ASIC vs. GPU mining – Profitability in Bear Markets


This post is for those of you who are thinking on either starting mining or expanding your existing mining farms. There is a lot of controversy regarding both ASIC and GPU mining. On one hand, ASICs beat GPUs performance-wise. Plus, the former are way easier to use and maintain than the later. GPUs on the other hand are more versatile and allow you to mine a wide array of coins. Which one to choose, considering today’s market situation?

The situation gets even more complicated if we take ideology into account. Certain people say that ASICs do not contribute to decentralization, which is one of the selling points of cryptocurrencies. In this post I am not going to go delve this topic. Instead, let’s compare ASICs to GPUs from the standpoint of someone who is looking to make the most money.

I am aware that this article is a long read. Some of the stuff you will read here might not be new to you, though I believe that you will find something valuable here too, no matter whether you are new to this or not. 🙂

Current Crypto Bear Market Period

It was pointless to talk about this topic half year ago when Bitcoin, Ethereum and a handful other important coins were reaching new heights every single day. Remember Q4 2017? Virtually any mining setup used to be profitable back then.

Now that crypto market is pretty much stagnant, many of the mining strategies that worked back in 2017 are no longer viable.

The second event that has marked a change in the way we mine was the crazy variety of ASICs released in Q1 and Q2 of this year. Most of the coins that were considered the haven of GPU mining (zCash, Ethereum, etc) are now being mined with ASICs. Bitmain, among others, has managed to break into the majority of the so-called “ASIC-resistant” algorithms.

This alone is enough for most people (especially beginners) to decide in favor of ASICs. Their logic makes sense – every new ASIC model that comes out usually outperforms older models and GPUs by anywhere from 100% to 10000%. For example, the Antminer A3 was expected to deliver a whooping $ 11,000 USD a month (and costing only $2,375 USD). The most important part was that those expectations were real – Bitmain did not lie about the specs in any way.

Every new ASIC would spawn a wave of hype. For example, the newest Antminer Z9 Mini has made people post videos with titles such as “This machine makes more than your mama’s rent – Antminer Z9 Mini” or “GPU MINING DEAD?! Bitmain Antminer Z9 EQUIHASH ASIC MINER 10000 Sols @ 300 watts

So Are ASICs the Best Option Right Now?

So far we know that GPUs are no longer viable when mining many of the modern popular coins. Besides, GPU rigs are tricky to set up and require you to learn how to assemble your own rig, which parts to use, which software to install, how to keep it up to date and so on. Finally, thanks to the mining hype, many GPU models that are the best miners are hard to find in the market and are often overpriced.

Does this means that GPU mining is something only a retrograde would do? Isn’t it easier to choose the right coin, buy an ASIC and profit? Sadly, not.

The Dark Side of ASICs

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If you are not new to mining, you know that as a miner, your profit depends on the network difficulty of the coin you are mining. The more is your hashrate, the bigger is the share of coins you get with every mined block.

This means that if someone gets a better miner than you, they will earn more than you by taking a part of your earnings. Therefore, as soon as everyone gets a super efficient ASIC miner for a certain coin, the network hashrate and the subsequent mining difficulty for that coin skyrockets in a span of few days or even hours. Ever wondered why the first ASICs for Bitcoin are no longer profitable?

Moreover, what happens is that once you get the ASIC you have preordered, you can only enjoy a tenth or less of the profits you have been expecting before it arrived. Those numbers can go really low and become a fraction of what has been promised to you before the shipping. For example the profits of an Antminer A3 for Siacoin are only 0.002% of the $11,000 USD/month we have been expecting back when it has been announced.

Of course, most people know that and they take the natural decline of profitability into account. There are two issues here, though.

The first one being that one can never say for sure how bad and how fast the profitability will drop. When buying an ASIC, you are usually doing a leap of faith. You might or you might not get your money back. Besides the volatility of cryptos and the unknown amount of ASICs the manufacturer will sell, stuff like shipment and payment delays happen too. A two week shipment delay (which are pretty common, sadly) often have a huge impact on the amount of money you get from your new ASIC.

The only thing you can be sure of is that your ASIC will not be mining for longer than one year. After that, the increase of network difficulty caused by the introduction of more and stronger units make the ASIC unprofitable, forcing you to buy a new one.

Here is where we should talk about the second issue. ASICs are hardwired to mine one algorithm only. Even the X11 ASIC can mine the eleven algorithms in a specific order, making it incompatible with any alterations in the chain. Once your ASIC becomes obsolete for that algorithm (for one reason or another), it becomes pretty much useless. Mining smaller coins is sometimes an option too, though it is also a risk – electricity is not free and those coins might never pay off.

