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The recent rise in the price of Ethereum above $1,400 has once again made graphics card mining popular. In recent days, more and more people have been asking questions about what graphics card mining is , how to mine , whether ETH2.0 can still be mined , etc. So this time, the editor has specially compiled a graphics card mining guide for everyone to clear up all knowledge blind spots. 01 What is Mining? Mining usually refers to the process of using mining machines to produce cryptocurrency . Specifically, it is the process of participating in network accounting through computer CPU (memory) , GPU (graphics card) or professional mining machines, and forming proof of work (POW) based on accounting , so as to obtain corresponding block rewards. Common cryptocurrencies that can be obtained through mining include BTC (Bitcoin), ETH (Ethereum), ETC (Ethereum Classic), ZEC (Zcash), DASH (Dash), DCR (Decrypted Currency) , etc. 02 What is the difference between mining with graphics card miners and mining with ASIC miners? Mining machines are a prerequisite for cryptocurrency mining. Existing mining machines are mainly divided into two categories: graphics card mining machines and ASIC mining machines . Graphics card mining machine, as the name suggests, is assembled from computer graphics cards . Its main hardware includes: graphics card (usually one mining machine has 6 or 8 graphics cards), motherboard, power supply, hard disk (it is recommended to use an SSD hard disk of 60G or more), CPU, memory, extension cable, adapter cable, monitor, mouse, keyboard, etc. Graphics card mining machine Graphics card mining machines require us to configure a PC ourselves to run the mining program. The performance of the graphics card determines the mining speed and computing power , and the motherboard and power supply largely determine the stability of the mining machine's operation . In contrast, ASIC mining machines (Application Specific Integrated Circuit) use integrated circuits (chips) as the computing core and integrate specific cryptocurrency algorithms into the chip, thereby greatly improving computing efficiency. Usually such professional ASIC mining machines only support one algorithm and can only mine currencies with the same algorithm. Bitmain S19 ASIC Miner For example, professional mining machine manufacturers have designed ASIC chips for the Bitcoin sha256 algorithm . Since this chip is designed only for Bitcoin mining and eliminates unnecessary image processing functions, its mining efficiency is naturally much higher than that of ordinary computer chips. For example, each hashboard of Bitmain S19 ASIC mining machine has 77 chips, three hashboards have 228 chips, and the rated hashrate is 110T . Now the best 3090 series graphics card has a single hashrate of about 120M . According to 1T=1000G=1000,000M , the difference in hashrate is a world of difference . So in summary, although professional ASIC mining machines only support one algorithm and can only mine one coin, they have high computing power and are easier to maintain. GPU mining machines, on the other hand, although they can mine multiple coins and have high residual value, have low computing power and are difficult to maintain, which are indeed their weaknesses. 03
Why does the Ethereum ecosystem use graphics cards for mining? Currently, most of the GPU miners are mining in the Ethereum network to make profits. Although both GPU miners and ASIC miners can mine in the Ethereum network to obtain ETH, in general, GPUs still dominate Ethereum mining , and ASIC miners account for a very small share. The reason why the Ethereum network has not developed high-computing ASIC mining machines like BTC is mainly due to ETH's special mining mechanism . During the ETH mining process, a DAG file is generated, which needs to be called all the time, so a dedicated storage space must be placed . This rigid demand for storage space means that even if ASIC chips are produced, their mining performance cannot achieve exponential computing power growth . Since the Ethereum network introduced the Dagger-Hashimoto algorithm in June 2016, the size of DAG files has increased from 1GB to the current 4G at a rate of about 520MB per year. The large video memory of graphics cards has a natural advantage in accommodating DAG files. Therefore, due to the limited development of ASIC high-computing power mining machines, graphics card mining machines currently occupy an absolute proportion in the Ethereum ecosystem. However, with the optimization of Ethereum ASIC mining machines in terms of efficiency and cost and breakthroughs in chip technology , high-computing power ASIC mining machines such as Innosilicon A11 will eventually squeeze out the proportion of graphics card mining machines in the Ethereum network. 04 The current logic of investing in graphics card mining The prerequisite for investing in graphics card mining is recognition of the value of the Ethereum ecosystem and confidence in the rise of ETH. As the second largest cryptocurrency after Bitcoin in market value, a series of smart contract protocols established based on the Ethereum ecosystem require the consumption of ETH. And with the popularity of many DeFi protocols this year, the locked amount of ETH has increased significantly since July 2020. The current total locked amount has reached 23.1 billion US dollars. Data source: defiplus The popularity of decentralized finance has once again strengthened the moat of the Ethereum ecosystem. In addition, as the amount of ETH locked increases and liquidity decreases, the price of ETH will naturally rise. In addition, for Ethereum graphics card miners, the increase in DeFi transaction volume will inevitably consume more Gas fees, and this part of ETH will