I have been mining Litecoins for a couple of weeks now. In the meantime I have experimented with overclocking my GPU card, learning more about the protocols used for mining and reading sites and visiting (Bit)coin related sites. One of the things which I try to figure out is, is it worthwhile to mine?
Although there are sites which look into cryptocurrency from an investment point of view (more on that later), I am currently just interested to see if I can even get a Return On Investment (ROI). The ROI for mining is determined by multiple factors. First are the costs, which boil down to:
- The initial investment in equipment.
- The operation costs.
And then you have the earnings, which are the number of mined coins.
One problem with the costs and earnings is that they are not in the same currency which leads to an extra dependency, the exchange rate. Because of this exchange rate, the term investment becomes more important and this leads to a more complex situation. However, as I said before, for now, I will try to just see if I can get my investment back.
For my mining setup I use a server which is already constantly running on Linux. I bought a second hand Club3D Radean 5850 graphics card for 60 euros, which for experimenting I thought was alright (every hobby costs some money, if I ‘loose’ 60 euros I will still survive!).
Although I have a power consumption meter connected to this setup, I do not take into account the total power consumption as the system is not only used for mining. Through the power consumption meter I am however able to determine more or less what the consumption of the GPU is, which for me is around 130W.
I have been mining for 17 days and 5 hours which resulted in 5.00632037 Ltc, which are my earnings.
During this period I calculate the system used 56.817475 kWh of power. Now comes a tricky part, as I live in the Netherlands and from what I see on the Internet for calculations, we have a very high energy price. For me the price more or less boils down to 0.18981 euros (a lot more than the 0.15 dollar I see on a lot of sites).
If you calculate the power costs it becomes: € 10,78
Now comes the most difficult part. To calculate my profit or loss I have to somehow compare my earnings in Litecoin with my costs in Euros. This involves the exchange rate between these two currencies. However, I can also turn things around and calculate what I minimally need to at least cover my operational costs. This leads to:
5 Litecoins / € 10,78 ≈ € 2,15
Currently the exchange rate fluctuates a lot between aprox. € 1.90 and € 2.50, so if I can sell my Litecoins for the 1.90 I definitely loose money, if I am able to sell for 2.50, I have a ‘profit’ of 2.50 – 2.15 = 0.35 euros per Litecoin!
But…wait a minute, I also spend € 60,00 euro’s on my GPU. If I think my GPU will become worthless in the future, I need to earn enough to cover for the 60 euro’s. So in order to have a return on my total investment, I need:
- € 60.00 / 0.35 €/Ltc ≈ 171,50 Ltc
- At least an exchange rate of 2.50 €/Ltc
So if I look at the route I took to mine LTC, it will take me (171,50 Ltc / 5 Ltc ) * 17 days and 5 hours ≈ 590 days to get a ROI on my current setup (not even making a profit). Although I will continue to mine for now, currently I can only consider this a hobby (which costs money). Unfortunately my Lamboghini will have to wait in the showroom (for now)!
Now someone could say that you might expect the exchange rate of Ltc to rise more in the future (related to the euro/dollar/etc). However, if you think like that, you are stepping into the world of investments where you ‘gamble’ on a certain future value. For those readers I suggest you read a very interesting article written by Bjørn Furuknap: