We started mining cryptocurrency again – Here’s how much we are making

Thanks to the gains in the Bitcoin price over the past several months, it has once again become popular to mine cryptocurrencies using graphics cards.

Like in the cryptocurrency bull run of 2017, this has contributed to a global shortage in high-end graphics hardware.

It has also caused the price of second-hand graphics cards to skyrocket.

Where you would have only got R5,000–R6,000 for an Nvidia GTX 1080-based graphics card a few months ago, they now fetch R8000 or more on classifieds platforms like Carbonite.co.za.

During the Ethereum mining craze four years ago, we bought some mining rigs to see what all the fuss was about (and perhaps retire early).

We switched off our mining rigs when the cost of the electricity they consumed exceeded the value of the cryptocurrency we were mining.

However, we hadn’t got around to selling all of our graphics cards yet, and when Bitcoin broke through $50,000 (and most recently, through $60,000) we couldn’t help but wonder if dreams of crypto riches were still within our grasp.

RX 580 4GB mining rig – Ravencoin

AMD-based RX470, 480, 570, and 580 cards were all the rage back in 2017 as the most cost-effective options for getting into Ethereum mining.

Nowadays these cards are all but useless for mining Ethereum, unless you happened to buy versions with more than 4GB of video memory.

This is because the size of Ethereum’s blockchain (called a directed acyclic graph, or DAG) grew larger than 4GB in December 2020.

Some clever tricks from mining software developers allowed graphics cards with 4GB of memory to continue mining Ethereum with reasonable efficiency for a few more months after that, but with the DAG now sitting at over 4.1GB these cards’ days of mining Ethereum are officially over.

Enter Ravencoin, which has seen its price surge in February from around 50 satoshis (R0.45/RVN) to over 300 satoshis (R2.70/RVN) and given our old mining rig a new lease on life.

The table below shows the estimated earnings of our five remaining RX 580 graphics cards, using Nanopool and its Nanominer software on Ubuntu 20.04.

Without any optimisations, the graphics cards consume between 650W and 700W of power, which is expected to add around R1,200 to our electricity bill every month.

At an electricity tariff of R2.3406 per kilowatt-hour, our old mining rig is estimated to make a profit of just over R900 per month, so long as we can sell our mining rewards for over R2.68 per Ravencoin.

GTX 1080 mining rig – Ethereum

Amidst the 2017 Ethereum mining craze, there were some graphics cards you could still find at reasonable prices and in reasonable numbers, like the Nvidia-based GTX 1080 and 1080 Ti cards.

This was because mining software had not yet been updated to properly use GDDR5X memory and mining Ethereum on GTX 1080-series cards was significantly slower than on cheaper hardware.

In 2018, tweaks for graphics cards with GDDR5X memory started appearing online.

By then the price of cryptocurrencies had already come crashing down after reaching historical highs that January, making mining Ethereum far less attractive.

Today, with Ethereum at an all-time-high, our GTX 1080-based mining rig is printing money even though we had already sold two of its graphics cards.

The table below shows the estimated earnings of our four remaining GTX 1080 graphics cards, using Nanopool and mining software called T-Rex on Ubuntu 20.04.

With a few minor power optimisations, the cards draw an average of 475W. Over the course of a month, we expect the rig to cost us around R827 in electricity.

Should you start mining cryptocurrency?

With the caveat that this article is not financial advice, buying expensive graphics cards to mine cryptocurrency in South Africa is not recommended.

More often than not, you are better off simply buying cryptocurrencies from an exchange with the money you would have spent on a mining rig.

On top of that, mining rigs are hot, noisy, and must be monitored and maintained constantly.

For instance, the power supply fan in our RX 580 rig seized up and caused the power supply to overheat and burn out.

Besides the unpleasant smell of burnt plastic that lingered for hours, replacing it will cost at least R2,300. Since our RX 580 rig is mining Ravencoin, which is much less profitable than Ethereum, the new power supply will cost more than two-and-a-half months’ profits.

While the profits from mining Ethereum on our GTX 1080 rig might look enticing, there are a few things you should consider before deciding whether or not to invest in a miner of your own.

Firstly, our rig is essentially paid off. If you buy new graphics cards now you will still have to make back your initial investment, which will be high thanks to the current graphics card shortage.

During the last cryptocurrency bull run, new miners failed to take the rapidly increasing Ethereum mining difficulty into account when making their return-on-investment calculations.

Something else to keep in mind is that the reason Ethereum mining is so profitable right now is because of the exorbitant transaction fees being charged and the high exchange rate.

If the price of Ethereum keeps going up, then so will your profits. However, if something causes the price to take a tumble, then you’re in trouble.

As for the high transaction fees – the Ethereum developers already have an update called EIP-1559 set to take effect in July 2021 which aims to make a significant change to how transaction fees are handled.

EIP-1559 is intended to make fees on the Ethereum network more predictable and help people to avoid overpaying on transactions.

Under EIP-1559 a fixed portion of transaction fees will also be “burned”, reducing the overall supply of Ether tokens in circulation. This, the argument goes, will make Ether a deflationary cryptocurrency, like Bitcoin, and cause its price to increase.

However, many miners remain convinced that they would have been negatively impacted by EIP-1559 and aimed to stage a protest on 1 April.

In the meantime, a proposal has been made to counteract the effects of EIP-1559 and the call among Ethereum miners to give a “show of force” has been repealed.

Before investing in a mining rig, also keep in mind that all of this infighting will eventually be rendered moot, as the transition is already underway to migrate Ethereum within the next two years from a Proof-of-Work system (i.e. mining) to Proof-of-Stake, also known as Ethereum 2.0.

At that point, miners will either need to find another profitable coin to mine or sell all of the graphics cards they have amassed.

Now read: South African crypto exchanges move headquarters overseas due to uncertainty over government regulation