An email prompted this.
Well, a few actually.
But one in particular. It was from a reader calling “BS” on the video I shared last week of the rigs I’ve built to mine a bit of the world’s #2 cryptocurrency, Ethereum. (If you missed that video, you can view it here.)
This reader rightly pointed out that Ethereum is switching algorithms at some point and, as such, mining Ethereum “is a non-viable source of income.”
We’ll come back to that…
I also received emails from readers fascinated by the mining-rig setup. They were curious about the components, what they do, and what my electricity costs are relative to my mining income.
So, I figured I’d send you this follow-up to explain everything a bit more clearly.
First, Ethereum and something called “proof of stake.”
Multiple ways exist to “mine” various cryptocurrencies. The two biggest are “proof of work” and “proof of stake.”
Proof of work is what I am doing: Using high-powered computer processing to crunch bazillions of calculations—a sort of mathematical brain teaser for computers—in an effort to unlock a piece of Ethereum.
Proof of stake does away with calculations and, thus, the need for mining rigs. It’s based on a process of buying some amount of a particular crypto, then “staking” it to the network to effectively strengthen the network and to verify transactions on the network. For that, your stake earns a bit of income paid in the form of additional coins. It’s sort of like depositing cash in a bank account and collecting interest.
Ethereum is currently proof of work, but it has promised to move to proof of stake—a promise that has been around for as long as I’ve been mining (since 2017). It will happen at some point, no doubt. The question is when.
ETH 2.0, as it’s known, was supposed to be here already. Obviously, it’s not.
The earliest the transition is slated to happen now is some time in 2022—though there are also rumblings that it could be early 2023 before all the testing is complete.
Frankly, I have no insight into that.
But I also don’t care.
I mine while I can, knowing that if my price projections for Ethereum are anywhere near accurate ($20,000 to $40,000…and maybe even six figures later this decade), the value of the ETH I mine from now until the end of ETH mining will far outweigh the cost of the rigs I’ve built.
The longer ETH 2.0 is delayed, well, that’s just more Ethereum dropping into my crypto wallet.
And once the switchover happens, it’s not like my rigs are suddenly electronics-without-a-cause.
I can switch to other proof-of-work coins that rely on graphics cards for their number crunching: Ethereum Classic, Monero, Zcash, Ravencoin…there are many, many other coins. Some are more profitable than others, but that’s a bridge for a later crossing.
The point is simply that, yes, Ethereum mining goes bye-bye at some point. But that doesn’t mean crypto-mining goes bye-bye too.
Now, as to components and power costs…
My electricity cost for these rigs is about $60 a month. (That’s for the roughly 10.8 kilowatt-hours consumed per day by all my rigs, at a cost that equates to about $0.20 per kilowatt-hour. And, yes, that’s a fairly high electricity cost, compared to many places in the U.S.)
As I noted in the video, I have a fifth video card I was planning to install, and it’s now installed. At current rates, I am mining about 0.12 ETH per month now—worth around $240 with ETH at $2,000. So, net—those cards generate about $180 a month.
Of course, that changes with the price of Ethereum.
If ETH drops, my net drops. If ETH goes back to, say, $4,000, my net jumps to around $480 a month.
The reality, however, is that I am not selling what I mine. I am stockpiling ETH for higher prices. So, in essence, I am spending $60 a month to mine 0.12 ETH that will be worth substantially more in the future. (I have rig costs to amortize, but that will ultimately depend on how much ETH I mine.)
As for my gear—in any mining rig, it’s the graphic cards that do all the heavy lifting, so I focus my budget there and keep the rest of the components as low cost as I can find. I use:
- Low-cost motherboards from ASRock, ASUS, and Gigabyte (any decent manufacturer, really), each with at least three slots to handle graphics cards (what are known as PCI-e slots).
- Very basic, low-cost RAM to run the system (8 gigabyte DDR4 RAM).
- And the cheapest Intel processer I can find that works with whatever motherboard I grab, as well as a low-cost power supply.
My graphics cards are a variety of AMD devices (a RX 480, two RX 580s, and a 5600 XT). I also have one Nvidia (GTX 1080), and a bid in on a second Nvidia card (GTX 1080ti). These selections are a function of cost since I try to keep my card purchases at roughly $300 or less. Many of the higher-end cards are $750 to more than $2,000 each.
There are a few other smaller components involved, but that’s the guts of each rig.
Now, before I sign off let me stress that I am not advocating anyone go out and build a mining rig. That wasn’t the point of me sharing the video. Rigs can be pricey. They can be temperamental. And, yes, Ethereum will one day go to proof of stake and the mining ends (at least for ETH).
But I built my rigs because I enjoy the process as something of a hobby, and because I suspect Ethereum prices are going to see highs that most people don’t expect.