Published: 2020-08-20

Limit Exposure to Altcoins, Stack Sats

By limiting exposure to altcoin markets, miners can stack more sats for the same hashrate.

A few months ago, we released Switch: a profit-switching algorithm that increases the value of our miner's hashrate by switching between chains. We found that it produced, on average, 3.5 to 5.5% uplift over several months of testing. Full release article.

From our conversations with Equihash miners, the most popular strategy is to mine Zcash ("ZEC") and, on a weekly-basis, convert all the Altcoin proceeds into Bitcoin. Then, sell just enough BTC to cover OpEx and hodl the rest. We are going to refer to this approach as the base strategy.

The recent spike in Bitcoin price increased our curiosity for this research piece. Our theory was that miners would see their rewards increased by just getting credited BTC consistently instead of getting altcoin payments and then manually converting to BTC once per week. We are going to refer to this approach as BTC-quote strategy.

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To test our hypothesis, we collected data for over three months, which includes: ZEC PPS rate, ZEC-BTC exchange rate, and ZEC PPS rate in Bitcoin.

Calculations assume a 1 MSol miner and using Zcash as the base-chain. The results found here can be extrapolated to any size miner.

Base Strategy

To calculate the BTC proceeds of the base strategy, the first step is to calculate altcoin miner rewards. To do so, we calculated the average return over 5-minute interval buckets and aggregated that into weekly miner revenue.

The formula to get the 5-minute bucket rewards is: = 1,000,000 / 8,192 * Average ZEC PPS Rate * 300

  • Solutions per second 1,000,000 is equal to 1 MSol (i.e. Hashrate)
  • The constant for Equihash coins (such as ZEC) is 8,192
  • Average ZEC PPS rate over the interval calculated as 1 / Network Difficulty * Block Reward
  • 300 seconds in a 5-minute bucket

Once we figured out weekly rewards in ZEC to miners we need to calculate the BTC proceeds when exchanging. To do so, we took the ZEC-BTC rate at 00:00 UTC once per week and multiplied the exchange rate with the ZEC rewards.

BTC-quote Strategy

For the comparison scenario, we need to calculate the ZEC PPS rate in BTC. To do so, we take the ZEC PPS formula and multiplied it by the exchange rate for each 5-minute bucket: = 1,000,000 / 8,192 * Average ZEC PPS Rate * 300 * ZEC-BTC Exchange Rate

We get to the weekly BTC rewards in this scenario by adding the 5-minute miner revenue into weekly buckets.

What did we find?

10 out of 15 weeks, our BTC-quote strategy, was more profitable than converting funds at the end of the week (base strategy). Over the 15 week period, the BTC-quote strategy resulted in almost 2% more Bitcoin to miners.

/static/blog/limit-exposure-to-altcoins-table.jpg

How miners can get their hashrate quoted in Bitcoin?

Because it would be difficult to manage 4 different Altcoins, Switch, our Equihash Profit Switcher, quotes your hashrate directly in BTC. You will see your Bitcoin balance increasing every few minutes.

On top of the uplift, Switch generates by pushing hashrate to the most profitable Equihash chain you will stack more sats by getting paid directly in Bitcoin as opposed to manually exchanging funds.

Already a miner or interested in getting started?

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Guzman Pintos
Growth & Cofounder at Luxor Mining

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