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Mining Trends: Is ETH Mining Still A Good Choice

Mining Trends: Is ETH Mining Still A Good Choice

What indicators should be considered when we buy an ETH mining rig?

When choosing the right ETH mining rigs, like picking Bitcoin rigs, the most important consideration is the payback period.

Given that the daily net mining profit equals the mining revenue minus the electricity fee, we will focus on two aspects. The first consideration is the mining revenue, which depends on the stability and hash rate of the mining rigs. When the Ethereum network hash rate and token price remain the same, rigs with higher hash rates and greater stability will generate higher mining revenues. The second aspect is the electricity fee, which relates to the rig's mining power consumption and the electricity price. Therefore, to obtain higher daily net mining rewards, a miner needs to raise the mining revenue and lower the electricity fee.

The payback period equals the mining equipment cost divided by the daily net mining rewards. Cheaper rig costs and higher daily net mining rewards mean that the payback period will be shorter and mining will be more cost-effective. Hence, regarding the payback period, the key indicators of an ETH rig include price, hash rate, performance per watt, and stability, which are similar to those of BTC mining rigs.

ETH is primarily mined using GPUs. Compared with AISC miners, GPU miners feature more token types (including lesser-known tokens) and higher scrap values. When choosing mining rigs, these two unique advantages should also be considered.

The two mainstream GPU brands, AMD and Nvidia, have launched many different models, including common AMD GPUs such as 470, 580, 590, and 5600XT and typical Nvidia GPUs like P106, 1060, and 1080.

When it comes to the mining of less-developed tokens, Nvidia is more cost-effective than AMD because it features a more developed ecosystem. However, concerning Ethereum mining, AMD outperforms Nvidia as it is more compatible with ETH's algorithm. That is why a miner needs to choose the type of GPU according to the target token.

The scrap value of Nvidia GPUs is generally higher than that of AMD GPUs, and just like in the traditional hardware market for PC, newer models have higher scrap values.

Therefore, the final choice of GPUs depends on your preference. If you are an ETH miner looking for quick payback, then AMD would be a good choice. On the other hand, if you are focusing on less-developed tokens, you might want to consider Nvidia.

The current status of ETH mining profit

Let's first look at third-party statistics. In July this year, ETH miners earned $143.8 million, a record high in 23 months, and transaction fees accounted for nearly 23% of the earning.

The Ethereum mining profit consists of two parts: basic block reward, which stands at 2 ETH per block, and on-chain transaction fee.

This year, as the ETH price continues to rise, USDT-margined contracts have raked in increasing profits. Meanwhile, the ETH transaction fee surged along with the boom of DeFi yield farming. Therefore, ETH miners have benefited from the rising ETH price as well as the soaring transaction fee, which is the primary reason behind the surge of Ethereum mining rewards.

Against such a background, the payback period of GPU miners has become significantly shorter. Last year, it took 300 to 400 days for a second-hand GPU miner to recover its cost, whereas the daily profit of an 8-GPU mining rig with a P106 mining card was $2 to $2.5. Now, the daily profit of the same rig has reached $6-$8. In mid-August, the daily profits peaked at $10-$12. Even for new ETH rigs, the payback period has now been shortened to about 250 days or less, which is much shorter than that of BTC miners. This is the biggest reason why many are optimistic about GPU mining.

Apart from this, mining Ethereum also features the following merits:

l First and foremost,

Ethereum is noted for its great potentials.

l Secondly,

Ethereum now has more on-chain transactions and higher service fees. As mentioned above, DeFi ecosystems have boomed over recent months, which has enabled tenfold and hundredfold token growth. Once the DeFi sector reaches a certain scale, speculators will transfer ETH to decentralized exchanges like Uniswap for yield farming, which makes the Ethereum blockchain more congested. Many DeFi projects suffer from high volatilities and significant risks. Moreover, the rising popularity of DeFi projects further congests the ETH network with massive transactions. This in turn makes it more expensive to transfer ETH. In short, if you plan to stake tokens for yield farming, then you must first pay tolls to have them transferred. In this process, the tolls are charged by miners. In the past two months, the ETH transaction fees accounted for approximately 20%, which means that the daily mining rewards have increased by about 20%. Recently, the daily fees peaked at 20,000 ETH, whereas the daily block reward is only 13,000 ETH. As mentioned earlier, when everyone is busy staking DeFi projects on Uniswap, GPU miners only have to sit still and collect the tolls. In the long run, excessive service fees will do harm, but as long as the ETH ecosystem grows steadily and new trending applications or protocols continue to pop up, the miner can always reap the benefit of such unexpected perks.

