Is Ethereum Mining Profitable? You Need to Know

Ethereum is a cryptocurrency and an open source shared world computing platform which allows for the decentralized verification of transactions. Ethereum is a distributed public blockchain network where miners work to earn Ether which is a type of crypto token that fuels the network.  As a proof, Investors and miners have already made huge sums of money with the gradual rise in Ethereum. There might be various questions regarding Ethereum mining, profitability, etc which this article tries to answer.

Still, Ethereum Mining is Profitable

For those people who simply want to acquire this currency, mining Ethereum does not seem a profitable choice. Buying Ethereum seems to be a better option for those looking to have cryptocurrency rather than investing in it. So, it is vital that you analyze the entire mining and investing process before decided which one is best suited for you.

The reason why Ethereum mining is said to be profitable is that:

Ethereum is regarded to be very much similar to Bitcoin, however, there are some significant differences between these two: Smart Contracts and the shift to proof of stake. This also stands out to be the main reason for the growing success of Ethereum.

  • Smart Contracts

The coding language used for Ethereum has made it easier for programmers to develop ‘programmable money’ which is also dubbed as Smart Contracts. It is said to be a revolutionary move in the cryptocurrency world.

  • Proof of Work’s Downfalls

Proof of work saw its downfall because of the following reasons:

  • The initial investment in expensive computer components is very high
  • A lot of power is used while mining in this system
  • Proof of work hinders the profitability of miner due to its huge Electricity costs since the overall power cost to operate all of the miners on the Ethereum network is extremely high and beyond applicable

The downfall of Proof of Work has given way to the rise in Proof of Stake. The proof of stake ensures that your computer/wallet is staking the coins you already have. Since the GPUs do not solve any complex cryptographic hash so the Proof of stake does not use any energy.

Through this way, you’re locking your coins away and will not have to put an extra buck on buying expensive hardware or electricity. While in proof of work you have to turn electricity into coins to get rewarded, in Proof of Stake you will be turning coins into more coins.

One of the reasons why Ethereum’s price is rising is that people like the idea of POS. POS does not only save electricity but cuts the cost of buying expensive hardware showing a long-term benefit. Proof of Stake still largely depends on miners to validate the transactions in the blockchain.

The profitability of Ethereum mining is thus directly related to smart contracts and proof of stake. It is highly advised that you start to invest in great mining hardware to begin the mining of Ethereum.

Check also: Is Bitcoin Mining Still Profitable?

Ethereum Mining Profitability Calculator

Ethereum mining profitability depends on the hardware being used and the electricity being consumed. The returns that come from mining can vary. Since the crypto coins have very volatile value so the rewards can differ.

If you have the appropriate hardware and energy source then you definitely gain some profit. There are many online Ethereum mining profitability calculators which can help you determine the profit you will receive from mining the cryptocurrency.

With some basic assumptions like:

  • Hashing Power of 20 MH/s
  • The power consumption of 140 w
  • Cost per kWh of $0.12
  • Pool Fee of 1%

The following things were found:

  • The power cost/day is $0.4032, and 0.001398 ether is mined per day which gives a profit of $0.2120 per day.
  • In a year, the power cost is $147.17 while 0.5103 ether is mined, resulting in a profit of $ 77.38 per year.

Although, the following things must be considered:

  • ETH-USD exchange rate of 1ETH= $444.51 is used
  • Future block reward and hash rate changes are not taken into account.
  • 15 seconds of average block time has been used
  • The block reward is fixed at 3 ETH

Therefore, the calculation of the profitability coming from mining Ethereum depends mostly on the electricity cost and the hardware that has been purchased. Also since the value of Ethereum faces volatility, there are huge chances that the rewards may not be as expected. Thus, it is difficult to estimate exactly what profit you might receive.

What is Ethereum Mining and How It Works

Ethereum Mining Profitable

Image credit: Pixabay/RebcenterMoscow

Ethereum mining means the acquiring of Ether coins through the validation of network transactions. Mining in general terms is the participation in the authentication of transactions which takes place to check all activity in the Ethereum Blockchain.

Mining of Ether can be done on all platforms. It is available on home computers and tailored rigs. When it comes to Ethereum, it is easier to start with Unix machines rather than with Windows.

The primary motive of mining is to generate and collect more Ether coins than what is spent on the electricity consumed by it. By participating in a mining pool, you can generate enough money through mining if you are an amateur.

If you are a professional you can use various expensive gaming cards. If you find the entire process of mining Ether somewhat tricky then you can take the help of different mining clients. You can find miners provided by core software, CLI tools, GUI apps which help in the mining process and gives you a clear picture of what is happening.

Mining of Ethereum depends on the following factors:

  • Hash rate:

Hash rate in simple terms is the rate at which a mathematical problem is solved using algorithms to verify the transaction. A higher hash rate is better for Ethereum mining. The higher the hash rate, the more the coins attained from Ethereum mining.

  • Difficulty level:

It is not easy to mine Ethereum just because you have sophisticated tools to help you in the process. If Ethereum mining were so easy, everyone would start investing in the best mining hardware. In the Ethereum network, at a particular time, only a few numbers of coins can be mined.

