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The Ethereum and Bitcoin prices are rising. Therefore, many fear that GPU prices could also rise. However, a new mining boom is very unlikely.
Crypto prices rise again
The prices of crypto currencies, especially Bitcoin and Ethereum, have been rising strongly again for a good three weeks. Compared to April 30, Bitcoin price has increased by 31 percent, Ethereum price even by 37 percent. The rapid price increases were triggered on the one hand by a good market situation and on the other by two large acquisitions by investors. Since then, prices have varied, but have remained high. And according to most analyses, prices should continue to rise in the future as well. This has already fuelled fears among some gamers that a new mining boom could begin. In this article I would therefore like to give some insight into mining using the example of Ethereum.
How does mining work at all?
There are some crypto currencies that rely on the Proof of Work procedure to legitimize their own blockchain. A so-called block is calculated at random using an algorithm. This requires computing power provided by the miners. The first person to calculate the block is rewarded with a defined number of units of the minted crypto currency. With this completely calculated, i.e. “found” block, a certain number of transactions can be legitimized on the blockchain. For these transactions, which were executed by users of the crypto currency, a fee must also be paid, which also is paid to the miners.
While in the early days of Bitcoin even normal computer processors could be used for relatively high yields for mining, today this is almost only possible using so-called ASIC miners. They can only handle the calculations on the Bitcoin blockchain. On the one hand such miners are expensive, on the other hand they make sense to operate only at a certain size. With other crypto currencies, on the other hand, the calculations run on graphics cards. For this no special hardware is used, but sometimes also quite normal gaming graphics cards. The Ethereum mining boom in particular triggered a real crisis last year. During the first wave In spring 2017, there were suddenly no more graphics cards to buy, during the second wave in early 2018, the prices for graphics cards shot to astronomical heights. With the fall of the Bitcoin and Ethereum share prices, mining became less and less attractive. But profitability also suffered from the many participants.
How mining is profitable
Private users in particular began to mine with their own hardware or to buy additional graphics cards just for mining during the first wave. I myself built and operated various miners for Ethereum mining at the end of 2016. While the first Miner with six AMD Radeon HD 7970 was still relatively inefficient (20 MH/s per card with a total consumption of 1,800 watts), the following Miners performed better. I built one rig with six AMD Radeon R7 370s, the third rig ran with five RX 470 8 GB. Especially the last rig was extremely effective and reached with overclocking and undervolting 30 MH/s with less than 800 Watt consumption. The base was manageable with an inexpensive motherboard, a small SSD, eight gigabytes of RAM and an efficient power supply.
Compared to today, however, this is almost nothing. The Radeon VII achieves an impressive 90 MH/s out of the box in Ethereum mining at 300 watts consumption. With optimizations 100 MH/s at 200 Watt consumption are probably also possible. However, the costs for the graphics card are enormous, which is why many Miners probably stay with mid-range cards like the GTX 1060 or the RX 570/RX 580.
The consumption of the entire system and the number of MH/s reached are two of three important variables. The third size is the Difficulty. It depends on how many miners mine on the Ethereum Blockchain at the same time. If many rigs mine at the same time, the Difficulty is high and the yield low. If we now assume that a mining rig with five Radeon VII GPUs delivers 500 MH/s and consumes 1,000 watts at a price of 0.20 US dollars for electricity, we will achieve a yield of $4.12 per day. This corresponds to $1,503.76 per year if the prices per Ether remain the same. However, if prices fall, the profit is negligible. In addition, there are the acquisition costs for the hardware, which amount to a good $3,900.
No new mining boom in sight
So, is there another mining boom coming? From today’s perspective, this question can actually be answered relatively easily. While mining was so profitable in the second mining wave that many private individuals also entered the market with small rigs, the market currently looks different. Most coins can no longer be mined profitably without long-term investment. Those who can’t get cheap electricity always have to struggle with efficiency.
Another argument is that there is now also a kind of ASIC miner for the largest mining-currency Ethereum. It does not require a graphics card and is therefore the right choice for large mining farms. Although they are much more universal with graphics cards, at the end of the day only the short-term profit counts. In addition, Ethereum will switch from Proof of Work to Proof of Stake in the foreseeable future. Then the mining of the most profitable crypto currency is history anyway. The gamers can therefore breathe a sigh of relief. A new mining boom is not in sight.