What equipment does cryptocurrency mining require and how much does it cost – How are miners paid and taxed and how much money does mining make on average per month?
A double-digit percentage of the population is now estimated to be Greeks engaged in the trading of cryptocurrencies on various platforms, while on the contrary the -very energy-intensive- bitcoin or ethereum mining has now become prohibitive for individuals, as the equipment depreciates quickly, while the price of electricity in Greece is high. This assessment is expressed, speaking to APE-MPE, by the civil engineer and self-made businessman Georgios Nolis, CEO of the company “Lancom Ltd”, based in Thessaloniki, which operates in the field of data center services and cloud computing.
Due to the rapid rise of cryptocurrencies – which experienced unprecedented growth in the midst of a pandemic – and the fact that more and more people are now engaged in them, APE-MPE sought professionals with a long presence in the field of information technology and deep market knowledge form a more active picture of what the current situation is in Greece and internationally. Among them, G. Nolis spoke anonymously and others anonymously.
Energy consumed by Finland, the example of China and the bold El Salvador
So what are cryptocurrencies? According to experts in APE-MPE, it is digital money, which is not controlled by an individual or a central bank and is completely decentralized. For example, in the case of Bitcoin, which has an exchange rate (5/10/2021) of 42,553.18 euros (compared to 2,925.45 euros for ethereum), all transactions are recorded in a public directory – something like a digital ledger. – the maintenance of which requires large amounts of energy, while the cryptocurrency is given as a reward to those who solve complex mathematical puzzles with computers. This process is called “mining”, in English “mining”, and requires powerful computer systems.
Overall, bitcoin is considered extremely energy-intensive, as in order to “maintain” its production system, it needs every year the electricity consumed by a country like Finland (while back in the distant 2010, when its value was very low, you could mining with a simple computer with a powerful graphics card and minimal energy costs).
According to data gathered by APE-MPE from various sources, China, until recently a global mining hub, announced on September 24, through its central bank, that it declares all transactions with cryptocurrencies illegal, expressing fears of money laundering. However, any concern, groundless or not, does not change the fact that digital money is growing more and more on the planet – it is indicative that in the last five years the consumption of electricity for bitcoin mining has increased tenfold, while every year and a half the computing power required mining is doubling – with the result that governments and organizations are increasingly turning their attention to cryptocurrencies, potential opportunities and risks.
In fact, in early September, El Salvador became, despite public outcry, the first country in the world to adopt bitcoin as its official currency, with its 40-year-old president, Najib Boukele, declaring that the dominant cryptocurrency would help. save $ 400 million a year, which it will save on commissions it currently pays on remittances, while also providing access to financial services to 70% of residents who do not currently have a bank account (a quarter of its GDP). El Salvador comes from cross-border remittances, according to the World Bank).
How many miners are there in Greece?
“There is no methodology to calculate the number of people or companies involved in cryptocurrency mining in a country or region. Crypto mining is based on the logic of anonymity, as are cryptocurrencies, so we can only speculate. “I know many miners who are involved in one to ten” mining rigs “as amateurs (s.s. the equipment required for mining) and a few who have the so-called” mining farms “, ie mining farms, mainly rented abroad,” he explains. at APE-MPE George Nolis.
Amateur miners are usually people who are involved in computers and new technologies, not to mention those who simply invest in rigs, because they decided to enter the field on a trial basis, in order to gradually expand their activities in the future. Professional miners usually employ a group of people, who work 24 hours a day, to optimize the return on their investment. “In general, Greece is not particularly suitable -at the given time- as a country for this activity, due to the very high price of electricity, as well as due to high temperatures (therefore even higher electricity consumption for air conditioning, in order to maintain the equipment)” he notes.
What equipment does cryptocurrency mining require and how much does it cost?
