"It's a scam, if you could actually make money from it they would be doing it themselves". When I started looking for articles on how to make money from Nicehash, this was almost always the conclusion of the audience.

Lucky for us, that comment is not 100% true. Making money buying hash power on Nicehash is possible, but it's going to take a little more effort than you were expecting.

Before we start:

• If any of the below is incorrect, please let me know and I will fix it.
• It turns out explaining all of this takes a bit longer than I expected. If you would like more detail on some of the points below, let me know in the comments.
• You're going to have to read the help sections on Nicehash before the below makes sense.
• I'm going to completely ignore Nicehash fixed orders in this article, simply because I don't believe you can consistently make profit from them. I'm sure someone will prove me wrong, but for now this is my view. The below assumes you are always placing standard orders.

A very quick overview of how Nicehash works (way oversimplified)

• On the one side, you have a heap of people offering to sell the hashing power of their mining rigs to the highest bidder. It always amuses me when Nicehash miners refer to the currency they are mining. The truth is that Nicehash miners are not mining coins, they are selling hash power, for which they are paid in Bitcoins. The profit sellers make is 100% dependent on the price’s buyers are willing to pay. Of course, the price buyers are willing to pay is closely correlated to the coin they are mining against.
• On the other side, buyers choose a mining algorithm and load a bid for a certain amount of hash power (in MHs, GHs, THs or even PHs) at a certain price. Buyers specify the pool and credentials that sellers need to mine to for their order.
• Nicehash matches buyers to sellers. Importantly, sellers are higher priority to Nicehash, so seller's hash power will always be allocated to the most profitable bids, across the algorithms supported by the seller.
• Where buyers and sellers are matched, Nicehash directs the applicable amount of hash power to the mining pool specified by the buyer. The mining pool will pay the rewards to the account/address configured by the buyer.
• For buyers to make profit, earnings paid by the mining pool need to exceed the cost of the original bid.

Why do sellers mine on Nicehash and not directly to a mining pool?

• Convenience seems to be a big consideration.

• Nicehash automatically switches miners to the most profitable algorithms.

• Because profit relies directly on the bids by buyers, miners can sometimes exceed the profit they would make by mining directly to a pool. I have seen this happen when there is a lot of hype around a new coin being launched, and also when a new buyer doesn't know what he is doing and loads an order for a price that is obviously just too high.

• Nicehash sells hash power per algorithm, and not per coin. This is actually very important as it is difficult to make profit against the "mainstream" coins, everyone knows about them and is trying to mine them at a profit. Profits are easier to make when you are competing against a smaller audience.
  Example: a buyer might find a new coin running on the Ethash algorithm that is more profitable than Ethereum. He can then direct his Nicehash Dagger Hashimoto hashing power to that coin for the time that its profitability exceeds Ethereum. The seller will see returns higher than Ethereum, even though he might not even know about the new coin.

• Miners are paid in Bitcoin. The reason of course is that buyers place their bids in Bitcoin, regardless of the algorithm they want to mine.

Why would buyers buy hash power on Nicehash?

• To try it once expecting massive profits for no effort, make a loss and then never try it again.
• Once off opportunities to make a quick profit when new coins are introduced on existing algorithms, when the price is still high (think the price of ZCash when it was first introduced).
• To test new mining pools, or new coins.
• For profit.

Why would buyers mine via Nicehash instead of just buying coins?

• To try it once expecting massive profits for no effort, make a loss and then never try it again.
• Nicehash provides a unique opportunity to make money when markets are flat. Usually one would buy coins and hope that the price will rise to make a profit. However, on coins where the price is flat and doesn't really fluctuate, one can still make money by buying hashing power at a discounted rate and getting slightly more value mined in return. In fact, flat markets are almost the best time to be buying hash power on Nicehash.
• Bidding for lower mining prices is a completely different game from trying to make good investments. I believe some people are just more comfortable working to get the best deal on Nicehash, rather than trying to predict markets.

Alrighty then, I'm going to give it a go ...so what do I do first?

