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Research Outline
Prepared for Thomas V. | Delivered April 24, 2021
Cryptocurrency Mining
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Goals
To provide an understanding of the profitability of cryptocurrency mining, including an understanding of the operating costs, and to list the top five crypto assets to mine.
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Early Findings
The initial round of research indicates that there is a wealth of information available on this topic.
Calculating Cryptocurrency Profitability
Profitability, or loss, is
calculated
using the collateral currency e.g., ETH for Ether-Dollar futures or BTC for Bitcoin-Dollar futures.
Profit or loss is
calculated
for inverse Futures as outlined below.
Profit or Loss i
n Base Currency = (1/Futures Entry Price — 1/Futures Exit Price)*Position Size.
P
r
o
f
i
t
or loss is
calculated
for vanilla Futures as outlined below.
P
r
o
f
i
t
or Loss
in Base Currency = (Futures Exit Price — Futures Entry Price)*Position Size.
Cryptocurrency Mining Costs
Cryptocurrency mining cost include capital outlays for mining equipment and infrastructure development such as hosting and hardware efficiency (an average of
45%
of the total cost of hashing), along with recurring operational outlays (
55%)
for utilities (primarily electricity), maintenance and workforce. Utilities account for three-quarters of the operational costs.
Top Five Cryptocurrencies to Mine
According to Coin Insider, the
top five cryptocurrencies to mine
in 2020 are Grin (GRIN), ZEC (ZCASH), RavenCoin (RVN), Monero (XMR), and Ethereum Classic.
Top Five Crypto Assets
The top five crypto assets by market capitalization, according to
Weisscrypto.com,
are Bitcoin, Ethereum, Ripple, Binance, and Cardano. These assets have an overall rating of B+, A-, B-, C+, and B- for Bitcoin, Ethereum, Ripple, Binance, and Cardano, respectively.
At
Bitcoin Suisse,
the top five crypto assets were ranked, at the time of writing, as Bitcoin, Ether, Ripple, Polkadot, and Cardano.
On 24 April 2021,
Forex Rating
s ranked the top cryptocurrencies as Bitcoin, Ethereum, Binance Coin, Tether, and XRP.
For
Coin Insider
, the top five coins are Bitcoin, Ethereum, Binance Coin, XRP (Ripple), and Cardano.
Crypto Asset Profits
Bitcoin mining has a
profitability rate of 0.3219
USD per day for 1THash/s.
Ethereum
mining has a profitability rate of 0.0868 USD per day for 1THash/s.
Monero
has a profitability rate of 0.1287 USD per day for 1THash/s.
Mining by Region
Bitcoin is the
most p
opular coin
to mine in the Asia-Pacific, Europe, Latin American and Caribbean, and North American regions.
Ethereum is the
second most popula
r in Asia-Pacific and Latin American and the Caribbean, while Bitcoin Cash is the second most popular in North America, and Litecoin is the second most popular in Europe.
Summary
During the initial hour of research, the focus was placed on determining the availability of information. The search revealed that there are large amounts of publicly available information for this subject.
For this initial phase, information was sourced regarding how to calculate the profitability of a cryptocurrency investment, an outline of the costs associated with crypto mining, and identification of the top five crypto assets. Information regarding the popularity of different crypto assets by region, the profits to be derived for several crypto assets, and the top five crypto assets to mine was also provided for context.
We propose to continue the research by providing information related to the different processes and mechanisms used in crypto mining, a competitive landscape for Bitcoin, Ethereum, Ripple, Binance, Cardano, and Polkadot, and a review of the risks associated with crypto mining as well as a review of the global regulatory and compliance outlook. The research methodologies for these are outlined in the sections below.
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