The DeFi wave brings a good harvest season for Ethereum miners, and a comprehensive understanding of the risks and benefits of ETH mining


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Can ETH be mined? Understand the investment logic of graphics card mining.

Original Title: “Analysis Report on Graphics Card Mining Investment”
Written by: Shanghai Dieyi

With the blossoming of DeFi (Decentralized Finance) projects and the development progress of ETH2.0, Ethereum (ETH) has recently received more and more attention, and with the gradual increase in currency prices, graphics card mining has also become more and more popular The hotter.

Based on a comprehensive analysis, we believe that now is a better time window for the layout of graphics card mining, so we will give you a complete introduction to some of the ETH mining with graphics card miners.

Introduction to Ethereum

Ethereum (Ethereum) is an open source public blockchain platform with smart contract functions. Through its dedicated cryptocurrency, Ether (also known as “Ethereum”), it provides a decentralized virtual machine (called “Ethereum Virtual Machine”) to process peer-to-peer contracts. The concept of Ethereum was first proposed by programmer Vitalik Buterin after being inspired by Bitcoin between 2013 and 2014. The idea is “the next generation of cryptocurrency and decentralized application platform”. It began to develop in 2014 through ICO crowdfunding.

As of June 2018, Ethereum is the cryptocurrency with the second highest market value. Ethereum is also known as the “second-generation blockchain platform”, second only to Bitcoin.

The above is the definition of Ethereum in Wikipedia, and the token of Ethereum is ETH. Unlike BTC’s vision of becoming a decentralized financial system, Ethereum’s vision is to become a blockchain platform for smart contracts.

The so-called smart contract is a program that can run automatically according to pre-set rules. Such programs can be used to implement various functions, such as running games, issuing other tokens, online insurance, lottery tickets, and so on. And running these smart contracts requires ETH to be consumed, which is the relationship between the Ethereum system and ETH. Compared with the traditional centralized program operation method, the Ethereum smart contract has the advantages of open source, automation, fairness and justice, and it is the existence of the smart contract that gives the Ethereum unlimited possibilities.

Introduction to ETH mining

At present, ETH’s mining is mainly through graphics card miners. The so-called graphics card miners are actually similar to home desktops, except that each machine has 6-10 graphics cards and no monitors (as shown in the figure).

Picture: Graphics card mining machine

The reason why Ethereum has not developed an ASIC mining machine similar to BTC is mainly due to the special mining mechanism of ETH.

During the ETH mining process, a DAG file is generated, which needs to be called all the time, so there must be a dedicated storage space for it. This hard demand for storage space will result in the fact that even if ASIC chips are produced, the cost of unit computing power cannot be greatly reduced. Simply put, the price/performance ratio is poor.

The DAG size of Ethereum started from 1GB when the Dagger-Hashimoto algorithm was introduced in June 2016, and has increased to 3.7G at a rate of about 520MB per year. It is expected that the DAG size of Ethereum will increase to 4G by the end of 2020. By then, graphics cards with video memory less than 4G will be phased out.

One more thing to introduce is that since the size of the graphics card mining machine is usually 2-4 times that of the Bitcoin mining machine, and the power consumption is only 1/2 of the Bitcoin mining machine or even lower, which makes most people unwilling to build A dedicated graphics card mining machine mine (because the mine mainly earns the difference in electricity charges, the same area of ​​the site, the number of graphics cards that can be placed is small, and the power consumption is less). Even with a small number of graphics card mines, the electricity costs charged are usually higher than those of Bitcoin mining machine mines.

In addition, the assembly, debugging, and operation and maintenance of graphics card mining machines are more complicated than Bitcoin mining machines, and the requirements for operation and maintenance personnel are relatively high.

The current logic of investing in graphics card mining

The rapid development of DeFi

The figure below shows the trend of changes in the value of tokens locked in DeFi projects in the past year. It can be seen that starting from June this year, the amount of funds locked in DeFi projects has increased.

