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- Josh Metnick says the demand he’s seeing for crypto mining and hosting is outpacing supply.
- And when it comes to ether mining, the amount of profit varies substantially based on the machine.
- He breaks down the variables and risks that need to be considered when investing in ether miners.
In May, a bill in New York sought to halt bitcoin mining for three years until the state assessed its environmental impact. In June, China banned mining operations in key locations.
But even amid government pushback, crypto mining is thriving. It remains essential to the growing crypto ecosystem because in practice, miners’ computers compete to solve mathematical equations that help verify digital currency transactions and update shared ledgers known as blockchains.
Blockchain’s decentralized technology means miners can simply take their business elsewhere. Josh Metnick, the CEO of Navier, operates seven crypto mining facilities across the US and Canada, and says the equipment moving in from China means demand is outstripping supply. To illustrate this, he said that just a few months ago, he charged about $.04 per kilowatt hour per miner. That rate has increased to $.075.
As the world moves to build more applications on blockchains, miners will continue to be a key part of the sector. Globally, the mining hardware market by product (ASIC and GPU) is expected to grow by $2.80 billion at a compounded annual growth rate of over 7% from 2020-2024, according to a report by Technavio.
Metnick’s career in crypto mining was unplanned. He began dabbling in bitcoin mining in 2013 by setting up a rig in his own apartment. The more he learned, the more he began helping others until word of mouth grew and he gradually began hosting miners.
Potential earnings from various miners
His facilities are agnostic, meaning they can host all types of crypto mining rigs. And although profit margins are a moving target, some machines and cryptos are more profitable than others at varying times. For example, the website WhatToMine.com estimates that a bitcoin Antminer S19 earns about 0.3204 bitcoin a year. At a price of $46,336 on Friday, the earnings were equivalent to $1,237 a month. Meanwhile, ethereum’s Innosilicon A10 earns around .3746 ether a month; at $3,220, that was equivalent to $1,206.41.
These earnings must then factor in costs that include the price of the miner and electricity, both of which vary. Ether, being the second-largest crypto by market cap, is a popular one to mine.
Below is a breakdown of four ethereum miners, their estimated monthly crypto rewards, and their estimated revenues based on calculations from WhatToMine.com. The electricity cost is based on the average US residential kilowatt-per-hour rate of $0.14 in May, and fiat profits are based on ether’s trading price of about $3,220.83, as of August 13.
What to know when getting started
Residential rates can be substantially higher than commercial. That’s why many choose to have their rigs hosted at a facility like Metnick’s, which has contracts that range anywhere between $.055/kwh to $.075/kwh. The machine of choice is shipped directly to a hosting facility where it is set up by the company.
This would mean the Bitmain E9’s electricity costs, for example, would be reduced to $138.02, the A11 Pro to $135.00, the A10 pro+ to $70.20, and the A10 Pro to $51.30.
The Bitmain E9’s yields are much higher than the A10, but the former retails anywhere between $20,000 to $30,000, while the latter starts at around $7,300. While the initial investment is steep, some investors compare it to buying real estate and earning passive income, except the rents are collected in ether and the property is much cheaper.
Metnick adds that it’s important to get the right miner at the right time. Purchasing a machine that’s too outdated may render its capabilities obsolete, or the machine may be too out of date to mine efficiently enough to earn profits. The price of the machine relative to its output usually equalizes the profit margin for each device.
“When more powerful machines come out of the network, it compresses the availability of point output for the less efficient machines,” Metnick said. “There’s a finite supply for a period of time. So when more powerful machines enter the network, they push down the production on the less efficient machines.”
Owners can also resell their machines — and there’s a big market for that, Metnick says. Sometimes the machines can be sold at a higher rate than purchased if there’s a lack of supply. All this requires an understanding of the chips and type of technology that goes into mining.
But if someone is buying a used machine, they have to be careful and do their research.
“You get what you pay for in this space. One might think that it’s a less expensive machine, and it’s a more reasonable entry point, but it actually might be a riskier position because that machine can easily become outdated,” Metnick said.
Metnick and his team built a service called HashTest, which is essentially similar to an internet speed test. The platform can remotely link to a miner and determine how efficient the machine is before purchasing it. You can also use it to check the performance of your current miner. You would need to have access to the miner in order to connect it to the application. A potential buyer would need to ask the seller to run the test.
The last thing potential ether miners need to keep in mind is how future updates to ethereum’s blockchain may impact their profits. The platform has plans to transition from proof-of-work to proof-of-stake, and the outcome it will have on mining rigs isn’t yet clear.
The unknown variables kept Metnick from purchasing more ether miners for himself a few years ago, something he admits he now regrets due to the profitable returns ether miners are racking in, as well as the increase of ether’s price. It has jumped more than sevenfold over the past year.
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