l Thirdly,

ETH's algorithm involves DAG, which will occupy the memory of GPUs. By the end of this year, the DAG size will be close to 4G. By then, a large number of 4GB GPU miners will no longer be able to mine Ethereum. According to initial estimates, there are more than 3 million 4GB GPUs in the ETH network, accounting for 50% of the network hash rate. Owing to the strong performance of ETH this year, many of these mining rigs may be upgraded to 8GB GPUs. However, due to upgrade failures and time costs, the 4GB rigs will still suffer a certain loss. As such, though we cannot estimate the specific number at this stage, a loss of computing power is very likely.

l Fourthly,

Ethereum mining features a low proportion of electricity fees in the total cost and more stable returns. At the moment, electricity accounts for 15% to 25% of the ETH mining cost, which is much lower than BTC mining. At the same time, the supply of GPU miners will not surge as the production capacity of GPUs is limited. Therefore, the hash rate of GPU mining is relatively stable, and so are the profits of USDT-margined contracts for miners.

The impact of algorithm change on ETH miners

With its upgrade to ETH 2.0, the ETH network will shift from PoW to PoS. By then, ETH mining may no longer be possible; yet that will not happen until Phase1.5.

ETH 2.0 will be released in four separate phases, the most important of which are the first three phases, namely, Phase 0, Phase 1 (including the subsequent Phase 1.5), and Phase 2. ETH developers will roll out the components of ETH 2.0 phase by phase and gradually introduce the various functions of ETH2.0.

Phase 0 will introduce the Beacon Chain and run PoS validation on the Ethereum blockchain. In Phase 0, ETH 1.0 (PoW) will continue to operate. The delivery time of Phase 0 has not been determined. Phase 1 will release shard chains and allow users to store data on them. However, in Phase 1, users still cannot conduct transactions on shard chains. Phase 1 aims to test the consensus of the sharding structure. In Phase 1.5, the Ethereum 1.0 chain will become one of the 64 shards that make up ETH 2.0, and the transition from PoW to PoS will have been completed. In Phase 2, users will be able to conduct transactions on shard chains, which means the full completion of ETH 2.0.

Right now, ETH remains in the stage of testnets. The present testnet should be the last one before Phase 0. The purpose of the testnet is to identify the possible problems and ensure the stable operation of the mainnet. On August 16, Ethereum 2.0 testnet fell to a clock synchronization bug, which caused abnormal node validation and disrupted the network consensus. Right now, the bug has been gradually fixed. According to information released by Vitalik Buterin, the Beacon Chain will be launched in November this year, which will mark the beginning of ETH2.0. Right now, Ethereum did not release any specific timetable for the subsequent Phase 1 or Phase 2. Plus, such a complex ecosystem migration is also subject to a great number of uncertain factors. We believe that it will take at least 2 years for Ethereum to release Phase 1 and Phase 2. In addition, the interest of a miner will be a key consideration as Ethereum balances its ecosystem. Before the full launch of ETH 2.0, many unexpected factors may still arise.

Comparison between ETH mining and BTC mining

ASIC stands for an application-specific integrated circuit. Many cryptocurrencies have shifted from GPU mining to ASIC mining. A few years ago, Bitcoin was also mined through GPUs. At the time, some miners booked entire Internet cafes just to mine bitcoins. However, later on, GPU mining was replaced by FPGA and ASIC, and as a result, BTC mining has been dominated by ASIC miners like Antminer and Whatsminer.

