Back in May I wrote a guide explaining how to build an Ethereum mining rig, 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. Shortly thereafter, Motherboard also made a video documenting this process. Since then, I’ve received countless emails from readers inquiring about my mining rig. I’ve received three such emails this week. The most common question voiced by these readers is whether or not it is still worth it to build a mining rig.
The answer to this question is no. Building an Ethereum mining rig hasn’t been worth it for months and a few months from now, mining ether will be completely obsolete.
Arguably, building an Ethereum mining rig wasn’t even worth it when I built my machine in May, and many readers let me know this when the article and video first came out. This is somewhat true, but there is a necessary caveat here.
Mining ether also 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.
In hindsight, these early miners 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—hence the article about how it works.
Neither the guide nor the video were meant to be an endorsement of mining, but rather a hands-on look at how to turn some basic supplies from your hardware store and a few hundred dollars’ worth of computer equipment into a device for verifying transactions on the Ethereum network.
Shortly after the article came out, many readers reached out with technical questions about how to assemble the parts of their rig and I was happy to oblige them. Others reached out asking if I thought it was a good idea for them to build a mining rig. I usually told them ‘probably not,’ if for no other reason than the graphics cards that power the rigs were impossible to find or prohibitively expensive.
In late October, I stopped using my rig to mine ether. By this point, my machine had already produced enough ether to pay for the cost of building it, but this isn’t why I stopped mining.
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.
By October, the difficulty of solving a block on the Ethereum blockchain was almost eight times higher than when I started mining in May and the same thing was true of the total computing power on the network.
Then 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 of this change—apparently implemented by the Ethereum Foundation to wean miners off block rewards in advance of the network’s switch to Proof-of-Stake (more on this later)—was that my mining rig was mining under half as much ether as when I started.
The recent rise in price of ether to well over $400 this month meant that even with my mining rig’s drastically reduced capabilities it would still be profitable to mine. But this is entirely dependent on ether’s price staying this high.
If you’re still not convinced, consider how long you expect it to take to mine enough ether to pay back the cost of the rig. When I build my mining rig, I expected it to take about 6 months to recover the cost of the rig (about $2,000), so long as the price of ether stayed around $250. As it turned out, the price of ether has kept rising, so I was able to break even on my mining rig within about 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 this type of rig might cost you close to $2,000 (if you can find them), 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.
Plus, a year from now it’s likely no one will be mining ether at all.
Sometime in 2018, the 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. It’s uncertain when this transition to POS will happen, but it’s the inevitable terminus of the Ethereum network.
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. You could also mine cryptocurrency for charities like Bail Bloc, which donates mined coins to post bail for low-income people in New York. Alternatively, you could repurpose your rig to play PC games or donate the computing power to SETI@home, a distributed computing project that is analyzing radio signals for signs of intelligent extraterrestrial life. (There are lots of other cool distributed computing projects that could use your computing power, too).