What are the differences between Ethereum mining and Bitcoin mining?
The ETH miners benefits the most from the congested Ethereum network and high transaction fee.
Based on the current Bitcoin price, the net profit of the 5700XT 8 cards machine is $16.43 per day. The static payback period for Ethereum mining is around 240 days; the 1660S of the NVIDIA series has only 210 days.
(Note: The above prices were collected on August 31. The price of ETH at that time was $480. Now the price of ETH has fallen, and the fee revenue has also decreased. The static return period has changed significantly)
From the perspective of the static return period, Ethereum mining is extremely attractive.
However, compared to Bitcoin mining, only a minority of miners know and take part into the Ethereum mining. In today’s article, we try to compare Ethereum mining and Bitcoin mining in 4 ways.
1.Mining algorithm, equipment, hashpower scale
As everyone knows, Bitcoin uses the SHA-256 encryption algorithm. the hashower is crucial when it comes to competition. In order to improve hashpower performance, Bitcoin mining has gone through four stages: CPU, GPU, FPGA mining machine, and now ASIC mining machine, with increasing specialization.
While Ethereum uses the Ethash encryption algorithm. During the mining process, it needs to read the memory and store the DAG file. Since the bandwidth for reading the memory each time is limited, besides, it is difficult for the computer technology to make a qualitative breakthrough on this issue, therefore, no matter how the computer’s computing efficiency is improved, the memory reading efficiency cannot be improved in a remarkable way. Therefore, in a sense, ETH’s Ethash encryption algorithm is “ASIC resistant”.
The difference in encryption algorithms has led to a large difference in terms of mining equipment and hashpower between Bitcoin and Ethereum.
At present, the mainstream Bitcoin mining equipment consists of highly specialized ASIC mining machine. The hashpower of a single mining machine can be up to 110T/s (Antminer S19 Pro model), and the scale of the whole network is 120EH/s or above.
While the ETH’s mining equipment is mainly graphics card, and there are very few specialized ASIC mining machines. On the one hand, the “ASIC resistance” of the Ethereum mining algorithm increases the threshold for developing ASIC mining machines, on the other hand, once Ethereum is upgraded to 2.0, the consensus mechanism will be transformed into PoS and the mining machine will become obsolete.
Compared with ASIC miners, graphics card miners differ by 2 orders of magnitude in hashpower. At present, the mainstream graphics mining machine (8 GB) has a hashpower of about 420MH/s, and there are 230Th/s hashpower in the whole Ethereum network.
Over the past two years, Bitcoin’s entire network hashpower has grown rapidly, while Ethereum’s has grown relatively slowly.
However, Bitcoin’s ASIC mining machine is monopolized by several major manufacturers, miners can only buy from the market; , although there are also specialized Ethereum graphics card mining machine manufacturers, miners can also DIY according to their own needs, they can purchase parts in the market and then assemble them by theirselves.
2.Proportion of energy cost
ASIC mining machine has high hashpower and high power consumption. For example, the latest Antminer model S19 Pro has a rated power consumption of 3250W and consumes 78 kwh of electricity per day. According to the current Bitcoin price and the energy cost of $0.033/kwh during the wet season, the electricity cost accounts for 30.68% of the total cost. Other older generation Bitcoin ASIC mining machines, such as the Antminer T17 series, the electricity cost ratio generally is greater than 50%.
Therefore, ASIC miners are very sensitive to electricity fees. This is why every year with wet season in Sichuan coming on, many ASIC mining machines have to be relocated from thermal power mining farms in Xinjiang and Inner Mongolia to hydropower mining facilities in Sichuan. When the mining output cannot cover the electricity bill, the mining machine has to be unplugged.
In contrast, graphics card mining machines consume low energy as the electricity cost ratio is also low. For example, a 5600XT 8 graphics cards mining machine, based on the electricity price of $ 0.0514/kwh, the daily electricity bill will be about $1.49, accounting for about 11.5% of total cost; and for the model 1660S 8 graphic cards, the daily electricity bill is about $ 0.986, energy cost ratio is approximately 10.3%.