The DeFi wave brings a good harvest season for Ethereum miners, and a comprehensive understanding of the risks and benefits of ETH miningData source:

The prosperity of the DeFi project brought two results.

First of all, the value of Ethereum itself is once again recognized by everyone. Decentralized finance allows everyone to see solutions that are different from traditional finance. The value of ETH, which is an Ethereum token, will naturally rise and the price of the currency will rise. The possibilities are greatly increased.

Secondly, because of the prosperity of DeFi, frequent on-chain operations have led to more and more ETH that needs to be consumed, and the consumed part of ETH will be paid to the miners as a miner’s fee, and the miner’s income continues to increase. Under normal circumstances, miners can get 2 ETH rewards for each block, including miner fees, about 2.2 ETH, but now this reward has increased to more than 3, which means that the prosperity of DeFi gives miners Brings an additional 50% benefit.

The DeFi wave brings a good harvest season for Ethereum miners, and a comprehensive understanding of the risks and benefits of ETH miningData source:

High residual value of graphics card

Since the nature of the graphics card mining machine is the same as an ordinary home computer, when the project ends and the graphics card mining machine is processed, most of the accessories can be sold on the second-hand computer market, and the miners can obtain a relatively high residual value of the mining machine.

Take AMD580 8G graphics card as an example. The market value of a new card is about 1300 yuan, and the value of a second-hand graphics card on Xianyu is about 400-700 yuan. Therefore, it can be predicted that after 1-2 years, the residual value of the graphics card will be about 30% (different cards have different residual values, and the residual value ratio of Nvidia graphics cards is usually higher than that of AMD graphics cards). Therefore, for miners, it only needs to pay back about 70% of the cost, and this investment will become very low risk.

The DeFi wave brings a good harvest season for Ethereum miners, and a comprehensive understanding of the risks and benefits of ETH miningSource: Xianyu

Appropriate static payback cycle

The static payback period refers to the payback period of the mining machine based on the current profit level and assuming all conditions remain unchanged. Take AMD 580 8G graphics card as an example. According to the price on the website, the cost per unit is 13,500 yuan. According to the current currency price difficulty and electricity bill, the daily income per unit is about 41.5 yuan, so the static payback period is 13500/41.5 =325 days. This is the case where the residual value is considered to be 0. If the residual value is considered as 20%, the static payback period will become 260 days. This is a very good income project even in the currency circle known for its high yield.

In comparison, the bit miner is almost the payback of the most advanced S19Pro. Under the assumption that the difficulty is completely unchanged, the static payback period is 788 days.

The DeFi wave brings a good harvest season for Ethereum miners, and a comprehensive understanding of the risks and benefits of ETH miningData source (September 9)

4G video memory card exit

As mentioned above, it is expected that by the end of 2020, 4G video memory graphics card miners will have to withdraw from the mining market due to the size of the DAG file.

According to estimates, 4G video memory miners account for about 40% of the current total computing power of graphics cards. There are two options for these miners. One is to shut down and liquidate directly, and obtain residual value after selling the miners. The other is to upgrade the 4G video memory to 8G video memory. This technology is relatively mature at present, and the cost is about 350 yuan per card.

However, because these graphics card miners have been running for a long time and the quality is uneven, coupled with the bumps in the loading and unloading and transportation, it will definitely not be able to complete the upgrade without damage. It is estimated that this will be about It causes about 10-20% of computing power loss. For miners who directly invest in 6G video memory or 8G video memory, the shutdown of other mining machines means an increase in the income of our mining machines.

Ethereum 2.0 expectations

Ethereum 2.0 is a relatively large topic, so I won’t elaborate on it here. This article briefly introduces it and provides a conclusion.

Ethereum 2.0 is a project that was proposed a long time ago. The purpose is to make Ethereum have more powerful performance and support the entire system to run more efficiently, quickly, and at low cost, especially in the recent block congestion and high cost caused by Defi. Against the background of handling fees, more and more people are looking forward to the arrival of Ethereum 2.0, and the development team is also intensively developing

The entire Ethereum 2.0 will be implemented in 7 phases (Phase0-Phase6, see the figure below). The current progress is that Phase0 is still under development and is expected to be completed by the end of 2020. The latest news is that the development team has issued a statement postponed to 2021.

