ETH Mining Still Very Profitable Despite Upcoming Eth2 Update

Ethereum miners continue to enjoy lucrative payouts for their efforts in 2021, as the smart contract blockchain platform is nearing a transition away from its PoW consensus. The last few months have been phenomenal for much of the cryptocurrency space, as Bitcoin (BTC), Ether (ETH) and other currencies have seen monumental gains in value. The increased volume of transactions and users has also directly benefited the cryptocurrency mining ecosystem.

Ethereum miners, in particular, have made huge profits due to the success of decentralized financial projects running on their Blockchain. These various DeFi platforms have boosted transaction volumes and activity on the blockchain Ethereum, which has led to a skyrocketing increase in fees and processing times. While end users have to bear the brunt of increased transaction fees, miners have been smiling all the way to the bank.

As a result, Ethereum miners they saw a record revenue of more than $ 830 million in January 2021, levels not seen since the first weeks of 2018, before Ether, Bitcoin and cryptocurrency markets in general plunged after spectacular highs in December of 2017.

ETH mining surpasses that of Bitcoin

While Bitcoin sits firmly at the top of the list of cryptocurrencies by market capitalization, BTC miners are not enjoying the same level of profitability as Ethereum miners. Philip Salter, Genesis Mining’s chief operating officer, told Cointelegraph that While Ethereum mining is “super profitable” at the moment, current miners and potential newcomers still need to be aware of the initial barriers to entry.

“The margins that you can make with ETH are much higher than the margins that you make with BTC. However, that does not mean that it is more profitable overall. The reason is that ETH mining hardware is more expensive than ETH hardware. BTC mining, so you have a higher initial cost than you need to break even. “

Salter noted that Litecoin mining (LTC) Y Dash it’s lucrative too, but it’s not yet on the same playing field as BTC and ETH. He also added that all other cryptocurrencies that are mined using graphics cards were not as profitable as ETH mining.

Pylon.finance founder’s pseudonym, OxGrimReaper, also weighed in on the current mining climate and the current superior profitability of Ethereum mining, telling Cointelegraph:

“ETH is the most lucrative mining opportunity at the moment, even more so due to a GPU and hardware lockdown in retail. Also, we are in the middle of Chinese New Year, which means there is no production at the factories. barrier to entry right now is as high as ever. “

The founder of Pylon.finance also said that although Bitcoin mining was less lucrative than GPU mining, it is easier to get into it, given that users can buy ASIC mining machines, which are essentially plug-and-play. . Nevertheless, GPU mining has several barriers to entry, such as the cost of GPUs, the technical knowledge required to configure a system, as well as operational considerations.

OxGrimReaper also agreed that the success of DeFi platforms has had a lot to do with the profitability currently enjoyed by Ethereum miners. Ethereum’s gas fees, which are what miners are paid to process a transaction, have skyrocketed along with increased use of DeFi platforms, and he says this is a positive sign for miners.:

“The use of bots in MMAs is a major catalyst in the war on gas. But of course, a war on gas means high costs to do business. High gas is a great indicator that a miner is making money. Gas hit an all-time high this year, while mining also hit an all-time high. Additionally, transactions in the ETH ecosystem hit an all-time high this year. These are all strong indicators of a healthy mining ecosystem, especially for those who they already have their infrastructure in place. “

ETH miners have some time to prepare for Eth2

At the moment, Ether miners continue to take advantage of the high fees and volume of transactions while maintaining the blockchain. This is despite the transition slow-moving ongoing to Ethereum 2.0, which will signal the beginning of an end to Ethereum mining once the mainnet merges with the Proof-of-Stake Beacon Chain, which launched in December 2020.

The move away from the current PoW protocol, which Ethereum currently works with, is aimed at making the blockchain more scalable, secure and sustainable. However, it will also put an end to what has been a profitable venture for Ethereum miners. Although the full transition to Eth2 is still a point on the horizon, Salter says miners will carefully weigh improvements to their operations as Eth2 development continues.:

“The switch from Ethereum to PoS has been a possibility for a long time, but it always seems to be two years away. Miners will assess the risk of this happening before making any investment in new hardware.”

Salter added that a more pressing concern is the upcoming Ethereum Improvement Plan. EIP-1559, which proposes burning a large chunk of transaction fees rather than giving it to miners, has substantial implications for the profitability of ETH mining: “If accepted, this will lead to a significant reduction in mining rewards, up to 50% less. These kinds of drastic changes affect the Ethereum ecosystem quite frequently, creating uncertainty for investors.“

Ethereum transaction fees have continued to skyrocket in February 2021, with data from Block chair who estimate that the average transaction fee for Ether was up to $ 50, compared to Bitcoin’s average of $ 30 per transaction.

Meanwhile, OxGrimReaper said its farm could easily switch to profitably mining other cryptocurrencies that make use of GPUs instead of ASICs, which are used to mine cryptocurrencies, such as Bitcoin:

“There are more than 10 currencies that our GPUs can profitably mine without problems. We are doing this now with the wasted 4G cards in Ethereum. Ravencoin is being mined with some profitability. For us, the protocol is not as important as the arbitrage between electricity and computing hash rates. “

Nonetheless, cryptocurrency commentators such as Lark Davis, also known as “The Crypto Lark,” have underscored the need for Ethereum developers to accelerate the transition to Eth2 and give users a break from Ethereum’s astronomical transaction fees.

Although many users have started using DeFi platforms, such as Uniswap and 1inch, to make easy exchanges between currency pairs, the fees for these services and transactions are becoming exorbitant for the average user, making it difficult for new people to join the sector. DeFi.

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