Kaspa Mining in Crisis? Analyst Did the Math

Kaspa's price experienced a 7% surge on "Black Monday," trading above $0.063. This is noteworthy, considering Kaspa boasts a strong global community. However, YouTuber "Sebs" (over 100k subscribers) recently released a viral video highlighting concerns about Kaspa mining profitability.

Declining Mining Profitability

Sebs' analysis reveals a significant downturn in Kaspa mining profitability compared to two years ago. This is attributed to two primary factors: decreasing coin prices and Kaspa's unique 5% monthly emission reduction schedule, which continuously lowers mining rewards. Consequently, the network's hash rate is falling as miners become unprofitable and cease operations.

What makes this analysis significant is Sebs' generally positive stance on cryptocurrencies. He felt compelled to address the issue because Kaspa ASIC manufacturers are promoting new machines that his calculations deem unprofitable. His video utilizes real-world data to support his claims, rather than relying solely on opinion.

Sebs suggests alternative mining options, including ALO miners (acknowledging their risk), the Alphaex DG Home 1 (for Dogecoin and Litecoin), and the Ipolo Series (for Ethereum Classic). These alternatives are presented as more home-friendly, energy-efficient, quieter, and compatible with standard residential power, unlike the energy-intensive Kaspa ASICs.

The Numbers

Sebs' in-depth analysis reveals that even the new IceRiver KS7 and KS7 Lite miners, despite efficiency improvements, fail to achieve a positive return on investment (ROI). Using a spreadsheet developed over a year, he considered miner costs, power consumption, emission reductions, projected network hash rate, and varying electricity prices. His findings indicate:

• $0.15/kWh: Neither miner becomes profitable.
• $0.10/kWh: Miners might profit for approximately four months before becoming unprofitable again.
• **$0.05/kWh:** After two years, the KS7 Lite would still show a loss of approximately $800, while the KS7 would be roughly $3,500 in the red.

Furthermore, Sebs compares mining to direct investment. A tripling of Kaspa's price would yield minimal mining profits, while a direct investment of the same amount would generate significantly higher returns. For instance, a $1,400 direct investment could yield approximately $2,800 profit with a price tripling, whereas mining would yield only about $32.

The core problem, according to Sebs, lies in Kaspa's design: the 5% monthly emission reduction creates a compounding decline in revenue that miners cannot overcome. This monetary policy means that even with more efficient hardware, the total rewards continually shrink.

This creates what Sebs terms "the moving target problem." Miners starting today already face lower emissions than a year ago, and within six months, they'll be mining 25-30% fewer coins due to the compounding reduction.

Sebs acknowledges that some miners might benefit from business tax incentives, but for average retail investors, directly purchasing Kaspa is generally more financially advantageous.

In conclusion, Sebs' analysis suggests that Kaspa's emission model hinders long-term mining profitability, forcing miners to prioritize short-term gains. Even current profitability is negative unless electricity costs are exceptionally low or significant price appreciation is anticipated.

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