To Make Things Even Tougher

Sadly, this is not all. Lately, it became popular to invest in ASIC-resistant coins. While I am not certain who has started this trend, we can say for sure that After Monero forked to become incompatible with the then-new Antminer X3, many other developers followed its footsteps and decided to fork their coins to make those ASIC-immune.

This means that when buying an ASIC, there is always risk that once we get the device, it will no longer be compatible with the coins we were aspiring to mine. For instance, those who have bought the Antminer X3 have been left to mine the lesser CryptoNight coins no one wanted. Instead of mining Monero with a market cap of more than 2 billion, they were forced to mine Bytecoin with a four times smaller market cap.

 

Plus, Monero has got a bullish trend. Can’t say the same about Bytecoin.

ASIC vs. GPU Mining Profitability Trends Comparison

Let’s take a look at some real numbers. Let’s compare a GPU rig to the most popular ASICs and see how they fare.

1 Litecoin – Antminer L3++

 

  • Initial ASIC price: $1400
  • Current ASIC price: ~$550
  • Release date: May 2017
  • Profitability when announced: ~814 USD/month
  • Profitability now: up to 12 USD/month

Today, it mines Litecoin with a loss of $1 USD a day (unless you’ve got free electricity) and a profit of up to $0,45 USD/day on other Scrypt coins. Bitmain no longer sells it. With a bit of luck, you can use that same $550 to buy two GPUs and make about $100+ USD a month.

2 Dash – Antminer D3

  • Initial ASIC price: ~$2699
  • Current ASIC price: $289
  • Release date: Sep-October 2017
  • Profitability when announced: 6400 USD/month
  • Profitability now: 12 USD/month

Once the first batch arrived and everyone turned their Antminer D3 units on, its profit per month dropped more than 10 times, from $6,400 USD/month to $600 USD/month. After that, profitability went further downhill.

The only people who have made money with this miner were those lucky few who have got their units first. Anyone else who has got their units delayed due to shipment issues, payment issues or who wasn’t there for batch 1 had to face very low profitability. Many are still waiting for their units to pay off.

Let’s not forget that once the Antminer D3 came out, older miners such as the Baikal Giant-900, Giant+ and the iBeLInk DM384M quickly became obsolete, even though said miners have had the chance to mine for about 6 months only.

Here is a graph of the Antminer D3 profitability:

3 SiaCoin – Antminer A3

  • Initial ASIC price: $2375
  • Current ASIC price: $390
  • Release date: Late January 2018
  • Profitability when announced: 11000 USD/month
  • Profitability now: 2 USD/month

Again, whoever has got their units in January has got their money back by now. Anyone else is less fortunate. Full review!

4 Ethash – Antminer E3

 

  • Initial ASIC price: $1876
  • Current ASIC price: $2150
  • Release date: Late July 2018
  • Profitability when announced: 131 USD/month
  • Profitability now: 131 USD/month

The Antminer E3 is one of the latest and most controversial miners to be released by Bitmain. Aimed to mine Ethereum, Metaverse and other Ethash-based coins, the E3 is different from other ASICs. As you can see, its performance and price can be compared to those of a 6 GPU mining rig. Since Ethash is a memory-intensive algorithm, it is hard to create an ASIC for it that would outperform GPUs. The E3 does offer some improvements over GPUs and I will get back to it in a minute.

5 Equihash – Antminer Z9 Mini

  • Initial ASIC price: $1999 + $105 PSU
  • Current ASIC price: $850 + $105 PSU
  • Release date: End of June 2018
  • Profitability when announced: $1500-2500 USD/month
  • Profitability now: 600 USD/month

As for today, the Z9 Mini is ruling the show with an initial price of $850 and a profitability of $16-20 USD a day or ~$400-500 USD a month. Whoever has got this miner in June should have their money back at the end of this month, which is great. Others will receive their units after the difficulty levels skyrocket as it happened to other ASICs. I do suspect that anyone having a Z9 mini will face the same situation as those who bought D3 miners back in the day.

Later Added: I have started my research for this post in the first days of July. Two weeks later, the profitability dropped by 25% – from $20 USD/day to $15 USD/day. Also with the announcement of the Antminer Z9 that hashes four times more than the Z9 Mini, we should expect the Z9 Mini to become obsolete really quickly. The Antminer Z9 is expected to be shipped on 1st September of this year.

One thing to consider is that two of the most popular Equihash coins are going to fork to make existing ASICs (including the Z9 Mini) incompatible with it. Bitcoin Gold has already forked to Equihash-BTG and ZCash fork is expected to happen in a couple of months.

We can see a steep increase in difficulty in the past 30 days. Bitmain has announced that they have sold 7665 Z9 Mini units, though I am not certain on whether those numbers are accurate. January the 15th, a study has been published that claimed that 30% of Equihash network hashrate is being produced by ASICs and FPGAs.