As the number of miners in the network increases, the difficulty level of mining also increases. So this means that as the hash rate increases, the difficulty level also increases.

  • Consumption of electricity:

Electricity cost is a prime factor for determining the profitability of Ethereum mining. Ethereum mining costs a lot of power so you will have to pay a lot for the electricity consumed.

Thus you must first understand whether you can afford to pay for the electricity or not. If the cost you are paying for the electricity consumed is higher than the Ethereum you can mine then the whole mining process becomes unprofitable.

How to Mine Ethereum?

There are three ways to mine Ethereum:

  • Pool Mining

Ethereum mining can be done together with other people in a single pool. In a pool, if a single member finds the secret number, then they will share the reward with everyone in the pool.

The pool size determines the times you will find blocks and share rewards. So if the pool size increases then the chances of getting reward also increases.

Minimum payout is the minimum amount of Ether which you will have to mine before it gets sent to your wallet which also stands out as essential while choosing a mining method.

So it is best that you find a pool was the minimum payouts are small. Pool fee must also be determined before you get into a pool. It is the amount that you will have to pay to continue using the pool. It generally differs between 1 to 3 percent.

  • Mining alone

Although you will not have to share rewards while mining alone, you will have to input large sums of money initially. Since the competition in mining is very high so you will have to compete with professionals and other pools with far more resources than you have.

Some of the problems that arise while mining alone is heating problems, ventilation, noise, electricity costs, and space availability.

  • Using Cloud mining services

Using cloud mining services lets you pay someone to mine for you. You will be renting mining time from other people in return for the rewards.

However, this has not been a popular option among many miners since no one is willing to pay for mine to receive the same amount of reward, and no one is willing to mine for others using their equipment when they can do it for themselves.

Although it guarantees mining providers for profit, it is difficult for the investors to pay upfront money since the price of Ethereum might eventually drop.

The following things are needed and must be considered while mining Ethereum:

So, you want to set up your computer for full-time mining. To do this, you will have to thoughtfully choose the hardware that you want to use for the process.

You can choose from two options; you can either use CPU (Central Processing Unit), where you will be using your computer’s processor, or you can choose to use GPU (Graphics Processing Unit), which must be bought.

For your Ethereum mining rig, you need the following hardware :

  • Mother Board: To allow parts to communicate.
  • Graphics Card: To process the proof-of-stake algorithm.
  • Storage (HDD/SSD): To store the Blockchain and newly verified transactions.
  • Memory (RAM): Working memory for the mining program. Since the DAG file is only growing in size, you must put extra bucks for RAM
  • Power Supply (PSU): Supply power for the parts.
  • Ethernet: To help store the newly validated transactions in the Blockchain and the new validations completed while ‘mining.’

Since all the new GPUs are known to be 200 times faster than CPUs in the mining process, it is useless to mine Ether using CPUs. You must keep in mind the cost of electricity consumed and the cost of buying the GPU card itself before you get into the mining process.

The hash rate performance must also be considered before you begin the mining process. You can also set up a mining platform which is a machine with a set of GPU units attached for increasing the hash rate and profitability.

Ethereum Mining Software

You will have to install software after you have purchased your hardware. You will need to buy drivers for your graphics card. You will also spot them on the manufacturer’s website or it will be attached with the card itself.

You will have to set up the nodes and connect to the network for which you must download the Ethereum blockchain. The entire blockchain is more than 20 GB and will keep growing with time. You can install Geth with services like MinerGate, or you can install Ethermine.

The network is filled with nodes; once you have set up the software, your node will be connected to other nodes. You can now start mining, deploying your own smart contracts, building decentralized apps or sending transactions.

Testing

It is recommended that you set up a private test network before you begin the mining process. You might want to test the public contracts, develop new technologies or test the mining capabilities.

If you are in a private test network, you are the sole user, so you are entirely responsible for finding all blocks, validating all transactions and executing smart contracts. This is done through a command line. Geth is one service providing such options.

If you want to calculate the potential profit from mining, it is best if you know the approximate hash rate. You can also calculate your hash rate based on the hardware begins used and the electricity costs in your country.

Install Ethminer

After connecting the nodes to the network, you can start mining Ether by first installing a mining software called Ethminer for Windows. The primary motive to install Ethminer is to makes your CPU or GPU run the hashing algorithm.

It helps to secure the network through proof of work. The interface is a command line, but the recent versions of Ethereum network are known to have a superior user-friendly interface.

Being Paid

After successfully mining a block, you will receive three ETH reward. Miners not just receive the reward but also get some fees related to the transaction which serve as an added incentive to mine Ether.

Miners usually prioritize transaction with higher fees. You must also have an Ethereum wallet where the reward will eventually be transferred.

The income you receive from the mining you have done will be evaluated on your hash rate and electricity consumption. This should also include the costs of your chosen hardware and possible upgrades on your bandwidth.

Many Ethereum profitability calculators found online can be used. These calculators are also offered by CryptoCompare, CoinWarz, WhatToMine, and MyCryptoBuddy.

Joining a mining pool

It is best for a beginner to join an Ethereum mining pool rather than mining Ethereum alone. A mining pool has of a group of miners who combine their resources and computational power to enhance the possibility of solving the cryptographic puzzles and receiving more Ether.

