How to start mining ethereum

Is Ethereum Mining Profitable?

As the price of Ether (ETH) hovers around $900 (After touching a whopping $1400 just last month), you may be wondering if it’s worthwhile to begin Ethereum mining. Like Bitcoin, Ethereum is a proof-of-work (for now) coin that uses miners to confirm network transactions.

Before we begin, let us remind you that Ethereum will eventually move to a Proof-of-stake framework and mining will go obsolete. But, there is still time for that, and we will talk about it later in the article. Meanwhile, let us discuss if Ethereum Mining is profitable right now.

As it goes with all Proof-of-work algorithms, the mining profits vary from person-to-person and can actually become less and less profitable with time.

There are three important factors to consider when figuring out if Ethereum mining will be profitable for you:

  1. Mining difficulty
  2. Hash rate
  3. Electrical costs

Mining Difficulty:

In laymen terms, you receive Ether in reward when your mining rig solves a complex mathematical problem. The difficulty of this mathematical problem is setup by the Ethereum Network and has been steadily increasing since its inception, barring one exception – the Byzantine fork. To put it simply, as the difficulty increases, the ethereum you receive per unit of energy spent goes down. As more miners join the network, the difficulty increases.

Although there was a sharp drop in difficulty by Byzantine fork, it didn’t make any difference as the Ethereum mining rewards per block decreased from 5 ETH to 3 ETH.

You can view the past and current difficulty on the Ethereum network at CoinWarz.

Hash rate

The hash rate is the speed in which your mining rig can solve the mathematical algorithm needed to validate a transaction. New miners are constantly entering the market with better and faster hash rates. The newer GPUs are designed to give more hash rates. However, it isn’t as simple as buying the fastest miner in the market. The newer miners have a higher price tag and use more electricity.

You need to look for a balance in the Cost to operate Vs Hash rate.

Electrical costs

A mining rig is a machine, a computer that requires electricity to operate. You need to estimate the cost of electricity to calculate the correct profitability of your miner. The Miners go from a power consumption of 100 Watts to 1000 Watts. The electricity costs in India is in a range of 6-9 INR per kWh depending upon where you live. You need to add the cost of Air cooling in Summers as the temperatures above 40 degree Celsius can damage the mining rig.

You can use CryptoCompare to calculate what your estimated profits would be using different Ethereum miners.


Moving towards Proof-of-Stake

By now, you must be aware that eventually Ethereum is moving to Proof-of-stake framework to confirm transactions. The first implementation guide of Casper was announced in August, 2017 and it is believed to be released sometime in 2018. Don’t worry, it isn’t going to end mining immediately.

The Casper protocol is a hybrid PoW/PoS framework which is designed to first decrease and eventually end the profitability of Ethereum Miners.

 

What will happen after the Hard Fork?

  1. The Casper protocol will first use PoS consensus to mine every 100th Block in the Ethereum Network, these are called “Checkpoints”.
  2. A difficulty time bomb, also known as the Ethereum Ice Age will be deployed. The Difficulty time bomb will increase the difficulty of the network making mining less profitable, forcing miners to switch to Proof of Stake chain. This will take ~ 12 months after the fork.

The Constantinople hard fork can potentially split the Current Ethereum (ETH) network into 2 chains:

  1. Ethereum PoW
  2. Ethereum PoS

A third chain Ethereum Classic (ETC) is already in existence.

But with the difficulty time bomb, miners will be forced to mine coins other than ETH for profitability.

So should we invest in ETH Mining now?

It is absolutely your choice. ETH mining will eventually cease to exist, but mining other coins like Monero won’t. If you invest in Ethereum mining right now, be vigilant about the profitability. Switch to mining other coins as and when you feel appropriate.

If you decide to mine Ethereum, you’ll also want to join an Ethereum mining pool.

Read Now: How I convinced my mom to invest in Cryptocurrency

CoinCrunch.in’s owners, writers, and/or guest post authors may or may not have a vested interest in any of the above projects and businesses. None of the content on CoinCrunch.in is investment advice nor is it a replacement for advice from a certified financial planner.

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