What affects the profitability of mining ETH? Let’s say you have a mining farm that works around the clock, does not glitch, does not freeze, and its hash rate is constant. It doesn’t matter how big your farm is: a huge factory or one graphics card in a gaming computer.
All of the factors that we discuss below have the same effect on the income of a farm of any size and scale .
We will of course assume that the farm is running smoothly. If your video card turns off every two hours or the farm goes into reboot for unknown reasons, then first you need to fix all these problems, and only then proceed to the profitability of mining.
So what influences Ethereum mining income?
- The complexity of the Ethereum network: the higher the difficulty – that is, the competition with other miners – the worse.
- Ethereum blockchain workload: the more ETH users use the network for transactions and transfers, the better.
Let’s take a closer look at each of these parameters.
Hashrate and complexity of the Ethereum network
On the Ethereum network, new blocks are found every 13.2 seconds on average. Blocks can be located in either one second or one minute, but the average result will always be 13.2 seconds. This is the most important parameter of the ETH network: the network always monitors it and regulates this time, keeping it at 13.2. The more miners there are in the Ethereum network, the higher the complexity of the network, the more difficult the network gives them the task that needs to be solved to find the block. Conversely, the fewer miners, the easier the task.
In simple terms, there are many miners on the network – blocks are found frequently – the network has increased its complexity. No blocks for a long time, few miners – the network has lowered the complexity.
Since the average time of finding a block is the same, an equal number of blocks are mined daily. In other words, the “pie” of the award is the same every day. All Ether miners have 6,500 blocks per day. Let’s imagine that your hash rate – for example, 100 Mh / s – does not change. Obviously, if the hashrate of all miners in the world is 1,000 Mh / s, then you get 1/10 of the pie. If all miners in the world have 10,000 Mh / s, then you get 1/100 of the “pie” and so on.
The more miners appear on the network, the higher the competition and the less ETH you mine every day.
Fortunately, the hashrate of the Ethereum network is already so large that the arrival of another hundred miners does not significantly affect the hashrate. However, if you consider the growth of the network hash rate over the year, you can see a jump of two and a half times. Ethereum’s current and historical hashrate can always be viewed on this chart.
The Ethereum network is used to:
- Translations. Vasya transfers 1 ETH to Masha, Katya transfers 0.3 ETH to Petya, and so on.
- Execution of smart contracts. It can be anything: crypto kitties and other NFT tokens, decentralized finance like trading exchanges, and so on.
For each block found in the Ethereum network, miners are entitled to 2 ETH. This is the base value that encourages miners to mine. Miners will receive rewards even if users are not transferring money at the moment.
Every netizen wants his transaction or interaction with a smart contract to take place faster, because no one likes to wait. And the more actively users use the network, the higher the network fees for transfers and execution of smart contracts become. Miners are not fools. They primarily include transactions with the highest commissions in blocks in order to earn more.
When we say «miners», we mean primarily mining pools. Solo mining Ethereum is almost impossible because it requires too much power.
The mining pool for each Ethereum block found receives 2 ETH and commissions from all transactions and interactions with smart contracts that were included in this block. On not very busy days of transactions, it can run up to the whole ether in addition to the main reward of 2 ETH, that is, the pool will receive a total of 3 ETH for a block. On busy days, commissions on one blog can reach 7 ETH, 8 ETH, 10 ETH, and so on.
Here is an example of a block of 24.88 ETH, of which 2 ETH is the reward for a new block, and 22.88 ETH is the fees for included transactions. That is, for one block, the 2Miners pool received 24.88 ETH, and then distributed this reward among its miners.
If you want to see how big the commissions are today, go to the found blocks section on the 2Miners Ethereum pool. Look at the “Reward” column. The larger the blocks, the better for miners, and the worse for ordinary users of the Ethereum network, because they have to pay high fees.
By the way, smart contracts load the network much more than regular transfers. If you see that the network is overloaded, it is smart contracts that are to blame, that is, DeFi projects, all kinds of exchangers, kittens, and so on. If you want to understand how commissions are measured in the ETH network, what is gas and its price, be sure to read our material “What is gas in Ethereum? How much to pay for Ethereum transactions. «
The more the network is loaded with transactions and smart contracts, the more ETH you mine every day.
In July 2021, Ethereum developers want to implement the EIP-1559 network update. It should reduce the fees that Ethereum users pay, and miners, in turn, will receive less reward. How much less? It is not known yet, but we will keep you updated and update the article as new information becomes available.
Why are mining calculators lying?
All mining calculators cannot predict the future. They are guided by data from the past. The calculator is just a tool that helps you assess the profitability of mining. The calculator does not know how heavily the network will be loaded in an hour, how lucky the mining pool is today, and what it will be tomorrow, and so on. Nobody knows this.
Let’s take a simple example.
The network is flooded with crypto-cats, everyone runs and sells them. Or some project promises free tokens – everyone immediately rushed to fill out an application for receipt. Ethereum network fees have gone up, miners are being rewarded twice as much as usual. You go into the calculator and see that at the moment you will receive $ 5 a day with your video card. Happy to start mining. But a day later, it turns out that your earnings were only $ 2. Why did this happen?
When we started mining, the euphoria with the cats subsided, and the free tokens had already been distributed. The load on the network has eased. The total block reward dropped from 6 ETH to 3 ETH. In addition, the Ethereum price dropped, and the pool was not very lucky that day. This is how $ 5 can turn into $ 2.
Likewise, everything can happen in the opposite direction. The calculator predicts you $ 2, but in fact you got $ 10. This also happens.
Do not forget that the calculator should be guided by the income in the cryptocurrency that you are mining.
Mining profitability – in dollars or ETH
Very often, miners look at the amount of their reward in dollars or in the local currency of their country. They can be understood, because the mining process for them is to get the maximum reward in rubles or dollars using their mining power. This is totally normal.
However, very often they ask the same question “Why did mining profitability fall?”. The answer can be very simple – the price of Ethereum has dropped. If you are not targeting income in ETH, but in your local currency, check the current Ethereum rate before looking for problems in hardware or pool.
Why did Ethereum mining income increase?
Representatives of the 2Miners pool rarely hear this question. Usually, when miners get more than they think they should, they just rejoice and don’t tell anyone about it. However, if you wondered why, according to the calculator, you should have received 0.1 ETH per day, but received twice as much, we recommend that you carefully read this article again.
Probably, you can easily find exactly the factor that influenced the growth of income in your case. Most often, you need to look at the congestion of the ETH network, and then at the complexity of the network. You can also look at the pool’s luck on the last day. And if you are looking at income in dollars, then, of course, first of all look at the ETH rate. Perhaps he is already on the moon, and you have become a millionaire.