The profits are then split between all the members of the pool according to their contributed computational power.

Some pools do not even require any registration for joining a pool. You might have to need to sign up on the website for some pools. There are many pools you can join including Ethpool, Ethermine, DwarfPool, Ethfans, and f2pool.

Best Ethereum Mining Hardware

Best Ethereum Mining Hardware

Image credit: Pixabay/WorldSpectrum

AMD Cards

You will have to download the AMD blockchain driver to begin mining through AMD cards. If you do not use this driver, there might be some degraded performance from the new and old generations.

Most of the miners using this card will use the card’s BIOS to achieve much better mining power with lesser energy costs.

AMD RX 470/570

AMD RX 470/570 has Price between $250-$550  and a regular price between $200-$270. Its power draw is 80W to 200W and has a hashrate from 20 to 30 Mh/s. The VRAM required is 4 and 8GB GDDR5.

Some of the advantages of AMD RX 470/570 are: 

  • One of the most energy-efficient series
  • The card can run on only 70 to 80 Watt and give a hash rate of 30 Mh/s if you uses proper memory overclocking and core underclocking and undervolting techniques.

Some of the disadvantages of AMD RX 470/570 are:

  • Sellers often overpriced it twice its original price.
  • They are not very good at most other algorithms and are not suitable for mining other altcoins.

AMD RX 480/580

AMD RX 480/580 has the price of $250-$550 and a regular Price of $250-$300. It uses Power of  100W-250W and gives a hash rate of 20-30 Mh/s. The VRAM is 4 and 8GB GDDR5.

Some of the advantages of AMD RX 480/580 are:

  • It has an almost exact hashrate as RX 470/570  but with more power usage.
  • It is better on a few other algorithms so you can choose more altcoins to mine.

Some of the disadvantages of AMD RX 480/580 are:

  • Many times the sellers can overprice this product.
  • They are good at only a few other, so you are not entirely free to choose all other altcoins.

AMD Radeon RX Vega series

AMD Radeon RX Vega series is the newest AMD series and has an increased Price of $800-$1200 while having a regular Price of $450-$700. It uses up 150W – 250W power and has a hash rate of 30 – 45 Mh/s. The VRAM is 8 GB HBM2.

Some of the advantages of AMD Radeon RX Vega series are:

  • It comprises of both the RX vega 56 and the RX vega 64. They are exceptionally good at mining performance.
  • They consume low power.
  • Since they have been recently manufactured, they can be sold again at a profit.
  • They are good at other algorithms like mining Monero and Zcash.

Some of the advantages of AMD Radeon RX Vega series are:

  • They are pretty expensive.
  • While operation they can be a little hotter than their previous series.
  • They are very rare to find at a reasonable price.

Nvidia cards

AMD’s are less expensive than Nvidia cards. However, Nvidia is easier to use and don’t require any specialized technical skills.

You will have to buy the Nvidia card and download the drivers to begin the mining process. When you want to overclock, then you can increase the memory clock and decrease the power limit.

GTX 1060

GTX 1060 has an increased Price of $260-$400 and a regular Price of $170-$270. It has a power draw of 60W – 150W with a hash rate of 18 – 25 Mh/s. The VRAM is 3/6 GB GDDR5.

Some of the advantages of GTX 1060 are:

  • It’s relatively cheap.
  • It is good at Ethash mining.
  • It does not face any degradation of performance as the DAG increases.
  • The card can also be found in 3GB and 6GB configurations, however, there will not be many differences in the hash power while mining.
  • The card is also good at mining Zcash.
  • It has extremely low power usage.

Some of the advantages of GTX 1060 are:

  • The price has been increasing since the past few months They are comparatively expensive than AMD cards.
  • It has the lowest mining density, the Mh/s per motherboard.

GTX 1070

GTX 1070 has an increased Price of $550 – $700 and a regular Price of $370 -$450. It has a power Draw of 150W – 225 W with a hash rate of 25 – 32 Mh/s. Its VRAM is 8 GB GDDR5.

Some of the advantages of GTX 1070 are:

  • Very good at Ethereum mining.
  • It is also good at mining Zcash, VTC, and many other coins.
  • It does not have degraded performance if Ethereum mining stops as a whole; it has plenty of other choices.

Disadvantages of GTX 1070 is:

  • In the past few months, it’s price has increased dramatically.

GTX 1080ti

GTx 1080ti has an increased Price of $900-$1200 and a regular Price of $750-$850. It has a power Draw of 150W – 250W with a hash rate of 35-40 Mh/ s. It has a VRAM of 11 GB GDDR5.

Some of the advantages of GTX 1080ti are:

  • It is the most powerful GPU. It has the highest mining density an can be used regularly.
  • A full rig (6) of these would cost almost as much as 3-4 full rigs of the RX 470 series.
  • It is suited for virtually any GPU mineable coin out there.

Some of the disadvantages of GTX 1080ti are:

  • Its hash rate isn’t much higher than the GTX 1070, so mining Ethereum is not entirely worth it.
  • It is costly for almost double the price.

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