Mining profitability of Chia illustrated with our miner example

Is Proof of Work Still Profitable?

It all depends on how we look at it and what resources we have. However, let's start with a bit of historical knowledge. In the era of the global energy crisis, electricity prices soared. This had a direct impact on the profits of miners extracting cryptocurrencies based on the Proof of Work algorithm. However, it wasn't the end of the world, as revenues, although smaller, were still noticeable. The problem arose when one of the key players in the market - Ethereum - decided to switch from Proof of Work to Proof of Stake. Then, mining this cryptocurrency with conventional miners became impossible. So, what happened to the miners? Primarily, they were left with expensive equipment, which for Ethereum purposes was useless. Some of them then gave up on PoW cryptocurrencies, putting their miners up for sale. It was then that the market was flooded with a significant number of graphics cards, which were difficult to sell for a reasonable profit. The second group of miners decided to connect their equipment to other blockchains. This, in turn, made mining cryptocurrencies operating on these blockchains more difficult.

It's best to analyze this situation with a specific example. The charts below show how the difficulty of mining the largest cryptocurrencies based on PoW (including ETC, RVN, KAS) increased. The most drastic jump was recorded on September 15, the moment Ethereum switched to the PoS algorithm.

Source: minerstat.com

Source: minerstat.com

Source: minerstat.com

Alternative: Chia, the Cryptocurrency Based on PoST

In light of the above, some miners have come to believe that Proof of Work projects are no longer profitable. Is this correct? Not entirely.

It turns out that mining PoW cryptocurrencies can still be profitable. However, one must make more effort to ensure profitability. First and foremost, it starts with verifying and optimizing the energy efficiency of your miner. We need to ensure that it has the highest possible computing power with the lowest possible power consumption. And then there's electricity. We also need to delve into paperwork and check our current electricity rates. If the tariff in our region is highly unfavorable, it's better to steer clear of Proof of Work. We could alternatively use photovoltaic systems, but here we also need to consider installation costs and the type of contract. Once the basics are in place, we must be vigilant and look out for young, promising projects. Why these specifically? Can't we just mine Bitcoin since it's so valuable?

Indeed, it is. There's just one problem, which we described above - mining difficulty. If we now connect to the BTC blockchain, the chance of mining anything is exceptionally low. The network has grown to such an extent that competing with other miners has become senseless. Instead, we should be on the lookout for new projects and start mining them as soon as possible. The fewer network users, the more of that cryptocurrency we will accumulate. Even if it is worthless at the moment, it can dramatically increase in value in the future. However, these can't be just any projects, but those boasting a high sentiment index. These are the ones most likely to make it big in the future.

In conclusion, mining cryptocurrencies based on Proof of Work can be profitable, provided we meet several conditions regarding costs and the level of electricity consumption. We must also show above-average initiative in continuously observing the market and scouting for promising projects.

Alternative: Chia, the Cryptocurrency Based on PoST

Struggling with tariffs and photovoltaic installation can be burdensome. The same goes for the need to constantly watch the market. For ardent crypto enthusiasts, this might not be such a problem, but for beginners or those with other commitments, it certainly is. However, there is no need to worry, as there is an excellent alternative. It eliminates the need to worry about electricity bills because, unlike Proof of Work projects, its impact on the environment is minimal.

We are talking about the cryptocurrency Chia. It is an eco-friendly project based on the Proof of Space and Time (PoST) algorithm. It somewhat imitates the functionality of PoW blockchains, but instead of power-hungry graphics cards, it uses hard drives for operation. First, they are cheaper and readily available. Secondly, they draw minimal amounts of electricity from the socket. That's just one aspect of this innovative project.

Chia is not just a cryptocurrency. It's also a comprehensive ecosystem offering many practical functionalities. It inherits most of Bitcoin's functions and adds many of its solutions. These include, among others, the Offers mechanism, thanks to which transactions occur between two entities entirely on the blockchain. This has enabled the emergence of numerous decentralized exchanges (DEX) that significantly reduce the level of centralization, thereby positively affecting security. The Clawback system is also noteworthy, preventing mistakes. This mechanism allows the withdrawal of transactions during a predetermined time window. The creators of Chia have also built DataLayer technology, which enables the creation of decentralized databases. This ensures users that the data is reliable, as proof of its existence is on the blockchain.

So who are the creators of Chia? Are they another enigmatic group of programmers like Nakamoto? Far from it! The birth of the Chia cryptocurrency is attributed to the Californian company Chia Network, which brings together specialists from various fields of technology and finance. The company is fully transparent in its operations, thereby directly influencing the community's trust in the project. It's also worth mentioning that Chia Network is currently working on conducting an IPO process. In other words, it plans to go public, thus becoming a public company.

In summary - Chia Network is a project with solid technological foundations, extensive and, most importantly, useful functionality, and a low impact on the environment. It is also admirable that the creator of this revolutionary cryptocurrency is a legally operating company that builds its ecosystem based on its expertise in the industry. Therefore, it's not another Bitcoin clone, but a solution built from scratch aimed at eliminating all the shortcomings of Proof of Work cryptocurrencies.

