By Larry Wright
The crypto market has provided people with a bunch of possibilities and opportunities like no other conventional financial market ever could. This is not a very old or passive market as it only has a 10-year history at max since Bitcoin began trading as a digital asset back in 2009.
But since then, many other cryptocurrencies have been developed that are now trading side by side Bitcoin and are preferably successful in their own way or in concern with the overall approach of investors. The crypto market is one of the financial markets that saw a sudden boom and interest from institutional investors, and that is why it has secured an early success in the short period of 10 to 12 years.
Is Ethereum a Competitor of Bitcoin?
Every cryptocurrency that is trading right now in the crypto market has its own blockchain; it is true for Bitcoin and as well as for Ether which is the second most successful cryptocurrency after Bitcoin. It also enjoys the second largest market capitalization in the crypto market and is a preferable choice among crypto investors and developers because it is efficient and can perform faster transactions at a discounted rate.
The concept of smart contracts being incorporated by Ether has made it a prominent choice among every other crypto investor out there. Its blockchain is being used for a number of things, including but not limited to the development of decentralized apps (d-Apps), non-fungible tokens, which are the digital expressions of art, and software/programs looking for a decentralized environment to grow.
Bitcoin might still have the edge when it comes to market capitalization and being the flagship cryptocurrency, but when it comes to the mere uses of the blockchain technology and taking into account the efficiency of the whole thing, Ether definitely has the lead. Ether was first introduced in 2015 by Vitalik Buterin and has been around since then, taking a heavy pounding from crypto market corrections but still providing a very decent service in terms of reduced transactional costs, fast and efficient transactions, and a profitable venture to people in the form of Ether mining.
What is Ether Mining? A Brief Explanation
Before you can understand what Ether mining is, you have to have a brief understanding of what mining is in general? Mining is a process of solving multiple mathematical equations which are in connection with the transactions taking place for a specific cryptocurrency. These transactions are to be parsed, interpreted, and recorded in real-time on the cryptocurrency’s blockchain in the form of a long and linear array of beads.
Every bead is called a block, and it contains multiple transactions and their information such as the total amount transacted, info of sender and receiver, the wallet that was used, and other such information. This information is recorded in the form of hashes that are properly encrypted and thus can’t be disclosed or read by any ordinary person viewing these transactions on the blockchain. After the successful integration of transactional information into the blocks, the miners who specifically did partake in the activity are compensated with a portion of the transaction which they helped in assorting and recording. This is how conventional mining takes place.
Like every cryptocurrency out there, the Ether network has its own very blockchain. That is why all Ether-related transactions taking place are recorded on its specific blockchain and are to be first approved by the miners. That is why when you send someone money in the form of Ether token; it will take some time to reach the intended recipient. All transactions are first verified and then put into Ether blockchain that is a long Ledger of all transactions that have taken place to date with room to incorporate the future ones too.
The verification protocol used by Ether is known as ‘proof of work’, which is the same as Bitcoin. The very job of an Ether miner is to ensure that no one cheats and recording of the data takes place ‘as-is’ without any editing or tampering of any sort. To ensure that mathematical certainty is involved in the recording of transactional data, the blockchain will continue to hurl out complex mathematical equations towards the miners, and they have to solve it using their computational power, looking for a specific hash number.
When a miner solves the equation, he would have to communicate this to all the others, which are that they have solved the equation and found the number or hash point they have been looking for all along. Now every miner out there has to verify this information by checking if the number appointed by the initial miner is correct or not.
If 51% or more miners agree that the number is correct, then a new block is added to the blockchain containing the information of that specific transaction which was solved by a dedicated miner. After the block has been added to the blockchain, the miner who initially found the number by solving the complex mathematical equation is then rewarded.
Different Types of Ethereum Mining
When people think about Ether mining, what they are initially picturing is a room full of server-based computers having graphic cards installed in them and running 24/7 to provide computational services for the sake of mining a dedicated cryptocurrency. Well, it doesn’t have to be initially like this. There are many other types of mining that you can use depending on the hardware you intend to employ and the speed and efficiency of the process that is required. This narrows down the research and provides with some of the most tempting ways of mining Ether;
CPU Mining
This is the type of mining that only uses the power of CPUs for the sake of mining Ether. Before five or six years ago, CPU mining was a very popular and favourably efficient way to mine Ether and Bitcoin, but its popularity has since declined gradually. Because it doesn’t comply with efficient mining scales, and the profitability factor is also considerably lower.
You can be running your computing machines for months on end without even earning anything, and that is not the sight an investor or crypto-miner wants to be a part of. But it is comparatively easier to set up than other forms of mining because it merely requires a computer or a series of computers connecting with each other sharing the CPU power and some common software programs to begin with.
GPU Mining
GPU mining is preferably the most efficient way to mine Ether to date. It isn’t lacking or slower as CPU mining is, and the profitability factor is also pretty intensive. What crypto miners do here is that they arrange multiple GPU units on a single motherboard having enough RAM and CPU power to have all of the graphics cards working together and mining the crypto.
It is comparatively cheaper than CPU mining because here, you only require one CPU and enough RAM to begin mining, and it is also possible to find good deals on graphics cards that were already being used in the mining function.
ASIC Mining
ASIC loosely translates into application-specific integrated circuits; it is a fairly new form of mining technique that has a better turnover than CPU and GPU mining. It can perform mining efficiently and, as compared to the above mining types, can produce a lot more Ethereum tokens because of the fact that it has a higher computational and processing power. The crypto community, on the other hand, doesn’t look as kindly to ASIC mining because these are extremely costly, and most of them can’t even afford to buy one in the first place.
