Can You Still Make Money Mining Crypto

Earn Money Mining Ethereum Before It's Too Late

Ethereum mining is on its way out, but it's not too late to partake

Ethereum has been a hot topic in 2021. A year ago, in October 2020, Ethereum was worth just under $400 per token. Today it is worth nearly $3,500 per token with many crypto enthusiasts bullish on its future value.

This isn't the first time we have seen Ethereum reach such high prices. Ethereum peaked at nearly $4,200 in May and then retreated down to as low as $1,800 by July. Many factors play into the volatility of cryptocurrencies, however, Ethereum has recovered quite strongly due to the success of decentralized finance (DeFi) and the explosion of NFTs; these popular use cases for the network mean that there is a lot more driving the value of Ethereum than simply the prospect of a digital currency and investment opportunity.

With NFTs and DeFi keeping the network incredibly busy, the demand for miners to mint transactions onto the blockchain has remained very high. If you have been interested in mining Ethereum, it isn't too late to still earn some ETH by putting your graphics card to work. In this post, I will briefly discuss how mining has changed since July, and then give a quick guide to begin mining in just a few minutes.

Ethereum Mining

EIP-1559 Did Not Lower Profitability

I last wrote about Ethereum mining in early July, where the NFT craze and the launch of ShibaSwap were driving high fees and increasing profits for miners. I had predicted that Ethereum mining would become much less profitable after the rollout of the EIP-1559, which included a major overhauling of the fee structure and miner compensation.

However, EIP-1559 was rolled out in early August and mining revenue has not declined. Using a single RTX 3080 as my test each month has actually shown a slight increase in profitability, partly due to the increasing value of Ethereum. We can see in the chart below that mining revenue has stayed fairly constant since the boom in May.

Mining Will End In the Coming Months

While EIP-1559 did not result in the loss of revenue that many worried about, the upcoming transition to Ethereum 2.0 and a proof of stake consensus protocol will still end the need for mining Ethereum with GPUs. The good news to those looking to take advantage of mining is that this update is still likely several months away.

The ETH 2.0 update is split into three major updates: The Beacon Chain, The Merge, and Shard Chains. The Beacon Chain is already live on the network, which essentially set the stage for the transition to a proof of stake model in the future and allowed users to begin staking Ethereum. The Merge is the update that will combine the Ethereum mainnet with the Beacon Chain, which will bring an end to GPU mining in favor of staking.

The Merge has been postponed several times. Many had hoped it would roll out before the end of 2021, but the current estimate given by the Ethereum developers is Q1 or Q2 2022. This means that miners have several months remaining to take advantage of profitable Ethereum mining.

Determine Your Profitability

Before getting set up to mine Ethereum, it is best to use a calculator to estimate your potential earnings. I personally like to use whattomine, which allows you to choose the GPUs available to you along with local electricity prices and displays the most profitable coins to mine. Certain GPUs may have higher profitability with a coin like RavenCoin. I won't get into the considerations of mining alternative coins in this post; just keep in mind that unless you are liquidating mined coins very quickly, their future value will be a factor in your profitability.

Get Setup to Mine

If you have a modern graphics card with more than 4GB of VRAM, it is easy to start mining Ethereum. There are four key components needed to mine Ethereum: a modern GPU, a mining pool, a miner, and an Ethereum wallet.

Choose a Pool

Since the majority of people reading this article will be mining with one or two GPUs, they will need to use a pool. Pools are large groups of miners who combine their computing power to solve blocks faster and more consistently. Choosing a pool is relatively simple. They all have their own policies for calculating earnings and charging fees, however, after EIP-1559 they are all fairly similar.

Prior to EIP-1559 some pools like Ethermine offered free payouts to miners by adding miner payouts to their solved blocks. This was possible since all of the fees paid by users to be added to a block went to the miners. However, EIP-1559 introduced a base fee that is burned by the network and cannot be avoided by the pool.

This means that most pools now make you pay the base fee when withdrawing your ETH earned from mining. The impact of this is low on large miners and larger on small-scale miners since it takes much longer to accrue a large amount of ETH on a single GPU. However, this change doesn't make small-scale mining less desirable; the implication to small miners is less frequent payouts. The longer a small miner waits to receive a payout, the fewer fees they pay relative to how much ETH they receive.