Profitability of Mining Chia with Crypto Mines

Our calculations were based on the results obtained using our proprietary Harvey miners. This line offers many hardware configurations (currently 7 different models), so profitability should be considered on several examples. To avoid unnecessarily complicating calculations, we selected three variants:

• Harvey Home Lite
• Harvey Home Pro
• Harvey Business Pro +

In addition, in our calculation, we took into account the current network space of 32,914 EiB and adopted the current price of Chia cryptocurrency (XCH) at 38.54 USD (1 USD = 3.94 PLN). Here are the results:

Of course, to make the calculations complete, one must also consider additional costs of Chia farming. Besides the purchase of a miner, key aspects include electricity consumption and equipment depreciation. So, let's go step by step.

As for electricity consumption, we took into account the average price of electricity in Poland, which is 0.73 PLN for 1 kWh (1000 W). The average level of electricity consumption for the above-mentioned variants of miners is as follows:

• Harvey Home Lite - 150 W
• Harvey Home Pro - 200 W
• Harvey Business Pro + - 700 W

These results should be multiplied by 24 to get the daily value - this way, we determined that the daily electricity consumption of the described models of miners is as follows:

• Harvey Home Lite - 3.6 kWh
• Harvey Home Pro - 4.8 kWh
• Harvey Business Pro + - 16.8 kWh

Then we multiply the above results by the average electricity price. As a result, we get the daily maintenance cost of the equipment, based on which we can also calculate monthly and annual expenses. For the described Harvey miner models, it looks like this:

• Harvey Home Lite - 2.63 PLN daily / 78.84 PLN monthly / 946.08 PLN annually
• Harvey Home Pro - 3.50 PLN daily / 105.12 PLN monthly / 1261.44 PLN annually
• Harvey Business Pro + - 12.26 PLN daily / 367.92 PLN monthly / 4415.04 PLN annually

It's worth adding that electricity consumption can be reduced, for example, by creating a farm based on server solutions, such as RACK cabinets. Another issue is the fact that the room where the farm will be located will be incidentally heated - in an area of 20 m2, it is easy to achieve room temperature without turning on a radiator.

Regarding depreciation - after one year of use, equipment purchased as new for 262 thousand PLN should not lose more than 5% of its value. At the time of writing this article, we are most likely at the beginning of a bull market, demand for cryptocurrency miner equipment is still small, and there is a lack of components in the market - the price of electronics is practically stagnant. It is very likely that a miner purchased at this moment will be worth even more during an advanced bull market, where the demand for such equipment will be high, and the supply very limited.

Bear and Bull Market - When to Invest, When to Harvest?

The above calculations prove that farming with an energy-efficient Chia miner is profitable even in a bear market. Does this mean that one should immediately sell the mined cryptocurrencies? Absolutely not. It would be a very bad move during a bear market. The point of investing in equipment is to earn properly, even if we have to wait a few years for substantial profits. It's best to keep a cool head and wait until the bull market - then the prices of cryptocurrencies are the highest, and the return on investment significantly exceeds the incurred costs.

During a bear market, it is advisable to focus on investing - it is during this period that one can hunt for the best investment opportunities. When an advanced bull market arrives, farming will be difficult, as farmers will join the network en masse, and rewards will be distributed among a larger number of people. There are also other factors that are easy to predict. Examples include problems with component availability or rising equipment prices. Those who survive the bear market can expect a generous payout during the bull market, i.e., a period of profit realization.

How Will the XCH Price Develop?

At the time of writing this article, the price for 1 XCH is 38.54 USD, while the market capitalization is maintained at around 364,000,000 USD. Chia is in 166th position in the ranking of all cryptocurrency projects. Not too high? And that's good because it only shows how undervalued this project is. Given the scale of its innovation, entering the TOP 50 seems very likely (to say the least), especially if the project maintains its current pace of development. Currently, the Chia Network project is investing in the ecosystem and lucrative business collaborations - the time for a marketing campaign will come later. Then users will have access to a complete and functional product.

However, this does not mean that the development of the Chia Network project is problem-free. We mentioned earlier that the Chia Network is currently working on conducting an IPO process. Unfortunately, due to the loss of a banking partner, who ended its operations, this process has been significantly prolonged. Chia Network company was forced to reduce staff and reach for the so-called Strategic Reserve (pre-farm). For many community members, this was a controversial move, but necessary for Chia to continue to develop. Currently, a so-called market maker has been engaged, who actively buys and sells cryptocurrencies to ensure liquidity and stabilize prices in the market. In other words, it stimulates the turnover of XCH on exchanges. Such actions will certainly reflect on the price of Chia.

Taking all this into account, it can be stated with high probability that Chia has great chances for significant increases in the upcoming bull market. Of course, it should be noted that these are predictions based on the experience of our team and market observations. However, everyone should form their own opinion about the Chia project and its chances of success. Surely following posts on our site will help in this.

Chia Network is an innovative, energy-efficient, and secure project. All this is, of course, very important, but in the context of the XCH price, it is worth taking a closer look at the project's cryptocurrency. While fiat money (the one we use every day) is constantly losing value, as central banks have been printing more of it for decades, driving inflation, digital money usually has built-in mechanisms to protect it from inflation. When Satoshi Nakamoto created the first cryptocurrency - Bitcoin (BTC) in 2009, he ensured the implementation of a mechanism to reduce inflation (halvings). What are the so-called halvings? In the case of BTC, once every four years, the reward for mining a block is halved, which automatically reduces inflation by half. In the long run, halvings stimulate the price of BTC to increase.