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Given all the posts speculating about future performance of Ethereum, I figured I'd ask and answer a question about past performance: Historically, would I have ended up with more Ethereum if I had mined it or if I had bought it?

Somewhat related to Mining or buy Ether?

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On any given day, it has almost always been the case that simply buying Ethereum tokens (ETH) would have been more profitable than mining it. For example, even if you started on day 1 (July 29, 2015) at home, you'd have half as many ethers as someone who bought on an exchange -- or somewhat less than someone who bought on an exchange any time up to January 21st, 2016 (give or take). A miner starting on the release day of the RX 480 (June 29, 2016), paying MSRP, would have as many ethers as someone buying ethers on the open market any time up to January 23, 2017.

Conditions required for mining to be more profitable are that difficulty remains low for a prolonged period of time before a rapid rise in price since rising prices can be expected to result in rising difficulty (but the opposite is not true -- if the price increases by 10% and the collective hash rate increases by more than 10% to take advantage of the price increase, this will not drag up the price). Your "investment" in hardware is depreciating in the meantime and your capital is tied up. Alternately, miners come out ahead if the price of Ethereum plunges, in which case the miners can still sell off/use physical assets.

I wrote a program to use historical data to determine whether one would have more ETH buy simply buying and holding ethers or by mining them. There are several caveats in the calculations (see program code), but regardless of how you calculate it, it's still true that mining has rarely resulted in better yields than buying ether. The program also has the ability to extrapolate (it defaults to doing no extrapolation).

Past performance is not indicative of future returns and this answer, nor the program, constitute investment advice. These are provided merely as informative tools (with no guarantees of fitness for purpose) and are provided as-is.

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Mining is more profitable because you never know exactly if the price will go up or down. Nowadays, price per kWh is cheaper than earned profit.

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  • This is arguably true if you have free (or existing) hardware and nothing breaks. However, you can't spend as much as you want on electricity since you are limited by your hardware. I.e., if using "free" hardware, you are likely hardware-limited, not cash-limited. Using my calculator, you can see that if you took your electricity budget for the period of time of interest and bought Ethereum with it at market rates, you're right -- mining would have been more profitable on around half of the days in question (350 of 758, using an R9 390). – lungj Aug 25 '17 at 17:51
  • The closer you get to the present, the better mining looks, but that's always to be expected in the short term if we assume miners are not cash-strapped (thus requiring short-term liquidity at the expense of long-term gains) and profit-motivated and will stop mining if it is short-term-unprofitable. However, if they were to take three or four months of their energy bills (exacerbated by the June price drop) and simply buy as much ether as they could for that amount, you end up with a different result: mining is less profitable. If you had to buy mining hardware, you're probably cash-limited. – lungj Aug 25 '17 at 17:52
  • For reference, 4xR9 390s running since July 29, 2015 would have generated around 2400 ethers. In Toronto, where electricity is about $0.11 USD/kWh, the same $2800 in electricity would have bought you about $2800 ethers. In Germany, with electricity running ~$0.31 USD/kWH, your energy bills would have bought you nearly 8000 ethers. A German miner who started one month (31 days) ago using 4x RX 480s would have 0.8 ethers mining; the electricity bill would have paid for 0.92 ethers on that same day. Doubtful you'd have four RX 480s sitting around for free. – lungj Aug 25 '17 at 18:00

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