The DeFi wave brings a good harvest season for Ethereum miners, and a comprehensive understanding of the risks and benefits of ETH mining

After the implementation of a certain stage of Ethereum 2.0 (currently estimated to be after the third or fourth stage), the current form of mining ETH by mining machines will gradually be eliminated, and POS will be replaced by POS. It is estimated that this cycle will be 2-5 years later. In other words, the life cycle of the graphics card mining ETH industry is about 2-5 years, this will depend on the progress of the development team. Under the premise of this estimate, the current investment in graphics card mining is a very suitable time.

In addition to the deterministic news that the expected development progress will bring us, Ethereum 2.0 will also bring an additional benefit. After the first phase of 2.0 goes online, verification nodes will be opened, and ordinary users can pledge 32 ETH to become A verification node obtains the benefits of staking, and this pledge is one-way in the first stage of 2.0. As long as the pledge is entered, it can only be retrieved after a later stage is completed. The first stage cannot be retrieved Back. This rule will lock up a large amount of ETH, resulting in a shortage of liquidity, so it will also bring certain expectations to the rise of currency prices.

Risks of investing in graphics card mining

There are risks in any investment. After analysis, graphics card mining may have the following risks:

Ethereum 2.0 is progressing fast

The general expectation of the 2.0 progress has already been introduced above. If the progress far exceeds your expectations, there may not be so much time left for graphics card mining. However, even according to the most optimistic forecasts, it will take at least a year. According to the above forecast of the payback cycle, within one year, the investment in the mining machine has basically recovered, so this risk does not need to be too worried.

In addition, there is a topic related to Ethereum 2.0 called “Difficulty Bomb”. In the final analysis, this is still closely related to the progress of Ethereum 2.0. When the development of 2.0 fails to meet expectations, rashly detonating the difficulty bomb will bring a great blow to Ethereum, so the difficulty bomb is likely to be delayed again. .

By the same token, even if it is not delayed, there will still be a year to calmly mine.


EIP is the abbreviation of Ethereum Improvement Proposal, which is the Ethereum improvement proposal. EIP is usually proposed by the community. After full discussion, the development team confirms its acceptance and updates the content of the proposal to the code, and then pushes it to everyone for upgrade.

This proposal is more complicated to describe. If you are interested, you can search for it. In short, if this proposal is passed, the current miner fee part of the mining revenue will be greatly reduced to almost zero, leaving only The next block reward itself. This will bring a relatively large loss to the miners. Before Defi became popular, the loss was about 10%-15%. According to the current high miner fees, the loss will be 40%.

We do not evaluate how this proposal is, only the impact on miners. It is undeniable that once this proposal is passed, it will be relatively bad for miners. But first, the proposal itself is still under discussion, and there is no final conclusion. And by convention, in general, Ethereum will only have one major upgrade a year, at most two major upgrades, at the beginning and the middle of the year. In other words, even if the proposal is passed immediately, the fastest implementation time is January 2021, leaving miners with at least 4 months. The main energy of the development team is currently on 2.0. We judge that the probability of the proposal passed this year and implemented early next year is not high.

Currency price plummeted

This is the most worrying thing for many people, especially friends who have entered mining at a high level. Therefore, we usually recommend that if you consider starting graphics card mining, you must carry out hedging operations to lock in profits and avoid risks. .

Hedging, referred to as hedging, is when you buy a mining machine, predict how much ETH the purchased mining machine can produce in the next period of time (3-6 months), and then borrow the same amount of ETH according to the current market Sell ​​directly at the price, locking in gains. The ETH mined after the mining machine goes online is gradually returned to the borrowed coins.

