A Quick Look at Bitcoin Mining Calculators & How Helpful They Are
How do you figure out Bitcoin’s mining profitability? You do that with a bitcoin mining calculator of course.
They’ve been jokingly referred to as “unprofitability calculators” because they don’t reflect an accurate potential yield of a bitcoin mining operation. Nevertheless, they’ve been frequently used to get a fairly close estimate.
With that said, it’s worth taking a look at how a bitcoin mining calculator works, along with its strengths and weaknesses.
A Look At Bitcoin Mining Calculators
As was mentioned above, bitcoin mining calculators generally serve the function of determining the profitability or number of coins that specific bitcoin mining hardware can generate.
Essentially, they help miners figure out whether it’s worth it or not to start an operation based on the hardware at their disposal.
For these calculators to work, they tend to factor in a few variables to produce their numbers.
What Bitcoin Mining Calculators Calculate
Hashing power – This refers to the hash and hash function, which ultimately relates to the speed at which a computer completes an operation using the Bitcoin code. With that said, a higher hash rate is better for mining since it increases your chances of finding the next block.
Power consumption – A mining calculator will also examine how much electricity a specific piece of hardware is using in relation to its other functions.
Cost per KWh ($) – A third element a bitcoin mining calculator will factor in is the cost per kilowatt hour, the unit of measurement used to determine the cost of electricity.
Pool fee (%) – For those mining in a pool, a fee is added and bitcoin mining calculators will factor this cost in as well. Pool fees are typically 0-4%.
These are the four main components that the typical bitcoin mining calculator examines. There are other calculators out there that calculate other things such as hardware costs and pool difficulty, depending on which one the miner chooses.
The Problem With a Bitcoin Mining Calculator
Reliability. A bitcoin mining calculator can offer anything else but that. Although they do calculate the basic factors which determine bitcoin’s value, a calculator has no ability to know the future. And while that may seem like a redundant point, it’s important to remember that cryptocurrencies are volatile and change dramatically in the future (whether that means, next year, next month, or tomorrow).
A bitcoin mining calculator simply can’t tell you what the cost of bitcoin will be tomorrow, neither can it tell you what the network hashrate or mining difficulty will be. And those two factors have major impacts on the value of bitcoin.
For that reason, a mining calculator, although not useless, has significant limitations in presenting the true profitability of a bitcoin mining operation.
To say that a bitcoin mining calculator is completely useless because of its flaws wouldn’t be fair for us to say. While it’s true to err on the side of caution, it’s worth remembering that having one on hand is better than trying to guess or assume that an operation is profitable or not. Sure, it won’t give you a 100% picture perfect answer, but then again, is there anything in the cryptocurrency space that’s guaranteed?