Mining requires state-of-the-art equipment, as the competition is greater and the newer the equipment, the greater its performance (measured in hash per second). For overall efficiency, of course, power consumption must be taken into account. “There are” ASIC miner “and” mining rig “options. In the first case, we are talking about a specialized machine, which does powerful mining, usually on a specific cryptocurrency, which makes it quite to very binding for the future. In the second case, we are more flexible, because we create an array of usually widely used graphics cards and we can “extract” most of the cryptocurrencies “explains George Nolis.
“Obviously mining is of no use to individuals. In a healthy business, however, electricity costs, VAT and equipment depreciation can, under certain conditions, make the investment profitable, especially if the price of Ethereum rises (it has reached 3,400 euros in September 2021 and over 3,600 euros in May 2021). If these are combined with experience-strategy, strong know-how, development of specialized software that optimizes mining and protects equipment from damage, 24-hour performance monitoring services, then the performance can be very valuable, especially in long-term investments “he estimates and adds that because all this changes daily, there is always the risk of losing part or all of the investment, especially if it is combined with trading.
How are miners paid and taxed and how much money does mining make on average per month?
But what is the possible efficiency of mining? A very good example is a relatively modern mining rig for Ethereum cryptocurrency mining, with 15 NVIDIA RTX 3080 graphics cards with a combined output of 1,250 MH / s (MH / s: one million hashes per second). Its cost today reaches 20,000 euros without VAT. It consumes up to 4,800 watts, so it burns about 1,000 euros per month on electricity, with a theoretical charge of 0.30 euros per kilowatt hour, including adjustable charges, etc. With a selling price of Ethereum – on average – at 2,500 euros, it can “mine” 65% of a piece within 30 days, worth about 1,600 euros. So, the net profit, deducting the electricity, will be around 600 euros per month, with the current “mining difficulty”, which is constantly increasing.
The miners are generally remunerated with the so-called “Proof of Work”, as well as with the confirmation / cross-checking of transactions made in the respective blockchain cryptocurrency network, such as the Ethereum network. In simpler words, they are paid because they have computing power in the network they participate in and their fee is given in the respective cryptocurrencies and their subdivisions. The fee “enters” an electronic “wallet” and so one can gradually accumulate his cryptocurrencies there. If he wants to do more than just collect them in a wallet, he has to sign up at an exchange office and convert them into whatever he wants, either in other cryptocurrencies or in dollars, euros, etc.
“As far as taxation for the production of cryptocurrencies is concerned, this is theoretically meant for a legal entity, as an individual is not going to make a real profit after taxes these days, he will only lose money. The income from the production of cryptocurrencies in companies is normally taxed, after being converted into FIAT currency (eg euro) in exchange and transferred to the current bank account, at the current rate (22% for the tax year 2021). Of course, all expenses and depreciation are deducted, since the income is considered to result from a productive process “, announces Mr. Nolis, clarifying that the above does not concern income from trading cryptocurrencies, where other rates / procedures apply.
Opportunity for the future Greece?
During the pandemic crisis, cryptocurrencies moved in an unprecedented upward direction, have piqued the interest of investors worldwide in a short period of time and are now considered by many to have “come to stay”, although they still have a long way to go before they mature. . “I strongly disagree with the ‘criminalization’ of mining and cryptocurrencies and I believe that they will gradually prevail over traditional banking institutions,” notes George Nolis, who “sees” an important opportunity for Greece, which he links to the growing use of Renewable Energy Sources (RES): “I believe that Greece in particular will play a leading role in Europe for the production of electricity from RES.
However, the existing energy transmission network (IPTO and HEDNO) does not have the appropriate dimensioning and of course the necessary planning to support this development. The result of all the above is that we have already, for years, many photovoltaic parks, which while producing “clean” electricity, its absorption is much lower than production. So there is a very serious opportunity to organize “containerized” mining infrastructure, with excellent profit margins, but like any opportunity, it requires quick moves and determined investors. However, with this methodology, Greece can also become a pioneer in mining, with almost no environmental footprint “.