Due to low energy cost ratio, graphics card mining machines rarely is relocated back and forth every year (another reason is that graphics card mining machines are very “fragile”), and they are generally hosted in full-year electricity mining farms.
Earning the difference in electricity fee is the main profit model for the mining farm. The more electricity sold, the more money the mining farm makes. As Bitcoin ASIC mining machines consume high power and their maintenance is easier, so they are deeply welcomed by the mining farms owners, miners have lots of options when choosing farms for hosting.
Ethereum’s mining machine not only consumes less energy, but is also bulky. Compared with Bitcoin ASIC miners, an ordinary graphics card machine needs 3 times of space, which means it will take 3 ASIC miners to occupy the space 1 ETH miner.
In addition, graphics card mining machines have high requirements for mining farms. In addition to the most basic requirements, such as dust-proof, moisture-proof, and internal temperature control, the mining farm also needs to undertake anti-static treatment.
Moreover, when the graphics card mining machine is restarted, it is common that some hashpower will be lost, which will increase the workload of on-site operation and maintenance. Therefore, when choosing a hosting mining farm, the stability of the power supply and the ability of operation and maintenance are very important factors for consideration.
As a result, graphics card miners are not welcome in many crypto mining farms, and there are fewer hosting facilities to choose from. Generally speaking, for hosting, the electricity price charged by the mining farm on graphic card miners is generally higher than that of the ASIC mining machine.
4.Mining machine’s residual value
The chips of ASIC miners are customized and ASIC miners can only mine cryptocurrencies with fixed algorithms. For example, SHA-256 Hash Algorithm Bitcoin miners can only mine BTC, BCH, and BSV. After the ASIC mining machine is scrapped, it can only be sold as hardware, and the precious metals in the miner will be extracted and reused. A scrapped ASIC mining machine hardware can only be sold for about $4.29, so the residual value of the ASIC mining machine is extremely low.
In contrast, ETH miners have a high residual value.
First of all, if the graphics card mining machine can no longer mine Ethereum, you can switch to other cryptos, and there are plenty of options .
Secondly, even if you don’t want to continue mining, the graphics card within the miner can be disassembled and be sold to Internet cafes, game players, or companies that need to process a large amount of graphics and images. Generally speaking, for a graphics card that has been minining for two years, its residual value is about 30% of a brand new graphics card price.
In addition, the remaining parts of the graphics card miner (mainboard, CPU, power supply, hard disk, etc.) can also be reused and also have a high residual value, which can generally be sold for $71.43 to $142.
5.Block rewards and mining term
As part of Bitcoin’s coin issuance, crypto miners are rewarded a certain amount of bitcoins whenever a block is produced, Bitcoin halving takes place on average every 4 years, and all the Bitcoins will be mined until 2140. After the halving in May this year, the Bitcoin block reward is 6.25 coins per block and will decrease to 3.125 coins per block post next halving, estimated in April 2024. As long as the mining output can cover the electricity bill, miners can continue to mine Bitcoin until 2140.
At the beginning, the mining block reward of Ethereum was 5ETH. In October 2017, after the Byzantine upgrade of Ethereum, the mining reward per block was reduced from 5ETH to 3ETH; in March 2019, the block reward was reduced from 3ETH to 2ETH since the Constantinople upgrades.
The ETH 2.0 will fundamentally change the current economics, in fact the Ethereum will switch to PoS(Proof of Stake) and completely erase the concept of mining. There are uncertainties about when to upgrade, how long the mining machine can mine, and whether the block reward of Ethereum will continue to decrease during the upgrade process. At present, the majority of stakeholders in the industry believe that Ethereum can be mined for another 1 to 3 years.
The difference in encryption algorithms has led to great differences in mining equipment and hashpower scale between Ethereum and Bitcoin. Ethereum’s mining equipment consists of mainly graphics card miners, and very few specialized ASIC miners are available on the market.
Ethereum miners consume less energy but are large in size and require high mining environment and opex capabilities. Therefore, there are relatively few options of mining farms when hosting.
Although graphics card miners has a higher residual value, Ethereum 2.0 pose a potential risk for ETH mining, which must be taken into consideration before participating in mining.
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