Diving Deep into Crypto Mining Profitability: The 2020 Reality of $5,000 Rigs
Understanding the true profitability of crypto mining equipment is crucial before investing, and our real-world experience in 2020 with $5,000 worth of new ASIC miners offers valuable insights. While initial projections often paint a picture of extraordinary returns, the reality of cryptocurrency mining, especially for new coins and hardware, can be significantly different.
The video above chronicles our journey and findings, and this accompanying post will expand on the details, providing a clearer picture for anyone considering entering the dynamic world of digital gold mining. Crypto mining inherently carries risk, even when dealing with tangible hardware, making a thorough understanding of potential returns and challenges essential.
The Lure of High Profits and the Reality of ASIC Mining for Nervos CKB
In 2020, a burgeoning opportunity arose in mining Nervos Network CKB, a newer coin launched with substantial financial backing and high liquidity, evidenced by over $12 million exchanged in a single 24-hour period. ASIC (Application-Specific Integrated Circuit) miners, designed solely for specific algorithms, promised to be the most profitable option. Many enthusiasts, including us, were drawn by these impressive initial profit calculators that suggested daily earnings in the hundreds, sometimes even thousands, of dollars.
Our case study focused on two prominent ASIC miners: the Bitmain Antminer K5 and the Todek Toddminer C1 Pro, both designed for the Nervos CKB Eaglesong algorithm. Combined, these rigs represented an approximate investment of $5,000 USD, a sum that many hoped would quickly translate into significant passive income. However, the journey from pre-order to actual operation revealed a stark contrast between expectation and reality in the volatile crypto mining landscape.
The Bitmain Antminer K5 Experience: From $400 to $5 a Day
The Bitmain Antminer K5, a highly anticipated ASIC miner, initially captivated the mining community with projected daily earnings of up to $400. This staggering figure fueled excitement and drove pre-orders, often months before the hardware was even shipped. When the K5 finally arrived and commenced operation, the first day’s earnings hovered around $22, a far cry from the hyped $400, but still a hopeful start for many.
However, this initial profitability quickly dwindled. Over approximately 37 days of operation, the K5’s daily earnings dropped significantly to about $5 before accounting for electricity costs. Our detailed analysis, combining earnings from F2Pool and SparkPool, showed that the K5 mined roughly 61,000 Nervos CKB coins, equating to $241 at their then-current market value. With a residential electricity rate of 10 cents per kilowatt-hour, running the K5 for that period incurred an electricity cost of $141, leaving a net profit of only $100 from an initial investment of approximately $1,600 for the K5 alone. This meant that after more than a month, we still needed to earn back $1,500 just to break even on this single mining rig.
The Toddminer C1 Pro: A Lesson in New Hardware Risks
The Todek Toddminer C1 Pro, another new ASIC miner, aimed to be even more powerful and efficient than its counterparts. Early calculators projected an astounding $1,200 in daily earnings, a figure that truly captured the imagination of potential miners. We acquired the C1 Pro for approximately $3,400, expecting it to deliver superior performance and help reach our profitability goals.
Yet, the reality of the C1 Pro proved even more challenging. Over about 14 days of mining, it generated roughly 25,500 CKB coins, valued at $100. Its electricity cost for that period, again at a 10-cent per kilowatt-hour rate, was $65, resulting in a meager $35 in actual profits. A significant factor contributing to this low profitability was the miner’s instability, particularly in warmer environments—a common challenge in most mining farms. Scaling this miner’s performance to match the K5’s operational period showed that even then, we would still be thousands of dollars away from recouping the initial investment, highlighting the inherent risks associated with early adoption of new, untested hardware from newer companies.
The Impact of Network Hashrate on Your Mining Returns
One of the most critical, yet often overlooked, factors affecting crypto mining profitability is the network hashrate. This metric represents the total computational power being applied to mine a specific cryptocurrency, directly influencing the difficulty of finding new blocks and earning rewards. When we first received our miners around April 18th, the Nervos CKB network had a hashrate of approximately 5 peta-hash (PH).
As more miners, particularly the Todek Toddminer C1 Pro, were produced and came online, the network hashrate surged dramatically, almost doubling. This increase made it twice as hard to mine the same amount of coins. Consequently, individual miners found their daily coin output cut in half, directly impacting their USD earnings. This phenomenon illustrates a core principle of crypto mining: the more “shovels” (miners) that enter the “digital gold rush,” the less “gold” (coins) each individual shovel-owner will find, reducing overall profitability per unit.
Beyond Immediate Profits: The Long-Term HODL Strategy and Risks
After factoring in electricity costs, our combined $5,000 investment in these crypto mining rigs yielded a disappointing $135 in profit over an averaged three-week period. This figure is a stark reminder that spending thousands of dollars to make only a few hundred is far from the ideal investment scenario in crypto mining. However, the conversation about profitability extends beyond immediate fiat returns to include the strategy of “HODLing”—holding onto the mined coins in anticipation of future price appreciation.
The risk here is substantial; while some coins historically surge in value, others decline. In our case, the CKB price had been sliding, suggesting that selling the coins immediately might have been more profitable than holding them. While the long-term belief in a cryptocurrency project and its role in network decentralization are valid motivations for mining, the financial imperative to at least break even, and ideally turn a significant profit, cannot be ignored. Miners ultimately want to spend thousands to make thousands, or even tens of thousands, not just hundreds.
Essential Considerations for Aspiring Crypto Miners
Our 2020 crypto mining journey with $5,000 worth of rigs provides several key takeaways for anyone considering this path. Firstly, **electricity rates** are paramount; a low rate (e.g., 5 cents per kWh, common in some industrial mining farms) can drastically alter profitability compared to a typical 10-cent residential rate. High electricity costs can quickly erode any potential earnings, turning a profitable venture into a costly one.
Secondly, **acquiring mining hardware** can be incredibly challenging. Popular ASIC miners, especially new releases, often sell out within hours of becoming available due to high demand. Utilizing reputable middlemen or suppliers, like Coinmining Central in our case, who have established connections in regions like China and Hong Kong, can be essential for securing these coveted machines. Finally, **choosing a mining pool** is important. We used F2Pool, one of the largest CKB mining pools, which offered a Pay-Per-Share (PPS) payout system. PPS ensures a consistent, linear payout for every share your miner submits, eliminating the risk of waiting for the pool to find a block and providing immediate, predictable rewards. This structured approach to rewards can offer stability in an otherwise volatile market, making it an attractive option for many crypto mining enthusiasts.
