Ethereum depends on mining or “proof of work”, which means that individual users competitively contribute computing power to validate blocks and transactions. They also earn ETH in the process.
Although Bitcoin originally introduced mining, it is increasingly difficult to profit from Bitcoin mining. As a result, Ethereum mining has become a compelling alternative for crypto users, especially for traditional IT components.
Before starting, it is important to take into account the costs, benefits and requirements.
Ethereum mining algorithm
Ethereum currently uses a data mining algorithm called Ethash.
For practical reasons, this simply means that Ethereum is moderately resistant to ASIC. ASICs specially designed for Ethereum mining will not perform much better than high-end general-purpose GPUs. It also means that ASICs built for Bitcoin mining will not mine Ethereum efficiently.
Ethereum’s data mining algorithm may change in the future. The developers are discussing whether to introduce ProgPOW, which could give Ethereum ASICs less advantage over GPUs. Whether you plan to operate with a GPU or ASIC, you will need to purchase a device before you begin.
Efficient mining devices have a high hashrate (MH / s), which means that they will solve the stones quickly and gain more ETH. Energy efficiency (W) is also important because electricity bills reduce profits.
Several high performance GPUs are currently in use:
- GTX TitanV 8, 656 MH / s, 2150W, sold at ~ $ 3000
- RTX 2080 8, 552 MH / s, 2430W, sold at ~ $ 800
- GTX 1080Ti 8, 440 MH / s, 2150W, selling at ~ $ 1000
There are also some high performance Ethereum ASICs on the market, including:
- Innosilicon A10 Ethmaster, 485 MH / s, 850W, ~ $ 5,650.00
- Innosilicon A10 Ethmaster, 365 MH / s, 650W, price unknown
- Bitmain Antminer E3, 180MH / s, 760W, ~ $ 1260, may become obsolete in October 2020
Upcoming ASIC models include:
- Zhejiang V10 microcomputer, 2200 MH / s, 1500W, price unknown
- Linzhi, 1400 MH / s, 1000W, price unknown
The best performing devices generate daily revenues of $ 5.00 to $ 9.00 in April 2020. Taking into account the energy costs, the profits for the same devices generate net profits between $ 3.00 and $ 6.00.
Profits and revenues are subject to change due to changes in ETH prices and personal electricity costs. Up to date information can be calculated on sites such as F2Pool, CryptoCompare or WhatToMine.com.
While higher hash rates provide more revenue, it is important to factor in initial costs, depreciation, and electrical efficiency. It can take years to recover the initial cost of the “price to pay” for any device, whether it is a GPU or an ASIC.
Unfortunately, ASICs can quickly become obsolete. If the developers decide to change Ethereum’s data mining protocol, an ASIC may even become useless. Even if the developers don’t make a deliberate change, ASIC manufacturers may find it difficult to provide up-to-date firmware, as seen with Bitmain’s Antminer E3.
Unlike ASICs, GPUs can still be resold because they are useful for gaming and general system performance. Constant mining can wear out GPUs without proper maintenance or cooling, which can drastically reduce their resale value, but they’re generally easier to resell than ASICs because they can be used for other purposes outside mining.
It is also possible to operate Ethereum with low-end, previous generation or integrated GPUs. However, the profit margin can be very low and electricity costs can make you lose money overall. As such, it is important to know your electricity cost before you start.
Ethereum’s mining protocol and network are evolving gradually, and these changes are affecting profits. On a positive note, Ethereum’s total hashrate has decreased since November 2018, which means that Ethereum’s mining is less competitive in a relative sense.
However, mining rewards have also gone down. In February 2019, Ethereum’s rigid fork in Constantinople reduced the block rewards from 3 ETH to 2 ETH, making mining less profitable in absolute terms. It should continue to decrease.
Likewise, a “hard bomb”, which will make it harder to mine each block, could be set off soon, although it has been delayed in several recent updates, including the January Muir glacier upgrade 2020.
These two changes are aimed at discouraging mining and making room for staking. Ethereum 2.0 will introduce staking, but it has been delayed continuously and will not fully replace mining at first, which means Ethereum mining is expected to remain viable for some time.
It is unlikely that “solo mining” will discover a block, which means that individual miners must join a pool. Operating by yourself can mean waiting months or even years before getting a payment.
As part of a mining pool, you will share the profits with other miners and pay fees. While this will slightly reduce your rewards, generally amounting to 0.2-2%, you will also earn rewards on a much more regular basis.
The largest pools include Sparkpool, Ethermine, F2pool and Nanopool:
Each pool has slightly different fees, payment patterns, and payment thresholds. Typically, the fees are around 1% and you will need to earn around 0.1 ETH before cashing. Even with these restrictions, however, it is generally worth having more consistent income.
You will also need to install and configure data mining software according to the instructions of your mining pool. Ethminer, CGMiner, Claymore, Geth and Phoenix Miner are all popular and available for free. Make sure to download from an official or reputable website to avoid phishing scams.
Cloud Mining Ethereum
Instead of buying your own ASIC or GPU, it is also possible to rent the Ethereum hash power from a remote provider. NiceHash, Genesis Mining, Minergate, CCG Mining and IQ Mining all provide this service.
Exploring in the cloud has a certain appeal: you don’t need to maintain or configure your equipment, pay the electricity costs or consider the number of hours per day that you will spend operating. You just need to buy a contract.
Unfortunately, cloud mining services are not as transparent or accountable as mining pools. You will have to pay in advance, which is a risk, as cloud services may stop operating or manage their funds incorrectly. NiceHash, for example, recently said it was unable to reimburse victims of an attack.
Although there are many voice reviews of cloud mining services, they are still quite popular. However, in general, it is almost impossible to make constant profits from the cloud. The only way to make money from mining is to maintain an efficient machine with affordable equipment and low cost of electricity.
Ethereum is not the only Ethash-based part. It is also possible to extract Ethereum Classic, QuarkChain, Ellaism, Expanse, EtherGem, Ubiq, Ether-1, Dubaicoin, Callisto, EtherSocial and Metaverse. These altcoins offer the possibility of even greater profits.
Although it is possible to extract the most profitable Ethash part at any time, Ethereum is generally the most profitable option. Fortunately, you are not limited to parts based on Ethash. Two miners like Claymore allow you to mine Ethereum alongside non-Ethash coins like Decred or Siacoin. This can increase profitability.
Predicting which altcoins will go up in price is another strategy. However, this is extremely difficult, and if it were possible, it might be more efficient to simply buy these counts when prices are low. However, extracting altcoins is a good way to position yourself in altcoins without having to buy them from sometimes questionable cryptocurrency exchanges.
Ethereum mining is a viable option, especially compared to mining Bitcoin. Benefits include:
- Reasonably high profits
- Support for GPU extraction, at least for high-end GPUs
- Several parts to extract and double mining support
- Lots of mining areas to choose from
There are also some negative qualities:
- High initial costs for GPU and ASIC devices
- Uncertainty about the future of ASIC miners
- Increased difficulty and decreased block rewards
- Staking could replace mining in the coming years
Overall, mining is a great way to gain a better understanding of cryptocurrency and gain valuable technical know-how. If done correctly, it is possible to generate constant profits while creating a portfolio of cryptocurrency funds.