Mining is still considered to be one of the fastest and cheapest ways to become a proud owner of cryptocurrency riches. It seems to be easy-breezy: you install a mining rig, maintain its 24/7 functioning, and reap the profit.
However, not all cryptocurrencies are equally simple in mining. Is Ethereum worth hunting for at the end of 2018? It’s time to debug the myths.
What is Ethereum mining?
The process of Ethereum mining is pretty much the same a Bitcoin’s. For every block of the transaction, miners their computational power to solve mathematical puzzles until one of them wins. The first miner to process the data is rewarded with coins.
As explained by BTC manager:
For the uninitiated, mining involves running the computer continuously as all the systems on a network compete among each other to solve complex numerical problems. The first system to crack the problem earns a set amount of ether or Bitcoin.
Technically, miners run the block’s unique metadata (such as timestamp and software version) through a hash function and change the ‘nonce value’ that influences the hash value. If one miner finds the hash, other miners stop working on the current block and are automatically redirected to process the next block. This approach is called ‘proof of work’. In the nearest future, Ethereum team plans to make the switch to ‘proof of stake’ protocol.
Typically, a miner finds a block every 12-15 seconds. If miners start solving the puzzle too quickly or too slowly, the algorithm automatically changes the difficulty of the problem so that miners would get back to the 12-second solution period.
Does it mean that the chance to get a block depends on luck?
Both yes and no. With Ethereum mining, luck and the amount of devoted computing power are important.
ETH mining profitability: What it depends on?
Every crypto enthusiast should decide for oneself whether mining Ethereum worth it in their personal case. There are a few factors you should consider before buying hardware or a cloud mining contract.
Hash rate. This is the rate at which a mathematical problem is being solved to verify a transaction. The higher the hash rate, the better will be Ethereum mining power.
Difficulty level. As we’ve mentioned, Ethereum algorithm adjusts the difficulty of mathematical puzzles according to the speed miners resolve them to keep the 12-second mining time. Therefore, the more miners join the game, the higher will be the difficulty level.
Electricity consumption. Buying mining hardware isn’t enough: you have to keep it running by providing a continuous power source and cooling. That means enormous electricity bills. Is it worth to mine Ethereum when your earnings don’t cover electricity expenses? Definitely, not.
Add to that the cost of mining hardware, and you will understand that mining for Ethereum is a bit more complicated than most people think.
Look at the picture: the recent price falling has caused recession of users, and, consequently, lower difficulty. However, it is still enormous compared to other cryptocurrencies and initial condition.
Cloud vs hardware mining
If you don’t want to spend thousands of bucks on mining equipment, there’s always a chance to buy a contract for cloud mining – in this case, you won’t have to do anything at all. However, the most profitable contracts are typically concluded for at least a year or two. The hash rate stays the same while the difficulty level continues growing. That means that the contract that was once profitable may become totally useless within a few months.
Besides, it’s highly important to find a reliable cloud mining website – there’s a huge amount of scams and frauds.
Is mining Ethereum worth it?
Let’s face the truth: the biggest profits have already been gained. During 2017-2018, Ethereum raised in price considerably, and that attracted a lot of people. Millions of miners became suddenly interested in this way of making profit, so the difficulty of mining has risen enormously.
To top it off, the current situation on the market has made things only worse: Ethereum fell in price from $1,300 to $88. That totally devalues the process of mining.
What do experts say?
According to the recent report from CNBC, the cryptocurrency market will soon be filed as a history – this activity is no longer profitable.
A recent study by Susquehanna proves that it’s not worth mining Ethereum anymore: the profits per month have fallen from $150/month in summer 2017 to almost zero today.
This situation mostly takes place due to Ethereum price nosedive: it has caused a domino effect on the entire mining industry. The process becomes unattractive to miners and that affects the hardware producers. For example, Nvidia GPU and chip manufacturer has lost about $100 mln because of that.
