Estimate of the Profitability that is generated with the Mining of Cryptocurrencies and its tax Implication in Paraguay for the year 2022

Abstract

Cryptocurrency mining is possible thanks to the internet, the miner connects a certain type of hardware to the network and downloads the corresponding software, thus forming a “node”. The network and downloads the corresponding software, thus forming a “node”; and in an automatic way, the computer equipment automatically the hardware com- petes against other miners trying to decipher certain algorithms. The first one that succeeds in solving the algorithm is allowed to attach a new block with information to the blockchain and receive, as a “reward”, new cryptocurrencies (Zocaro, 2020). This novel economic activity had its beginnings in 2009, arriving in Paraguay a few years ago. Despite not being regulated at the national level, this economic activity is carried out in different cities of the country accord- ing to what has been published in different media publications. Therefore, the purpose of this research is focused on the determination of an estimated Tax income that the Paraguayan Tax Administration does not receive for the activity of cryptocurrency mining activity. Using the approach of the qualitative research method, and literature review. Also, prospective research is proposed. The calculation of profitability is performed with the web tool MinerStat, defining the following parameters: mining equipment model (Bitmain Antminer S19 XP), currency (U.S. dollar) and electric- ity tariff established by the National Energy Administration (ANDE) according to Resolution P/N° 46984. Tariff of 0.0082 USD kWh for the calculation of profitability of 1 Bitmain Antminer S19 XP machine, rate of 0.0066 USD kWh

for the calculation of profitability of 50 Bitmain Antminer S19 XP machines. Based on the profitability calculations obtained with MinerStat, it is presumed that, with 50 mining machines, in a period of 12 months, considering the costs of electric power and internet service, the estimated value of tax income that the tax administration will not receive is G 96.965.475.