• You need to decide how much hash power you want to buy. This is going to depend mainly on the amount of hash power available on Nicehash and how much you are willing to pay.
• You need to decide how much you are willing to pay. You will need to take the below into account:
  • You need to estimate how many coins you will receive per day at the current network difficulty, taking into account the coin's block time and block reward. More on how to do this at the bottom of this article.
  • You need to factor in the cost of placing the order, the percentage that Nicehash will take as a fee and the percentage your mining pool will take as a fee. Note that if you want to convert your coin back to Bitcoin, then you need to factor in the exchange fee as well. You need to deduct these costs from the coins you estimated you would earn.
  • You need to factor in luck, which plays a big part in mining proceeds. Oops, sorry, you can't really, the best you can do is to compensate by multiplying your calculated earnings by a "luck percentage" which you will need to decide on. :)
  • You need to work your answer back to Bitcoin, because you are going to place your order in Bitcoin.
• At the end of all of this, you should have a theoretical amount of BTC that you can earn per day at the hash rate you want to buy.
• You now need to compare your projected BTC earnings to the prices on Nicehash to see if you can make a profit. If not, you're going to have to move on to the next coin.
• If you find a coin that might be profitable, set a limit for yourself on the amount you are willing to bid. You could (for example) decide that you are willing to pay an order price up to 90% of the potential earnings you have calculated.

Decide which mining pool you want to mine against

• Consider that you are going to be sending hash power to a mining pool for a very specific period only (usually a few hours). You therefore can't choose a small mining pool that only finds one or two blocks a day. Generally, try to aim for pools that find blocks every 2 to 20 minutes. The block time of the algorithm you will be mining will also play a role here.
• I have read comments that mining pools with a payment method of PPLNS are not suitable for Nicehash mining. These pools calculate payment on the last N number of shares submitted by a miner (PPLNS = pay per last n shares). The thinking goes that because you will be mining in "bursts" from Nicehash, you might submit a large number of shares but if the block is only found quite a bit later, your shares will not be considered because they are not part of the last N number of shares considered for the reward. If the pool is big enough and finds blocks often enough, then my experience is that PPLNS will not really play a role. In fact, all the pools I mine from Nicehash are PPLNS.
• I have heard comments that mining pools with a payment method of PPS (pay per share) are fantastic for Nicehash mining, because you get paid for every share submitted, regardless of when blocks are found. This is true, but keep in mind that PPS pools charge higher pool fees to compensate for the additional risk the pool owner is accepting (usually between 5% and 7%).
• You need to factor in how regularly the pool pays. The less regularly a pool pays, the higher the risk that the price of the coin you are mining can fall before you can sell it, or convert it to another currency. If you're planning to stay in the same currency, then you don't have to worry about this risk. Some pools allow you to set shorter payment intervals but charge a fee, you would need to weigh the risk against the additional fees incurred.
• Do your research on the different mining pools.
  • One of the easiest checks to find the most profitable pool is to divide the reported pool hash rate by the number of blocks found in the last 24 hours, to give the hash rate required per block in that pool. Pools with lower hash rates per block are more profitable, but keep in mind that luck plays a role and the pool hash rate fluctuates all the time. Therefore, do this check across pools for a few days and check the trends. If a pool consistently has a higher average hash rate per block than other pools, then it might be a good idea avoiding it and mining against a pool with a consistently lower hash rate per block.
• Read reviews and comments. There are well known large pools out there that I firmly believe are stealing from miners. You will pick up on this quickly if you do your research.
• Use the pool verificator in Nicehash to ensure the pool is compatible with Nicehash. Some pools set their difficulty too low, making them unsuitable for Nicehash mining.
• Also check if the pool has ports reserved specifically for Nicehash. If so, use them as they likely run at a higher difficulty, making for more efficient mining.

Place your order

Once you have completed all of the above, you are ready to mine. You can now create your order.

Note that Nicehash provides for EU pools, and US pools. Although it generally is preferable to match the Nicehash region with the mining pool's region, there is no reason why you cannot mine Nicehash EU against a US pool, or vice versa. If one region is significantly cheaper than another, then go for the cheaper option.

