Digital currencies have flourished in recent years, buoyed by the tremendous success of Bitcoin. These blockchain-based currencies, called altcoins, have attracted enthusiasts who enter the market by mining or buying them. To mine or to buy, however, can be a difficult decision; each altcoin is different from another, and the market tends to be volatile. In this work, we analyze the profitability of mining and speculation for 36 altcoins using real-world blockchain and trade data. Using opportunity cost as a metric, we estimate the mining cost for a coin with respect to a more popular coin. For every dollar invested in mining or buying a coin, we also estimate the revenue under various conditions, such as time of market entry and hold positions. While some coins offer the potential for spectacular returns, many follow a simple bubble-and-crash scenario, which highlights the extreme risks---and potential gains---in altcoin markets.

Pre-2018 CSE ID: CS2017-1019