also be paid to miners as mining fees, and mining income will naturally increase . As shown in the figure below, a total of 13,495 ETH are added every day, of which 4,872 are miners’ fees , accounting for as high as 36% . Ethereum Block Reward Based on the confidence in the rise of ETH, coupled with the high residual value and relatively short payback period of graphics cards, miners are more determined to invest in graphics cards for mining. High residual value of graphics card A graphics card mining machine is essentially a computer with multiple graphics cards installed. After mining, the graphics cards can still be sold on the second-hand market or installed on a computer for use . Therefore, miners can also obtain a relatively high residual value for the mining machine. Generally speaking, a graphics card mining machine can still have a residual value of 10-30% after two years of mining . The static payback period is relatively short In addition to high residual value, a relatively short static payback period is also an important factor for miners to choose graphics cards for mining. The static payback period refers to a payback period calculated by miners based on the current coin price and mining difficulty . Biyin Cloud Mine RTX3060Ti Miner Internal Page Let’s take the RTX3060Ti 8 graphics card mining machine as an example. The overall computing power of the mining machine is 470M . Based on the current difficulty and currency price, the mining income is 238 yuan per day . According to the market purchase price of 3060Ti mining machine of 52,000 yuan, it can be recovered in 218 days . This is far beyond the 300-day static payback period of Bitcoin mining machines . If the residual value of graphics card mining machines is taken into account, the payback period will be further shortened in theory. 05 Ethereum 2.0, can graphics cards still be used for mining? Ethereum 2.0 is like a sword of Damocles hanging over the heads of graphics card miners, making miners who want to enter the graphics card mining field hesitant, fearing that Ethereum 2.0 will progress too quickly and the graphics cards will no longer be able to mine before they have even recovered their investment. The Ethereum beacon chain has been launched, which means that the Ethereum network currently has two chains at the same time, with two consensus mechanisms , PoW and PoS . So when will the PoW chain be merged into the PoS chain and ETH mining will no longer be possible? In fact, this process will take a long time. Ethereum mainnet expected launch time for ETH2.0 Let’s look at the stages of ETH upgrade : Phase 0: Launching the beacon chain with PoS as the consensus mechanism Phase 1: Data Sharding, Introducing Sharding Chain Phase 1.5: ETH1 (PoW chain) merged into ETH2 (PoS chain) Phase 2: Continue to implement the sharding mechanism, and each shard chain will officially perform various functions We can see that Ethereum can no longer be mined after Phase 1.5 is implemented. Before Phase 1.5 is implemented, Ethereum can still be mined normally . According to the outside world and Ethereum core developers, this process may take another 1-2 years . Therefore, miners entering Ethereum mining do not need to pay too much attention to the transition of Ethereum to stage 2.0. 06 The risks of Ethereum GPU mining We all know that ETH mining income = ETH mining quantity * ETH coin price . Ethereum mining difficulty and ETH price are the most important indicators for calculating the payback period of graphics card mining and measuring mining revenue . Next, we will look at the risks of graphics card mining from these two aspects. Risk of currency price decline The falling price of coins will reduce mining income and extend the mining payback period. Since many miners are afraid to enter the market at high prices, we often recommend that customers hedge when the price of coins is high . The so-called hedging is the process of pledging the coin production in a certain period in the future, such as three months, and then borrowing an equal amount of coins from a central institution such as CoinIn, and then quickly selling them in the market to lock in profits. When the miner mines an equal amount of coins, he just needs to pay a little interest to the borrower. Risk of sudden increase in mining difficulty After hedging, miners can still mine with peace of mind even if the coin price falls. The most feared thing at this time is the sudden increase in difficulty . If the difficulty of mining on the entire network increases dramatically , the output of each graphics card mining machine will decrease , and the income will drop . Then it may take you longer to return the coins you borrowed. Is there a possibility that the difficulty will skyrocket in the short term in the future? First of all, from the data point of view, the computing power of the entire Ethereum network has indeed had a relatively obvious increase recently, but in the short term, due to the insufficient supply of graphics card mining machines and the possibility that A11 will not be delivered in large quantities before the flood season, the computing power of the entire network will basically show a slow upward trend. Ethereum mining difficulty increases In addition, due to the uncertainty of mining brought by the ETH conversion to PoS mechanism , there is a high possibility that there will be a vacuum period for the ETH conversion to PoS, and the income of ETH miners will not decline. Even after Ethereum completely switches to PoS mining, graphics card mining machines can still mine other types of cryptocurrencies . Therefore, considering the above aspects, as long as risk prevention and control are done well and hedging tools are used , it should be a relatively good time to enter the graphics card mining market. |
