Faced with the increase in the computing power of mining machines and the rising cost of electricity in France, private bitcoin miners are becoming increasingly rare.
Today, there are no figures on the number of specific minors in France. And yet, France would face a paradox: there would be fewer and fewer bitcoin miners in France, even though the interest of the French for cryptocurrencies is growing.
Indeed, according to a study by the association for the development of digital assets (Adan), 8% of French people own cryptocurrencies and 30% would like to invest in these assets during the year.
If an individual is looking to obtain cryptocurrencies, and in particular bitcoin, there are not many options: either you have to buy some (usually on a cryptocurrency exchange platform), or you have to “mine” bitcoin .
“Individuals do not mine bitcoin in France, or really at the margin. First of all, electricity is too expensive there for everyone, and above all, mining bitcoin requires specific machines (Asics) that are particularly heavy to manage in a domestic environment. Those who mine at home rather choose to mine Altcoins (Editor’s note: cryptocurrencies other than bitcoin, such as ether), with graphics cards, which are much less restrictive to use at home”, explains to BFM Crypto Sébastien Gouspillou, the boss of the company BigBlock.
Asics machines (for “Application-specific integrated circuit”) are made up of chips programmed to perform complex calculations. By running 24 hours a day, they allow miners who secure the Bitcoin network to be paid in bitcoins. In most cases, these machines are installed in what are called “mining farms”, but some individuals may decide to obtain them, to mine bitcoins themselves by doing “solo mining”. Concretely, this amounts to validating a block of the Bitcoin network on its own. A marginal technique, but which exists almost everywhere on the planet. As a reminder, a bit like a digital book, the blockchain (or chain of blocks) brings together all the blocks (transactions) of a network, from the oldest to the most recent.
Suppose a person decides to start solo mining with an Asic machine, what are the basic investments to be made, and what factors to take into account?
For a mining machine to become profitable for an individual, many factors must be taken into account. On the one hand, there is a first economic investment, since a machine is currently worth around 10,000 dollars. The price of the mining machine can also change, depending on the power consumption and the hash power (TH/s) of the machine, that is to say the computing power of the machine: globally , the more powerful it is and consumes less electricity, the more expensive it will be and vice versa.
But there are other factors: the so-called “difficulty of mining” that is to say that the more miners there are on the Bitcoin network, the more the quantity of cryptocurrencies is reduced, as well as the periods of ” bitcoin halving, which implies that every four years, bitcoin rewards are halved (or “half” or half in English, hence the term “halving”). Today the “block reward” is 6.25 bitcoins for a mined block, but with the huge competition between miners, the chances of mining this block are obviously increasingly rare.
Finally, the most important criterion is obviously the cost of electricity in the country where you want to mine. The machine being very energy-consuming, it is on this criterion that the performance for an individual will depend in particular. And the price of electricity in France can discourage more than one.
“Today, an individual will lose money”
“Before the fall of bitcoin, we could say that in general a miner could make a profit from his activity in two to three years in France, especially when the price of bitcoin was around 50,000 dollars. Today, an individual will lose money. money because the price is lower and electricity in France is more expensive”, explains to BFM Crypto Laurent Pignot, analyst at Zonebourse.
Some French companies still offer for sale mining machines for individuals, such as Feel Mining. But other companies have chosen not to sell them to individuals. This is the case of the company Just Mining, which decided two years ago to stop doing so, for strategic reasons. From now on, it is their partners who take care of such sales, confirmed to us its founder Owen Simonin.
So, what are the other alternatives for French people who want to mine bitcoin? An individual can decide to join a mining pool, where companies decide to combine their computing power to mine bitcoin. Profits from mining pools will be divided by the number of people in the pool.
An individual can also become the owner, remotely, of mining machines, by participating in a mining pool. This is the case of Léo, who works in a start-up in France, and who bought three mining machines from the company Gwensas, which takes care of them abroad. The latter notably started mining a year ago, in order to be able to participate in securing the Bitcoin network.
“In my opinion, mining bitcoin in France, with the current price of electricity, is ecological nonsense. That’s why from the start I chose to mine bitcoin with green energy in countries where electricity is cheaper. A year after I started mining, I think I will continue to mine, it helps to secure the Bitcoin network”, explains the latter.