Here’s what the company’s representative said:
We estimate very little revenue from crypto-related GPU sales in the quarter, consistent with management’s prior commentary that they were including no contribution from crypto in their C3Q18 outlook.
Such mining giants as Bitmain have managed to create a monopoly in the digital mining market: recently, Bitmain’s hashrate already exceeded 40% on the Bitcoin network, and it is going to reach the threshold of 50%. But with Ethereum, things are different.
What’s the trick?
Here’s another hidden pitfall: the specific proof-of-work algorithm used by Ethereum (it’s called ‘ethlash’) is made so that mining would be harder with expensive ASICs – special mining chips.
That means that dedicated ASICs aren’t suitable for mining Ethereum. Besides, since Ethereum will move from proof-of-work to proof-of-stake protocol, buying an ASIC might be a bad idea because it won’t serve long.
Is Ethereum worth mining with a PC or a smartphone? Again, not – they won’t provide enough calculating power. Before you select any hardware or cloud mining plan, make thorough calculations – it will give you the understanding of perspectives and risks.
So, I stand no chance?
If you build a mining rig in hope for Ethereum difficulty to decrease with the number of miners subsiding, that won’t make any sense. However, you can switch to another cryptocurrency – this might be a great chance to compensate for hardware and electricity expenses.
The worthiest cryptocurrencies with optimal difficulty are:
Monero. This is a digital currency for anonymous transactions. Its network was specifically tailored to resist implementation of Monero ASICs, that’s why this coin can be mined on your home computer. The mining process is simple: download a wallet to store coins (the official Monero GUI is recommended). Now download the software that supports Monero, for instance, Guiminer or MultiMiner. Once you install it, the software will use the processing power to generate profit for you. If you want to get maximum coins, use AMD graphic cards – they’re in short supply, but you can still find some. For example, Nvidia graphic cards are still available.
Dogecoin. Opposite to Bitcoin, Dogecoin cryptocurrency was made to add new coins annually. That’s added incentive for all miners participating in the process. The process of mining is the same: create a wallet, use your personal computer to install mining software. AMD and Nvidia cards can be used to boost the process. If you choose GPU mining, then install cudaminer or the cgminer software. Note that mining Dogecoin doesn’t impact your device because the process is running on the background.
Vertcoin was created specifically for minor mining operations: it uses proof-of-work consensus, but is protected against mining by ASICs. Therefore, huge mining operations cannot dominate the Vertcoin Blockchain as it happened to Bitcoin. Implementing its philosophy of developing “the people’s coin’, the team created a special miner for generating VTC. This software can be downloaded for free from the official website, and supports CPU and GPU mining. Once you install and download the software, you will need to select a mining pool depending on the amount of available computing power. At the moment, Vertcoin can be mined with AMD and Nvidia graphic cards.
Bytecoin. This is another cryptocurrency that can be mined on a home computer. Bytecoin puts an emphasis on solo mining – it’s designed to be an easy process for Bytecoin users. They only need to download a wallet and run software on their computer: when the program synchronizes with Bytecoin’s Blockchain, the wallet should be specified. To boost earnings, it’s better to join a mining pool that supports CPU mining. bytecoin.party is a good case in point – it doesn’t charge fees. Alternatively, you can download compatible mining software, for example, xmrig. GPU mining is also available.
If you doubt whether Ethereum mining worth it, try altcoins – there are still many decent variants around. Considering the volatility of coins, you can still benefit from price fluctuations. There’s no need to own a huge mining rig – even your PC can generate you a small income. Just keep an eye on electricity costs.
So if you still ask yourself “Should I mine Ethereum?’’, change your mind. The difficulty is too high to handle it. The cruel truth is that mining cryptocurrency is not a ‘get-rich-quick’ scheme anymore. This is a business in which people invest a lot of money and time before they enjoy a substantial passive income.
While mining solo is still available, it’s highly recommended to join a mining pool because you will reap benefits from a larger supply of processing power and speed which will result in better returns. MultiPool, CoinEx are among the most well-established mining pools.