Retail bitcoin mining stages comeback amid AI boom, though profitability remains tough - CoinDesk

In the early days of bitcoin in 2009, individuals could mine the cryptocurrency using ordinary home computers, earning rewards for processing transactions on the proof-of-work network. Some early miners accumulated thousands of coins before specialized mining rigs pushed hobbyists out of the market.

Nearly two decades later, companies are trying to bring individuals back, offering ways to earn BTC without buying and operating expensive machines at home. But making a profit remains difficult, even as some of the largest industrial miners exit the business to focus on artificial intelligence (AI) data centers in search of better returns.

Industrial Shift

In the intervening years, mining developed into a business dominated by companies running thousands of machines in specialized data farms with sophisticated rigs, specialized cooling systems and tailored power-supply deals. For individuals, services such as GoMining, KuMining and Sazmining now offer access to the same professional environment.

Now, the larger bitcoin mining firms are shifting toward AI computing, renting computing power to technology firms rather than relying solely on bitcoin mining rewards, prompting speculation that any resulting drop in bitcoin computing power might make the activity more profitable.

That depends, however, on whether mining equipment actually leaves the network or is simply redeployed. The hashrate, a measure of the total computing power on the blockchain, was recently around 1.09 zetahash per second, little changed from about 1.13 ZH/s a year ago, according to data from Hashrate Index. It has been rising for two months.

Profitability Challenges

Mining remains competitive and will become less profitable in about 18 months, when the BTC awarded from mining a bitcoin block is cut by 50%. Still, it may be cheaper to acquire the coins than buying them at current prices, according to Nick Perchey, Sazmining's director of revenue.

Earlier this month, Sazmining, founded in 2018, began selling mining boards developed by Jack Dorsey's Block (XYZ). Each board costs $4,187. Electricity and maintenance cost another $153 a month, plus a management fee of 15% of the bitcoin mined. The company has received nearly 50 orders, with about half coming from first-time miners, Perchey said.

The company, which says it has nearly 500 customers who own about 4,000 mining rigs, projects the bitcoin they produce will be at least 20% cheaper than buying it on an exchange over the equipment's minimum three-year useful life.

Based on Sazmining's estimate of 0.035 BTC in annual production per board, at a bitcoin price of $83,000, gross revenue would be about $2,905 a year. After $1,836 in annual running costs and the 15% management fee, roughly $633 would remain toward covering the initial equipment cost. At that rate, it would take more than six years to completely recoup the outlay, assuming bitcoin's price, mining output and costs remain unchanged. The next halving, which cuts the reward to 1.5625 BTC, will extend that timeline.

Realistic Expectations

Jolie Du, chief operating officer of KuMining, offered another example. She estimated that an S23 XP Hyd machine would take 23 months to pay for itself with free electricity, or 29 months with power costing 4 cents per kilowatt-hour, before other expenses.