About NiceHash (and what I don’t like)

I first learned about NiceHash from a recent article at PC Perspective called Let’s Talk About Mining – Cryptocurrency Revisited. I read the FAQ, I was astounded with the amount of profit I was supposed to be making with my GTX970 and I downloaded the mining software.

There is a lot to like about NiceHash, and you will find much information and praise on the net. I agree with the general consensus that it is the best way for a beginner to try and get some coins. But there are some things about their model that I am not entirely happy with.

NiceHash Payouts

NH allows you to plug a BTC address from your own wallet (external-wallet in NH parlance) or — if you register an account with them, which is not required for sellers — they also provide you with a BTC address of their own (nicehash-wallet).

The one big advantage of using your nicehash-wallet is that their service will alert you via email if your miners stops working, but this is the only benefit I see if I am only selling.

Withdrawals from this wallet are taxed at 0.3% or 0.001 BTC (whichever is bigger) plus blockchain fees, even though all payments to it already carry a 2% incoming fee (true, that fee was recently decreased from 3%).

Sadly, payments to external-wallets come with their own set of problems as a result of the payment schedule. Here is what NH say about payments to external wallets:

• Once per day for external-wallet unpaid balances, greater than 0.1 BTC
• Once per week for external-wallet unpaid balances, greater than 0.01 BTC

However the fee is different for different schedules:

• Fee for payments with unpaid balances greater than 0.1 BTC — 3%
• Fee for payments with unpaid balances greater than 0.01 BTC — 4%

At the time I am writing this, mining with a single GTX970 yields approx 0.0014 BTC per day. This means a little over 7 days if I am mining 24/7, or two weeks in practice, because I can’t push it to go under 7 days with this hardware.

The second issue is that these payouts are automated, so I have no chance to say to NiceHash to keep my payouts until I reach 0.1 BTC. So basically all small miners are bound to be paid much less frequently and charged more in fees; the only way to change this is increase your hashing power by a factor of 10×.

NiceHash Income Model

The BTC which NH sellers get paid with come from buyers who purchase certain amounts of hashing power for whatever purpose (the financial benefit of such purchases is still unclear to me but I will research it).

NiceHash accept two types of  orders, similar to what stock exchanges use: you have a standard bid and a fixed order. Fixed orders are easy to understand: you pay a certain price for a fixed amount of hashing power. Bids allow you to achieve better cost, but then somebody may outbid you and you will get nothing, which means you are wasting time instead of mining…!

From a seller’s point of view I find such arrangements to be sub-optimal: if buyers become scarcer and/or the pool of sellers grows, your profitability will diminish, which will possibly make it much less profitable to take part in this pool rather than mining on your own (e.g. Ethereum) or joining a mining pool. And in any case the degree of unpredictability is higher because besides the volatile price of the coins you’re mining you now have to accept the volatile behavior of NiceHash buyers.

 

It is fair to note that the terms & fees defined by NiceHash are a result of the bitcoin market situation (blockchain transactions are slow to get confirmed and require larger fees…) But still I will keep looking for something better.