If Zcash leaves the show just like BTG did, all of the existing known and unknown ASICs will switch to the lesser coins, which will not have a good effect on their mining profitability.

How Do Those ASICs Compare to GPUs

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In brief, we can see two trends here.

The first, more classical trend are those ASICs that come as difficulty bombs. A good example is the Antminer D3 that has quickly turned megahashes into gigahashes for Dash. The newest ASIC that belongs to this category is the Antminer Z9 Mini.

As we could see, those ASICs have insane stats on paper but when it comes to reality, they take a lot of time to pay off. Those ASICs raise the bar way too high to remain profitable for long. For most people, anyway. The fortunate few who get the right ASIC for the right coin in the right moment do profit from a couple of weeks of competition-less mining. The rest have to be patient and pray for the coin market to go bullish.

The second trend is a bit trickier. The Antminer E3 belongs to this category. An ASIC that performs like a GPU rig yet costs less than one. Considering GPU inflated prices and limited availability, the Antminer E3 looks interesting indeed. The issue here is that a GPU rig allows you to mine a wide array of coins. If something happens to one coin (which, as we can see is not uncommon) you can always switch to a different one or even dual mine two. Can you do the same with the Antminer E3? Not really. You sign up to mine Ethash and that’s it.

GPU Mining Profitability

So far, we have been talking about ASICs. What about GPUs?

First of all, I guess it is obvious that thanks to its versatility, the income you get from a GPU mining rig is very stable. Especially compare to an ASIC. A year ago when I’ve got my first few rigs with RX 580 cards and the income I was getting from those is pretty much the same as I am getting today. The situation was a bit different in Q4 2017 when the market for Ethereum and other coins skyrocketed together with the profits. That being said, that event was the only “anomaly”.

Overall, a six RX580 8GB GPU rig brings about $170 USD per month of profit. That’s the cost of one RX580 GPU, meaning that such a rig pays off in about 10 months (considering we have to buy a motherboard, PSU and other components). The rig remains fully functional after those 10 months and it can keep making you money the same way it used to do before.

Moreover, once the Acorn gets on sale, we will be able to boost our GPUs and make them even more profitable. In fact, the Acorn might even bring Ethereum GPU mining back. We will see.

FPGA Mining

Another alternative to ASIC mining is FPGA mining. A lot has been said about it in my previous articles. The upside of FPGA mining is that it does not have the limitations ASICs have. The downside is that as for today, the entry price is quite high, plus the availability is limited. All of the FPGA sellers I know are almost or out of stock.

That being said, I do believe that FPGAs are the future of mining and I am actually keeping a close eye on how it is being developed. Make sure you subscribe if you want to keep updated with the latest news on FPGA and GPU mining.

A Real Life Example

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Since I do a lot of consulting to home and small mining farm owners, I’d like to share an example with you that illustrates the difference between ASIC and GPU mining. It is based on real world situations, though for the sake of this tutorial, we will make up the names and the amount of equipment. This situation happened more than once and the amount of gear involved was times higher. I will keep it small to make it easier, though.

January 2018. John and Jack have built two separate small mining farms. John has decided to make an ASIC Bitcoin mining farm. ASICs are easy to use, so he thought that he could avoid a lot of unnecessary hassle by not having any GPUs.

Jack decided to go the other way and make a GPU mining farm instead. He finds the flexibility and freedom to mine any coin too attractive to miss it out.

Each of them has a budget of 30k.

John uses that money to buy 12 ASICs.

Jack uses the same money to build 9 GPU rigs with RX 580 8gb GPUs.

It’s July 2017 now and here is what we have:

John could preorder and get the newest ASICs instead (like the Z9 Mini), though then he would have to do the leap of faith and risk a lot of money. If he wants stability, he has to deal with the expenses and hope that one day Bitcoin market will go bully and he will be able to sell his mined Bitcoins with some profit.

This might be my opinion but I believe that for those of you who want to build a mining farm, the best strategy is to go 85% GPUs and 15% ASICs. This way you get that GPU backbone that ensures a stable and steady income, while the ASICs would be that high risk high reward element.

In Conclusion

2018 is bringing new challenges to the miner community. What used to work in 2017 is no longer a viable strategy today. While 2018 seems like the era of ASICs (as many claim), I honestly believe it’s a very good idea to balance GPU and ASIC mining, especially if you are going to host your own mining farm.

I also believe it is worth keeping a close eye on FPGAs, as well as on the Acorn. Both could be the next big thing for various reasons. Again, while I have nothing against ASICs, I do believe those are a very risky investment, especially today when so many coins are forking.

Everything I wrote here is merely my point of view. Make sure you do your own research.

Thank you for reading. As always, your comments, suggestions and questions are welcome.

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