That is why when a new ASIC mining machine is being introduced; it receives a huge wave of criticism from crypto enthusiasts. Another common belief among crypto miners regarding ASIC is that these have more computational and processing power, and that is why it is robbing other miners of having similar or equal opportunities to mine.
The CPU and GPU mining combined can’t beat ASIC mining in terms of earnings and the overall mining speed. There are also reports that ASIC miners are now putting together ASIC farms to have a much broader setting to mine crypto around the clock, thus robbing others of the opportunity to mine Ether because they lack better tools to do so.
Cloud Mining
Cloud mining is also a preferable way to mine Ether and has also has become more popular among the miners of today. Because of the customizability and the convenience of putting together a virtual machine and then only having to pay for it by the hour means that a crypto miner can rent out as many resources as they require. An agreement is done beforehand, which states that all the earnings secured by the rented cloud mining setting will be directly deposited into the crypto wallet of the miner, and then they will pay for the rent or usage period for a specific cloud setting.
The most incredible advantage that cloud mining has over every other crypto mining is the convenience of putting several mining rigs together and then being able to use their combined processing power to mine crypto better and on a large scale. People who don’t have the money to invest in mining rigs and then pay for electricity separately are better off availing of this service and then paying for it by the other.
The only disadvantage that this system has is the fact that you have to pay for the rent upfront, and you won’t be compensated for anything if the price of the crypto that you are mining, which in this case is Ether, drops. Also, if someone wants to use their own software to delegate the mining process, sadly, they won’t be able to change it with what the cloud mining company has provided to them.
Pool Mining
Pool mining has recently become the most elementary way of mining Ether or any other cryptocurrency for that matter. The process is merely simple, as well as the ideology behind it. In a pool mining setup, different crypto miners band together with their computational power in a single pool and then use that unanimous and collected processing power towards the mining of a dedicated cryptocurrency; this way, their probability of finding a block or solving complex mathematical equations is improved and strengthened at the same time.
Solo miners are less likely to find a block before pool miners do because they have put together all of their computational power towards the objective, which is finding the block before anyone else does. When a block is found, the members of the pool receive an equal cut of the reward, which was initially given to the pool working as a collective unit and adding in the discovery of the block.
Is Ether Mining Profitable or Not?
The profitability factor of mining is initially tied to the electricity miners are using for the sake of running their mining rigs. Anything that costs below $0.12 per kilowatt is considered a profitable endeavor, but in order to make mining a truly ‘worth it’ economic enterprise, it is recommended to find even cheaper electricity, something below $0.06 would do great.
Taking this data into account, you can cross off any mining attempt that is done at home because electricity is generally going to cost more per kilowatt, and that way, this whole endeavor doesn’t remain a viable economic venture. There are other things that you can consider when it comes to drawing up a profitability statement for Ether mining; some of these factors are as follows;
- Rewards Awarded Per Block
According to the most recent calculations, miners able to mine a single block on the Ether blockchain would receive two Ether tokens in addition to the transaction fees for the block they have mined. You can check multiple sites out there to confirm the rewards that are collectable in case of mining a dedicated block on Ether blockchain.
- Network Difficulty
Network difficulty is an associated term that is strung out more often than not in the crypto mining business. Every cryptocurrency out there has its own network difficulty, and so does Ether. The mining difficulty for Ether loosely translates into how difficult or time-intensive it would become for a miner out there to be able to mine a single block of Ether. Time is of the essence and determines whether a block is easier or difficult to mine.
As a general rule of thumb, the number of miners for dedicated crypto delegate the mining difficulty. Suppose if there are more active miners out there, then automatically, the network difficulty for the mining operation for dedicated crypto would go high. Similarly, when they are fewer miners available, the difficulty would be less intensive. When the difficulty factor is higher, there are usually fewer profits involved. You can check the Internet and multiple sites out there to confirm the numbers at any given moment.
- Uptime of the Mining Equipment
This simply means the overall time period in which the mining rigs of the user would remain online and be mining. The more uptime, the more profitable this would be for the end-user.
- Mining Pools
Mining pools have become kind of a thing where miners usually bring their computational power together to be able to increase the hash rate and find the blocks rapidly so they could be awarded. Usually, the reward is split on the total number of miners involved in the operation, but it is competitively more economical and profitable as compared to solo mining.
- Hardware Employed
Your mining efficiency is only as good as the hardware you are using to mine. Therefore crypto miners should always be on the lookout for new and improved hardware such as GPU, CPU, and better motherboards so they can truly bring together a more intensive and collaborative approach towards solving the blocks and getting their reward. At the same time, any technology that can reduce the cost of electricity is also much appreciated.
- Changes to the Network
Last but not least, any kind of changes that take place on Ethernet work will directly be affecting the profitability of its mining for the end-user. At the moment, the Ether network relies on a ‘proof of work’ mining algorithm which is to be continued until 2023. And that time around ‘proof of stake’ algorithm would take effect and would become the basis for Ether mining.
Final Thoughts
Ether mining is a profitable business even still, and the scope for it is only going to get bigger and better as more and more people will be joining or adopting cryptocurrencies the need for miners is only going to increase in the future.
So, if you are thinking about getting into the Ether mining business, then there is no time like today, and with proof of stake implemented in a few years, Ether mining will only be getting more traffic and appeal not only from the investors and crypto market but also from the general public given how people are coming around decentralization and the use of cryptocurrencies.
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