However, when it comes to ETH, ASIC miners are not cost-effective due to the network's ASIC-resistant algorithm. This is why most ETH miners have been using GPU rigs. Compared to ASIC, the features of GPU miners are as follows:

l GPU mining is more flexible. ASIC miners only support certain algorithms. For instance, ASIC miners used in Bitcoin mining can only work under the SHA256 algorithm (e.g. BTC, BCH, and BSV). In theory, GPUs support mining under most algorithms, and the reason why most GPUs are used in ETH mining is the steady stream of high profits.

l GPU miners have higher scrap values. GPU miners support more algorithms and can be used for daily operations once they stop mining. In the worst case, GPU miners can be sold in parts. Hence, the scrap value of GPU miners is often higher than that of ASIC miners. Accordingly, the payback period of GPU miners is also longer, except for this year, the reason of which will be elaborated in the following paragraphs.

l The supply chain of GPU miners primarily consists of second-hand rigs. An increasing number of ASIC miners are produced and used for BTC mining, and the size of ASIC mining is also growing increasingly larger, which is clear from the Ethereum network hash rate and mining difficulty of Bitcoin. Based on data from the last two years, new GPU miners often come with low returns due to the long payback period. Therefore, the market is still dominated by second-hand GPUs in stock. This is why the Ethereum network hash rate of ETH will not spiral out of control like that of BTC. As a result of the recent ETH surge, some speculators have started to purchase new GPUs. However, due to the limited production capacity of GPU manufacturers, in the short term, GPU mining will grow much slower than ASIC mining. From another perspective, the market passion for GPU mining also indicates high mining rewards, and the early GPU miners must have made huge profits. For instance, miners who bought P106 and 8GB AMD GPUs in the first half of 2021 have tripled their mining rewards.

l GUP miners are difficult to maintain and operate. Given that GPU miners involve more hardware and most of them are custom-built, plus most GPUs are second-hand, they are much more difficult to maintain and operate than ASIC miners. For instance, one of our partners PandaMiner, the biggest seller of brand GPU miners in 2017 and 2018, has had self-owned GPU miner hardware and a maintenance team from very early on. Additionally, as an experienced producer and operator of GPU miners, PandaMiner has established large mining farms dedicated to GPU mining. Here at OXBTC, we are also striving to improve the user experience of mining.

What risks should be avoided in Ethereum mining?

The greatest risk of Ethereum mining is that mining will cease to exist after the Ethereum network is switched to PoS. By the time ETH 2.0 comes, users can deposit their ETH holdings in nodes to get returns. That is, ETH 2.0 will replace PoW with PoS. By then, GPU miners may no longer be able to mine Ethereum and need to be readapted for other tokens or other uses.

There is a high risk of price correction as the ETH price has soared. Some miners think that ETH has grown too much, and the mining profit will plummet in the event of price corrections. To cope with such risks, users can hedge their ETH holdings at high prices for definite returns. For risk-averse users, OXBTC usually recommends hedging the mining rewards for 3-6 months to recover most of the costs and then staking the subsequent profits for higher returns.

Both of the above two factors are objective and should be considered in relation to your investment preference and market insight.

As non-standard devices, GPU miners are difficult to operate and maintain. For mining farms, GPU mining is highly demanding in terms of operation and maintenance. As such, the miner needs to look for farms that are experienced in this regard. Moreover, they should also find reliable manufacturers of GPU miners to source quality GPUs with sufficient hash rates. Plus, superior GPUs facilitate smooth operation and maintenance and ensure standard hash rate performance.

OXBTC - Provide mining software for eth miners

Halley Mining, the official partner of OXBTC, started as a mining farm in 2014. It is highly experienced in building, operating, and maintaining mining rigs, especially those dedicated to GPU mining. Given that GPU mining is more demanding in terms of facility, staff, repair, and maintenance, thanks to its partnership with big-name manufacturers, OXBTC has a number of advantages for GPU hosting. At present, to offer careful operation and maintenance, Halley Mining manages GPU miners based on five major indicators: runtime rate, rate of mining rigs reaching the standard, online hash rate performance, total hash rate performance, and theoretical total hash rate performance. In terms of maintenance, OXBTC will set up a professional maintenance team at each farm. In addition, we have created a maintenance office at OXBTC's headquarter in Shenzhen, which ensures that the damaged rigs are handled promptly. In short, with OXBTC's hosting service, minor repairs are done instantly on the farm; and major repairs are handled in the OXBTC headquarter with professional support, high cost-performance, and increased stability.

If you are interested in GPU mining, contact OXBTC, and we will help you work out a cooperation plan that fits your budget to seize the opportunity of GPU mining.