Gwensas runs its machines as close as possible to green energy sources, in Kazakhstan and Congo, where electricity is at $0.05 per kWh (kilowatt hour). This company buys electricity which is produced but not consumed, which in particular makes it possible to carry out certain projects in developing regions. For example in Congo, mining has a local impact to finance the preservation of Virunga Park.
Léo also explains that he has invested in several machines, because “there will always be certain technical, environmental or even political hazards that will cause a machine to break down”.
3,841 dollars abroad, against 258 dollars in France
Is his investment more profitable than in France? Let’s take an example. The latter notably bought a mining machine, whose hash power is 110 Th/s, which consumes 3250 Watts and which costs around 9,000 dollars.
Many sites can calculate the profitability of miners based on the electricity used on site, as well as the current price of bitcoin.
In France, at the current electricity price of 0.17 euro/kWh (i.e. 0.18 dollar/kWh) and at the current price of bitcoin on Tuesday, the current yield would be negative with a loss of 161 dollars over one year according to estimates from the Cryptocompare site. While the theoretical profit of Leo, who is in the mining pool, would be 3,543 dollars per year for a machine in Congo or Kazakstan where electricity is at 0.05 dollar per kWh. The latter considers in particular that he will only obtain 86% of the efficiency of his machine instead of 100% due to the hazards mentioned above. Thus, according to his calculations, his gain would be 3,543 dollars x 0.86 = 3,046 – 15% of costs to remunerate Gwensas, or 2,590 dollars.
More precisely, here is the mathematical formula to calculate the theoretical production of a machine compared to its power: Bitcoin/second = Hashrate x (1 – pool fees) x 2^32 x mining difficulty x block reward
Beyond this calculation of a theoretical return over one year, which depends strongly on the variation in the price of bitcoin, another factor must be taken into account: that of the depreciation of the mining machines. According to Leo, his mining machine will not be amortized between 13 and 15 months as specified by the suppliers, but rather within 3 years at the current bitcoin price. It will therefore take him 3.4 years, or 41 months, to amortize his machine.
In a context of disruption in the cryptocurrency market, the return remains particularly low for miners. To illustrate the numbers a bit more, a 100 TH/s machine generates an average of 0.008321 bitcoin in net production per month. So for a two-year amortization of a machine bought for $9,000, with today’s hashrate and a kilowatt hour at $0.05, one bitcoin would be needed at… around $45,000.
Finally, to calculate the profitability of mining over an entire investment cycle, the recoverable money should be taken into account if the miner decides to stop production and resell his machines, if possible. Which again is highly variable.
“Mining bitcoin, I gave up”
In this context, instead of mining bitcoin, individuals are turning to other cryptocurrencies, which are relatively “simpler” to mine than this asset. This is particularly the case for Jimmy, who started mining at home two years ago.
But from the start, he abandoned the idea of mining bitcoin. Before, he made his computer’s computing power available to help medical research ([email protected]). And it was in this context that he discovered a cryptocurrency project that was backed by it.
“Mining bitcoin, I immediately gave it up. The computing power needed to mine bitcoin is extremely high. In addition, the hardware for mining bitcoin is much too specific”, explains the latter. He has therefore been mining ether for almost two years, using a computer where he has connected 30 graphics cards, which also works with a mining pool. All this cost him 30,000 euros in two years.
“In terms of profitability, this is very variable depending on the volatility of cryptocurrencies, but I can get up to 3,000 euros per month in liabilities. There, I’m more around 1,000 euros per month. It took me between 11 and 13 months to reimburse my equipment”, he specifies.
The latter also admits that mining in France, when you are an individual, is a real source of constraints. Its issues are the same for those who venture into mining other cryptocurrencies, with bitcoin amplifying this trend.
“My electricity consumption went from 75 euros per month to more than 500 euros per month. Then the graphics cards generate a lot of heat so in the office where I installed them, it can be over 42 degrees, that implies to ventilate permanently. Then, it generates noise and requires maintenance”, he admits.