Monitor your order

Once your order is running, the following can happen:

• Rising price
  • Another buyer can outbid you, which will cause your miners to be reallocated to that buyer. You can increase your price to get the miners assigned back to you, but this will obviously reduce your profit. Alternatively leave your price "as is" and wait for the price to fall again for your order to resume.
  • Reduced profitability
  • The price of the coin being mined can fall, resulting in your profit margin decreasing, or your order running at a loss.
  • The network difficulty of the coin you are mining can increase, effectively meaning you are getting less hash power for the same price.
  • You can exceed the bidding limit you set for yourself.
  • Your options are:
    • Throttle your order by reducing the hash rate. You will be mining at a slower hash rate, with the idea of increasing your hash rate again when conditions become more favorable.
    • You can reduce the price on your order. Note that you are only allowed to lower your price every 10 minutes, and only by a small amount at a time. If your profitability is falling rapidly, this is not a good option.
    • Throttle your order while reducing your price, increasing your hash rate again when you have reached a suitable price.
    • You can cancel your order. The remaining funds will be returned to you, as well as a percentage of the order fee. However, when you create a new order later you are effectively "penalized" via the fixed fee levied on new orders. You therefore cannot cancel orders too often, as those fixed fees will add up and eat into your profitability.
• Falling price
  • The Nicehash buy price can fall. This is good news for profitability, but only if you can get the price on your order reduced. As per the point above, you can try to reduce your order price but this is a painfully slow process. Alternatively, you can cancel your order and create a new order at the lower price but you cannot do this too often, due to the fixed order price being levied on all new orders.

In summary

1. Calculate the potential returns for a coin.
2. Deduct Nicehash fees, mining pool and exchange fees from the potential returns calculated.
3. Set a bidding limit as a percentage of possible returns.
4. Find a large pool with frequent blocks being mined, with low fees and frequent payments.
5. Create your order.
6. Monitor your order and make adjustments as you go.

After reading all of the above, it should be clear that you cannot just do a thumb suck on an order price, load an order and wait for the profits to roll in. In fact, even if you do all of the above I am of the opinion that there is no way that you will be able to manually do all the ongoing calculations and adjustments you are going to need to do to make a profit.

You are going to need a bot, end of story.

I am not familiar with the one provided by Nicehash but over time have developed my own version in Python. It basically checks network hash rate and difficulty, the coin price on the exchange I use, the price on Nicehash, and a projection on whether it thinks the price will fall in the next 4 hours every 20 seconds, and makes the necessary adjustments. Whether you go with an "out of the box" bot, or develop one yourself, take the time to investigate the options and see if you can find something that will work for you.

Even with a bot running full time, I still have days where I don't make any profit. When I do make profit, it's a little bit of extra spending money, not the type you can quit your day job for. Thankfully, I rarely have losses, and when I do they are small. The challenge is that there are numerous competing bots running on Nicehash and their owners will tweak them if you cause them to lose profits, so consistently making money requires a lot of monitoring and tweaking to ensure your bot remains competitive.

How to calculate potential returns

In one of the points above, I mentioned that you need to estimate the number of coins you will receive above. Here are some of the methods you could consider:

• whattomine.com does the calculations for you. For bots, you can just call the json version of the page (click on the JSON button top right on the homepage, for the JSON URL and to see what it looks like).
• I currently calculate the number of coins I will receive by multiplying the block reward by the number of blocks per day (blocks per day = 24 hours divided by block time), getting these stats from whattomine.com. I then multiply the total block reward for the day by the BTC price on the exchange I use, to get the total number of bitcoins the whole network is generating per day. I then multiply that by my percentage of the total network hash rate (the hash rate I am buying on Nicehash divide by the total network hash rate). This gives me the total rewards (more or less) that I could potentially earn. I then deduct fees and make provision for luck by reducing the rewards by a percentage. After all of that, I work out how much I am willing to bid.
• I'm trying to figure out how to calculate total rewards using difficulty, which might be more accurate, not sure yet. If someone has an easy and standard way to do this across algorithms, please leave a comment.
• Nicehash also has profitability calculators, I've never used those so cannot comment.

Have I missed anything? Do you have any tips? Do you disagree with any of the above? If so, leave a comment and let's chat.