What to know about Ethereum mining in 2021.
Ethereum mining is going away. Not today, not tomorrow, not next week, probably not even in the next few months — but it is eventually going away sometime in the near future.
The Ethereum network is upgrading to ETH 2.0 and with that they are phasing out mining and replacing it with proof-of-stake (PoS). There’s even a threat of ETH 1.0 going PoS before ETH 2.0 is fully launched. The more immediate concern for miners is EIP1559, an Ethereum Improvement Proposal to address the fee structure and make the ETH more scarce.
What does this mean for Ethereum mining?
On a positive note, there’s a lot of upcoming events that miners can prepare for. The downside, however, is that Ethereum miners are more or less guessing and waiting to see when these changes will impact them.
I’m an Ethereum miner.
In 2020, I built an Ethereum mining rig for less than $1,000. Good luck doing that in 2021 though. With COVID, the crypto bull market, and FOMO last ditch efforts to mine ETH before PoS hits, upstart costs for mining have risen dramatically. It’s difficult to get your hands on GPUs and other parts (at reasonable prices) needed for mining.
Due to the upcoming changes to Ethereum, I’ve also started looking into other minable cryptocurrencies like Ravencoin. Currently, I’m doing some spec mining of Ravencoin, adding to my RVN holdings since it’s one of the more profitable coins to mine. I’m anticipating a spike in the price of RVN sometime in the next year. Similar to Bitcoin, Ravencoin has built-in halving events and one is coming in January 2022.
A jump in the price of Ravencoin is no guarantee. I’m mining it purely as a hedge in case it does rise. Alternatively, it’s a coin that will be minable on my rig once Ethereum is no longer minable.
Ethereum is very profitable to mine as of writing. Despite the threats to miners coming down the pipeline, gas fees remain high, ETH has hit all time high unit prices in recent weeks, and the overall crypto market is hot. Even volatile swings in the price of ETH tend to work in miners’ favor. In a wild market, miners can stand to benefit.
All of this will change. EIP1559 will be the first big test. We’ll know more in June or July about how the improvement proposal should really impact Ethereum mining and then we’ll have to wait and see how it plays out once implemented. Currently, ETH is very profitable to mine. As are other cryptocurrencies like Ravencoin.
When ETH is no longer profitable to mine or even minable at all (sometime much further down the line), that doesn’t just mean that other cryptos like RVN will automatically remain profitable.
It will be critical to watch where all of the ETH hash power goes once Ethereum is no longer profitable and eventually isn’t minable at all.
Some of this sounds like doomsday talk.
It’s not quite that urgent a matter but it’s crucial to understand what’s happening in cryptocurrency mining right now if A) you’re an existing miner or B) you’re interested in getting into mining.
I mentioned the high upstart costs in 2021.
COVID and the crypto bull market both contributed greatly to an increase in demand for graphics cards, computer parts, ASIC miners, and pretty much anything cool you can do at home related to technology. That meant that it was harder to get the parts needed to build a mining rig. I was lucky enough to get mine up and running just before the bull market hit. Now though, it’s been a challenge upgrading my rig because parts are hard to come by or are extremely overpriced.
You can buy parts secondhand from places like eBay or Craigslist. You might even get lucky in some lotteries with big stores like Best Buy or Newegg. I’ve added myself to the notification list straight up from companies like EVGA whose graphics cards I’m currently using. If you go the secondhand route to buy GPUs or other parts, you’re looking at prices 2 or even 3–4 times what you would normally pay. It’s hard to justify paying those prices.
The chip and parts shortage also means that if you’re in the B group (looking to get into mining), now is not a great time to start. You have high priced parts that are hard to come by and the prospect of Ethereum phasing out mining as we speak. Even though other cryptocurrencies will of course remain minable, the ETH transition will have ripple effects. There’s also a chance that the chip and parts market opens back up later in the year, especially if ETH miners dump their GPUs and rigs if ETH becomes less profitable to mine. I’m hoping too that Nvidia and other chipmakers will catch up to demand as the world recovers from the pandemic.
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Ravencoin Mining
Take Ravencoin as an example. Many Ethereum miners are simply saying that once ETH becomes less profitable or no longer minable, they’ll just move over to Ravencoin. While that is likely what they can and will do, that doesn’t mean that Ravencoin will be as profitable as it is right now.
As miners flood the network on a new coin like Ravencoin, there will be more hash power on that network and the difficulty will increase — leading to mining Ravencoin being less profitable than we might anticipate.
It’s tough to say what these scenarios will actually look like until they happen though. That’s part of the reason why I’ve gone ahead and started mining Ravencoin in anticipation of transitioning to it later. Mining it now allows me to grow my RVN holdings, get familiar with the mining pool I’m using, and see how my graphics cards perform. I’m primarily looking to increase my knowledge of the Ravencoin network in case I move the bulk of mining from Ethereum to Ravencoin later this year.
Let me put my approach to Ethereum and crypto mining in context. I’m a Bitcoiner first and foremost. I discovered Bitcoin in 2013 but didn’t buy my first BTC until 2015. I was, however, hooked. I found ETH sooner after in 2016 and was fortunate enough to buy ETH at $12. Bitcoin and Ethereum are responsible for the bulk of my cryptocurrency holdings. You can even take a look at my crypto portfolio as of May 2021.
I started mining Ethereum because I was at home a lot more due to the global pandemic and because I wanted a more tangible way to get involved in cryptocurrency besides just investing.
I wrote about building my Ethereum mining rig here and then followed up with why I started mining in the first place. Check out both posts if you’re interested in reading more about my journey through crypto mining. I also provide a complete parts list in my original post about the build if you’re curious to learn more about what goes into a rig.
It’s critical to note that I do hold some ETH but that the dominant holding in my crypto portfolio is BTC. As I said, I’m a Bitcoiner first.
My goal is to increase my Bitcoin stack. I’ll likely continue to hold some ETH, even when Ethereum mining eventually goes away, but my ETH stack will continue to shrink in comparison to my BTC stack. Part of why I mine crypto is to increase my BTC holding. I don’t hold 100% of the ETH I mine. I mine in a way that makes it easy to convert any rewards to BTC — that means mining directly to a wallet that allows me to convert.
This is also to say that when I ultimately switch off mining Ethereum altogether, I’ll have the same approach to Ravencoin or any other crypto I may mine such as Ethereum Classic. I can’t promise that I’ll simply be mining another coin and holding it. With Ravencoin, I am slightly bullish heading into its January 2022 halving. I do think there’s a chance that the price increases the closer we get to that date but nothing is definite. I also can’t say that I won’t convert at least some of any RVN I mine to BTC.
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The state of crypto mining in 2021 is rapidly evolving. It’s a dynamic situation with lots of moving parts. Right now, if you’re already a miner, it’s a great time to mine. Nothing like seeing mining profitability remain high AND the price of the coins your mining rise in tandem. New all time highs for Ethereum have made things even better. The Bitcoin and crypto bull market, with theories of a Bitcoin Supercycle being tossed around, are bringing more money and attention to cryptocurrency. But, everything is also changing.
Keep a eye on the upgrades coming to the Ethereum network. ETH 2.0 will reshape both Ethereum and the rest of the crypto mining space. Those changes, along with how things go in the chip manufacturing industry, will change the landscape for new miners and for those looking to build out mining operations further.
Let me know what you think about the state of GPU and even ASIC mining right now. Are you a crypto miner? Are you interested in getting into mining? If so, what strategies are you taking to secure parts and keep your upfront costs low? I’m happy to provide any insights I have too. Thanks for reading my post! If you want more content like this, sign up for my newsletter.
