Kaspa has recently experienced a surge in profitability, with some moments showing gains of up to five times the normal rate. This spike has generated excitement among miners, investors, and cryptocurrency enthusiasts alike.
Many are rushing to buy ASICs (Application-Specific Integrated Circuits) and even exploring the possibility of mining with video cards. However, is this increase in profitability as sustainable as it seems, or is there more to the story?
Kaspa Profitability Surge
The reason behind this surge is linked to the krc20 network, where tokens have now been introduced. Every time new tokens are created, or transactions occur on the network—such as buying and selling tokens—it leads to an increase in the Gas Price, the transaction fee. As a result, the blocks in the Kaspa blockchain become inflated.
In a short period, the amount of Kaspa spent on fees reached 76,673, with more than 60 million transactions processed on the krc20 protocol and over 10,000 tokens created on the network. Each new token brings more transactions, further inflating the blocks. For example, at one point, Kaspa blocks increased from the typical 82 Kaspa per block to as much as 400 Kaspa.
Temporary Nature of the Profitability Spike
While this surge might seem promising, it’s important to understand that this is temporary. Once the network returns to normal transaction levels, block sizes return to their usual range of 82 to 90 Kaspa. This means that the elevated profitability quickly subsides, and the increase in rewards is short-lived. For instance, shortly after reaching peak block sizes, the profitability quickly began to decrease, falling from 9 Kaspa per block to around 8.19.
Miners and investors who jump in during these peak moments risk being misled by the fleeting increase in returns. The profitability of Kaspa mining is subject to fluctuations, and making investment decisions based on temporary highs can lead to disappointment when the profits return to normal.
ASIC Mining: Profitability and Payback Periods
For those considering investing in ASICs to mine Kaspa, it’s essential to carefully assess the profitability of different models. A 34,500 hs5 pro, one of the best options for those who don’t pay for electricity, has a payback period of 10.3 months, offering 9.7% profitability per month. However, if electricity costs are factored in, the monthly profitability drops to just 3.1%, extending the payback period to 32 months.
For miners who pay for electricity, only the most efficient ASICs, such as the KS5 Pro, remain profitable. Other models, even if they don’t consume much power, often fail to yield enough coins to cover electricity costs, making them unprofitable.
The Impact of Kaspa’s Emission Reduction
Kaspa’s profitability is further impacted by its scheduled emission reductions. Each month, the number of coins that can be mined decreases by 6%, regardless of network activity or coin value. This means that even during times of higher profitability, the overall rewards are gradually decreasing.
For example, a KS Z0 Ultra miner, which produces 400 GH/s, would take 15 years to mine 1,097 Kaspa—far less than the 2,600 Kaspa you could buy outright with the same amount of money. Given these reductions, it’s crucial to understand that Kaspa mining profitability will continue to decline over time, regardless of short-term fluctuations.
The Risks of Buying ASICs During Profitability Surges
With these temporary spikes in profitability, many people are rushing to buy ASICs, fearing that they might miss out on future gains. However, this mindset, known as FOMO (Fear of Missing Out), can lead to impulsive decisions that might not pay off in the long run. Some miners have already invested in used ASICs, only to see profitability return to normal shortly after.
Before making any investments in mining equipment, it’s important to do the math and consider whether the purchase will be worth it over time. For those who pay for electricity, many ASICs will not generate enough income to cover their costs. Even for those who don’t pay for electricity, it’s essential to consider whether the long-term return justifies the initial investment.
Conclusion
While Kaspa’s recent profitability spike has created excitement in the mining community, it’s essential to approach this situation with caution. The increase in block sizes and profitability is temporary, and Kaspa’s scheduled emission reductions mean that mining rewards will continue to decrease over time. Investing in ASICs during these high points can be risky, especially for those who pay for electricity or don’t account for the long-term reduction in profitability.
Ultimately, careful planning and calculation are crucial for anyone looking to invest in Kaspa mining. Avoid making decisions based on FOMO and ensure that your investment is sustainable in the long run.