Zcash mining is currently going through its least productive moment since its profitability is at the lowest levels ever seen in the history of this cryptocurrency.
The BitInfoCharts cryptocurrency statistics portal notes that the daily profitability of ZEC mining, the Zcash native cryptocurrency, is at eight cents per kilos per second (KSol / s). This means that an Antminer Z11 device, designed by Bitmain to work with the Equihash algorithm used by Zcash, could produce about USD 10 per day in gross income, without taking into account expenses related to electricity consumption, Internet and commissions charged by the Mining pool and mining software used.
Although the figures regarding the profitability of mining in Zcash are still positive, they also reflect their worst time since their origins. Not even during the collapse of the market in 2018 these values were so low. Previously, the lowest figures that had been reported in this category for Zcash were USD 0.102 per day for 1 KSol / s (25% above current profitability) at the beginning of May of the current year. However, in the following weeks, there was an upturn that brought the profitability of ZEC mining close to USD 0.20 per day for KSol / s, which has been the highest point of the year and will be reached three times during the first semester.
The waves that sink the profitability of mining in Zcash
After falling in mid-June, the profitability of mining in Zcash has failed to recover to this day. There are two main causes for this: the increase in the hash rate of Zcash and the fall in prices of ZEC in the cryptocurrency market.
The more mining power is added to a network, either by adding workers or by increasing the hash rate of the hardware used for mining, the greater the difficulty of mining such cryptocurrency. This is due to the fact that the adjustment of the mining difficulty seeks to balance the speed of block production, so that the higher hash rate, the greater the difficulty. Given the increased difficulty, miners may take a little longer to reach the rewards per mined block and their profits could be reduced.
As of April 2019, both the hash rate and the difficulty of mining Zcash have been showing a sustained growth that has taken them to their historical highs. In the case of the hash rate, on August 20, Zcash reached 4.7 GSol / s , while the mining difficulty reached 88.2 million. These values have remained in similar ranges for the past three months and do not give evidence of decline.
The increase in the hash rate in Zcash adds a fall in the price of ZEC in the market, which aggravates the situation of the profitability of mining of this cryptocurrency. This is because, as explained above, a higher hash rate in the network causes greater difficulty which, in turn, makes the rewards achieved by the miners less frequent. If such rewards in ZEC decrease their price in the exchange market, the profits of the miner are double affected.
Between the months of April and June of this year, coinciding with the increase in the hash rate of the Zcash network, the price of ZEC in the cryptocurrency market experienced a rebound that led to USD 118.9. However, after this year record, the value of Zcash’s native cryptocurrency in the stock market has only gone down. During this week, ZEC has averaged a unit cost of USD 50, which implies a drop of more than 50% in two months.
Mining profitability in perspective
What is more curious about the low profitability of mining in Zcash today is that other cryptocurrencies, such as bitcoin (BTC) and ether (ETH), although they are far from their highest point of the year, did not fall enough as to mark its historical minimum.
Bitcoin mining sports a daily return of USD 0.23 TH / s, that is, an AntMiner S17 Pro could generate about USD 14 per day. The lowest point in the profitability of mining bitcoins in the year was USD 0.13 for 1 TH / s. As for mining in Ethereum, its profitability has also remained afloat above its minimum this year (USD 0.010 for 1 MH / s) and currently averages USD 0.015 for 1 MH / s.
What has favored the mining of other cryptocurrencies and not that of Zcash is, mainly, market valuation. ZEC, unlike BTC and ETH, failed to reverse the general fall of July, but has perpetuated its course towards a lower price; although it has not yet touched USD 46.23 in what was in February (its lowest price of the year).
Zooko Wilcox, founder and CEO of Electric Coin Company (the company in charge of the Zcash protocol), proposed last July 31 that this portion of mining rewards be continued to be used to collaborate with the Founders’ Reward, which he prefers call Dev Fund (developer fund); since, if not, there is a risk that Zcash will suffer a stagnation at the development level and a potential deterioration of its efficiency. Wilcox’s suggestion generated debate with opinions in favor and against that, apparently, could be negatively affecting the price of ZEC, given the uncertainty generated by these types of situations in the exchange market.
Although, there is no doubt that the uncertainty about a possible change in the roadmap of a project usually leads to market reactions, in the case of Zcash, the dilemma of mining rewards and the development fund is not necessarily the origin of the fall in the price of ZEC. If you look closely, the slope shown by the ZEC price chart starts at the end of June, one month before the founder of Zcash made his observation about the Dev Fund. In this sense, the fall of ZEC could only be part of a market cycle, while the discussion about mining rewards could be hindering the recovery of this cryptocurrency in the stock market.