Bitcoin Mining Profitability – The Good, the Bad and the Ugly

48 Pages Posted: 22 Feb 2018

Date Written: January 11, 2018


The ever-increasing difficulty imposed on miners to mine new Bitcoins is at the core of the Bitcoin eco system. In this study it is shown that an exponential function fits the past difficulty data very well. This function is then used to model future difficulty increases and future mining payouts – fully taking into account not only the changing difficulty but also the halving of the block-mining-reward which happens roughly every four years. Reliable, accurate and stable estimates for the profitability of a mining operation can be obtained with this approach. It is shown that, even if one disregards the risk of the mining operation ever failing, a positive outcome is far from guaranteed. There are bad situations where it takes a very long time to get the investment back, and also downright ugly situations where the ever-decreasing daily payouts are so low, that there is no chance of ever getting the full investment back – even in the ‘best case’ that the mining operation runs forever and never defaults.

Keywords: Bitcoin, mining, difficulty, exponential, cloud-mining, Bitcoin-halving, halving-day, break-even, exposure, profitability, investment

JEL Classification: C02, C22

Suggested Citation

Deutsch, Hans-Peter, Bitcoin Mining Profitability – The Good, the Bad and the Ugly (January 11, 2018). Available at SSRN: or

Hans-Peter Deutsch (Contact Author)

d-fine ( email )

D-60313 Frankfurt


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