you are going to mine is decisive. Most bitcoin miners use processors specifically designed for this: Asics (for Application-specific integrated circuit).
A mining machine can be obtained from 1500 euros, believes Julien Gourlet. But that price can quickly climb more than 8000 euros for the most efficient machines. Overall, the more powerful a machine is and the less electricity it consumes, the more expensive it is likely to be, summarizes the specialist. What must be looked at first and foremost is theenergy efficiency of your machine, i.e. the ratio between its computing power (or hashrate) and its energy consumption.
Another option: the cloud mining, a practice of renting computing power for a fixed period of time to mine cryptocurrency without investing in your own hardware. However, the practice is not without risks. Cloud mining contracts typically commit you to several months. If during this time, the price of the crypto you have chosen to mine collapses, you risk losing money, warns Julien Gourlet.
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Profitability of miners
According to some suppliers, it takes between 13 and 15 months to amortize the cost of a mining machine. However, this figure is given for information only, and depends in particular on the price of energy, the price of the cryptocurrency you wish to mine, as well as the mining difficultythat is, the level of competition between miners.
To amortize in the space of two years a machine of 100 terahash/second bought $9000 and able to mine on average 0.008321 Bitcoin per month, with electricity $0.05 per kWh, the bitcoin price would have to reach $45,000estimated for example BFM Crypto in a recent article. For the moment, we are far from it: the queen of cryptocurrencies currently revolves around 20000 euros.
The cost of mining machines is also strongly correlated with that of cryptocurrencies. And for good reason: when the price of bitcoin falls, the profitability of miners follows. At the end of 2021, miners could hope to win $85 per terahash/second, versus $35 today, more than twice as much.
Result: some decide to resell their machines, for lack of being able to generate sufficient profitability. During the recent bitcoin plunge, the 01.net platform, for example, noted a drop in -21% on the price of graphics cards Used AMD or Nvidia. The same phenomenon was observed in 2018, when the price of bitcoin collapsed in the space of a few weeks.
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Mine multiple
Another point to consider: if you are mining alone, it may take several weeks, months or even years before you manage to mine your first block. Because you will be competing with many miners. To circumvent this difficulty, several minors decide to join together through mining pools.
Concretely, the members of a mining pool aggregate their computing power to increase their chances of mining blocks. The profits generated are then redistributed between the members of the pool in proportion to the computing power provided by each of them. Thus, you are paid every day, or every week if you are really a small miner.
Joining a mining pool is very easy. All you have to do is install software and select the pool of your choice based on criteria such as profitability, proximity and stability. The mining pool usually takes 1 3% service charges, but in return these structures give you better visibility of your income, explains Julien Gourlet.
Whether you decide to go solo or via a mining pool, before investing in a project, take the time to find out about the risks associated with this activity. You can also simulate profitability your operation using sites like Cryptocompare.
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