I recommend anyone starting mining go ahead and use the Ethermine pool. It is easy to use and has started passing all of its miner extractable value (MEV) onto the miner after EIP-1559. I'll have an explanation of MEV at the bottom of this post.

Download a Miner

Miners are simply applications that facilitate connecting your hardware to your pool of choice and running the Ethash algorithm. There are many available miners, but there are several that are currently best for specific GPUs. Choose one of the suggested miners and use the link provided to download the latest release from GitHub. After it is downloaded, extract it to a new folder in your Documents folder.

Best for Nvidia: T-Rex

T-Rex is still the most reliable miner for Nvidia cards. NBMiner is a viable alternative now, however, I still have the lowest rejection rate using T-Rex.

Best for Nvidia LHR: T-Rex

T-Rex has had good success increasing the speed of low hash rate (LHR) Nvidia cards. It brought a friend's 3060ti from 30 MH/s to 40 MH/s, which is a 35% boost in performance. This does tend to increase power draw, so make sure to compare and tweak power settings. The latest release even allows for mining ETH and RVN/ERGO simultaneously on LHR cards.

Best for AMD: NBMiner

NBMiner has become very competitive this year, with frequent updates and excellent support for a variety of graphics cards. I have begun recommending NBMiner for AMD cards since it has been more consistent with fewer headaches than Team Red Miner for several colleagues lately.

Obtain a Wallet

The last piece needed to mine is an Ethereum wallet. Chances are the majority of people reading this will already have a wallet, however, it is critical to remember you should never use an exchange wallet for mining. This means that you should never use the public key from your Coinbase/Gemini/etc account. For beginners, I think Atomic Wallet and Exodus are great places to start.

Start Mining

Now that we have all of the pieces we need, we can start mining Ethereum! You will need to open the Command Prompt in Windows and navigate to the folder containing your miner. You should be able to navigate to the folder like this:

          cd Documents/<minerfolder>

You should see the command line reflect the change to now be located in your miner's folder as long as you unpacked it in your Documents folder. Now we can run the command to connect to our pool and mine Ethereum.

          t-rex.exe -a ethash -o stratum+tcp://us2.ethermine.org:4444 -u <ETH_WALLET_ADDRESS> -p x -w <ANY_USERNAME>

This is the command to copy and paste into the command prompt. Make sure you put your own wallet address in and you can choose any name for your computer username.

In this example, I am using "us2" as my region, which is for the Western United States. If you live in Europe, Asia, or the Eastern United States you should change the region to the closest option. If you live in North America and aren't sure which region to use, try both and see which one results in the least number of stale shares in your Ethermine dashboard.

Wrapping Up

You now have all of the basic information needed to start mining Ethereum with your personal graphics card. With the price of Ethereum so high most people will find their mining earnings easily outpace the electricity cost. While mining Ethereum with a single GPU won't make you rich, it can be a nice source of passive income. With temperatures cooling down in the Northern Hemisphere, mining can offset the need to heat your home.

What is MEV? How is it Increasing Revenue?

I mentioned something called MEV when discussing pools. Some pools, including Ethermine, have leveraged something called miner extractable value (MEV) to help increase mining revenue after EIP-1559. Blockchain networks are immutable ledgers of transactions, however, the order transactions are minted on the blockchain is not always in chronological order of when the transactions were made by users.

Miners have the ultimate say on when a transaction is minted into a block, which is heavily influenced by the fees paid to miners. High fees don't guarantee priority though, miners are also able to manipulate the order of transactions to extract extra profit from blocks. This extra profit generated from manipulating the order of transactions is MEV. This practice is controversial as it tends to increase mining revenue at the expense of unwitting users. However, MEV is a complex issue that would likely happen even if the pools didn't coordinate it; at least this way this revenue is passed onto miners.

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Resources

Ethermine
T-rex Miner Releases
NBMiner Releases
Guide to Crypto Wallets
Mining Profitability Calculator

Disclaimer : Nothing written here is financial advice. I am not a financial advisor, and this content is the result of personal experience and research. Never take financial advice from strangers on the internet.