A couple of months ago, building an Ethereum mining rig was quite an active sports in the Balkan region, however, building one in the recent months hasn’t been worth it and soon they will be completely obsolete.
An Etherum mining rig, is a special type of computer that forms the backbone of the Ethereum network and earns ether, the digital currency native to the network, for its owner. Like Bitcoin, Ethereum is a distributed public blockchain network. Although there are some significant technical differences between the two, the most important distinction to note is that Bitcoin and Ethereum differ substantially in purpose and capability.
Bitcoin offers one particular application of blockchain technology, a peer to peer electronic cash system that enables online Bitcoin payments. While the Bitcoin blockchain is used to track ownership of digital currency (bitcoins), the Ethereum blockchain focuses on running the programming code of any decentralized application.
It’s no longer worth it
Building an Ethereum mining rig hasn’t been worth it for months and a few months from now, mining ether will be completely obsolete.
According to Motherboard, mining ether wasn’t worth it for about the first year and a half of the cryptocurrency’s existence. The price of ether hovered around $10 from 2015 until early 2017, when it saw a spike to $25.
This was important because it meant the value of the ether being mined was higher than the cost of the electricity that was needed to mine it. In other words, until that point, small-scale mines were operating at a loss in the belief that the tokens they were mining would someday be worth a lot more money. And they were right.
The price of ether has risen over 4,000 percent in the last year and is now worth well over $400. There was a brief sweet spot, from about February to late April of this year, when ether was profitable to mine, but hadn’t attracted mainstream attention for its meteoric rise in value. Then in May, the sudden surge in the price of ether saw a corresponding surge in interest for mining globally and in the Balkans region as well.
Missing data from the Balkans
Unfortunately data from customs is very difficult to get, related to how many graphics cards have been sold in Albania, Kosovo, Macedonia or Serbia, yet what is known now is that every time a block is mined on the Ethereum blockchain, the miner that discovered the correct hash for that block is rewarded a certain amount of ether. Since Ethereum was created in 2015, the reward has been 5 ether per block. When Ethereum was created, it included code that would make solving a block increasingly more difficult over time.
The block difficulty is calculated based on the amount of time it takes in between block solutions. Ethereum’s creators wanted a block to be solved about every 12 seconds, and in order to maintain this solution rate as more computing power is put on the network, it is necessary to increase the difficulty of finding the hash solution for the next block.
On October 15, the difficulty of mining a block fell by about half and the reward for mining a block was reduced from five ether to three ether. This was part of hard fork on the Ethereum blockchain as it upgraded to a lighter and faster version of the network. The difficulty of mining a block has held steady since then, but the amount of computing power on the network has continued to increase. The practical effect to this change implemented by the Ethereum Foundation, was to wean miners off block rewards in advance of the network’s switch to Proof-of-Stake which means that mining rigs assembled in May 2017, would make under half as much ether as in their early days.
Price rise to $400
Although with the recent rise in the price of ether to over $400 this month, meant that even with the mining rig’s drastically reduced capabilities there would still be profits. But again it depends on ether’s price staying this high.
Back in May, it took about 6 months to recover the cost of a rig in the value of $2,000, so long as the price of ether stayed around $250. When the price kept rising, people were able to break even with their rigs within 5 months.
Building the same type of rig today would probably require a larger up-front investment since the scarcity of GPUs has caused their price to almost double. Now, just the six GPUs for a similar type of rig might cost you close to $2,000, not to mention another $300-$500 for the motherboard, CPU, RAM and power supply. Even with the price of an ether token sitting at well over $400, it would likely take 7-8 months to hit return on investment on this type of rig. If ether drops to below $400, it could take a year or more to hit ROI. Not to mention the cost for power!
Miners will become obsolete!
Sometime in 2018, the Ethereum network is expected to switch from a Proof-of-Work (POW) model to a Proof-of-Stake (POS) model. Under POW, miners are essentially verifying transactions on the Ethereum blockchain and are rewarded in ether for the computing power it takes to do this. Under POS, however, this validation process will be carried out by people who own ether in accordance with how much they own. In short, miners will become completely obsolete.
If you’ve already bought the equipment for a mining rig, however, fear not. There are plenty of other cryptocurrencies to mine and making the switch to something like Monero or ZCash—two cryptocurrencies optimized for anonymity—isn’t too difficult.