This can avoid the risk of a sharp drop in the price of the currency. Of course, if the price of the currency rises sharply, you will not be able to get the part of the profit that has risen. But for mining, the definite profit is the most important. Moreover, even if the currency price rises sharply, you will only lose the extra income of the hedging period. After the hedging cycle ends, you can still enjoy the extra income of the high currency price. What’s more, after the currency price rises, the mining machine The residual value will also increase.

Therefore, the currency price increase is not the most feared thing for hedging. The most feared thing for hedging is the skyrocketing difficulty. As a result, the coins you can expect to be mined are not actually mined so much, so the coins borrowed from elsewhere cannot be returned, so Let me talk about the risk of difficulty separately.

Soaring difficulty

After the difficulty skyrocketed, not only the miners who had hedged, but also miners who did not hedged would face a decline in their income. Is there a possibility of a skyrocketing difficulty in the next year? Analyze from several aspects:

a) Let’s first look at the historical data. The figure below shows the historical trend of Ethereum’s entire network’s computing power. It can be seen that, except for the crazy bull market in 17 years, the entire network’s computing power of graphics cards has remained at a relatively stable level. Even if the price of ETH in June 2019 rose to about $360, the highest point of the year, the computing power of the entire network only slowly increased to 199T, which is similar to the current level. That is to say, even if the current currency price increases by 20%-30%, the whole network’s computing power will probably increase by 10-20%, which is relatively flat.

The DeFi wave brings a good harvest season for Ethereum miners, and a comprehensive understanding of the risks and benefits of ETH miningData source:

b) Graphics card mining machine is different from ASIC mining machine. For ASIC mining machine, as long as someone buys it, the manufacturer can produce it at full capacity, which can be regarded as unlimited.

For graphics card mining machines, there are only two core suppliers: AMD and Nvidia. Their core business is aimed at ordinary consumers and will not easily increase production capacity due to the popularity of mining (this kind of thing actually happens) However, both manufacturers have been affected to a certain extent, so now they will be more cautious). Therefore, the supply of mining machines is not unlimited, nor will they emerge in large numbers in a short period of time.

c) The withdrawal of 4G video memory cards mentioned above will also offset the increase in difficulty.

Based on the above factors, it can be concluded that the difficulty of mining Ethereum may slowly rise or fluctuate in the next few months, but it is unlikely to experience a surge.

The risks of graphics card miners

The graphics card mining machine itself is also very watery. There are more than a dozen graphics card brands on the market, with a wide variety of models, and even unbranded so-called white cards. There is a big gap in the quality of graphics cards from different manufacturers, including materials, heat dissipation, Factors such as workmanship, size, etc. need to be considered.

Ordinary users are completely incapable of distinguishing the various traps in it, and this is not clear in a short time. Therefore, it is recommended that ordinary users do not easily go to unfamiliar merchants to buy graphics card mining machines, and try to buy products through a more professional team. There are dedicated technicians who will fully check the entire procurement, assembly, and operation and maintenance process to help customers Try to avoid stepping on pits in this regard.

ETH mining revenue forecast

According to the data provided by the blockchain browser, the computing power of the ETH network reached 215,010.36 GH/s, and the network difficulty was 2,733.64 TH. Ethereum’s block reward mechanism mainly includes three parts: basic reward + transaction fee + package uncle block reward. Among them, the basic reward was 5 ETH at the beginning, and it was reduced to 3 ETH after the Byzantine hard fork of the block height of 4370000. It has been reduced to 2 ETH; and the calculation method of the uncle block reward is: 8-(the block Height-target block height)/8*basic reward.

It takes about 15 seconds to produce a block in Ethereum, and there is no limit on the total amount of Ethereum, that is, the cycle is halved.

According to the current currency price and relatively conservative unit computing power, the static payback period of mainstream graphics cards on the market is within 300 days.

Under this year’s graphics card mining market, the new cards suitable for mining are mainly AMD graphics cards, including 588, 598, 5500XT, 5600XT, 5700, and 5700XT.

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