Poster to Learn — The Difference between Bitcoin and Ethereum Mining
Bitcoin (BTC) mining follows a “Proof of Work” mechanism. With the block interval of about 10 minutes, miners compete to cryptographically package “transactions” on the blocks to obtain corresponding mining rewards. Bitcoin mining has developed from CPU mining (with an ordinary computer), GPU mining (with a graphics processing unit), and FPGA (Field Programmable Gate Arrays) mining eventually to the costly ASIC (application specific integrated circuit) mining.
The block interval for Ethereum (ETH) mining is about 13 seconds. Vitalik Buterin invented the smart contract-based blockchain technology, and applied the Ethash algorithm he independently created. For most miners using graphics cards, running such algorithms costs less than running ASIC devices.
The Bitcoin halving cycle is about 4 years. In other words, the output and rewards are set to half of the previous four years, while the current circulation of Ethereum remains unchanged.
The difference in the algorithm and hardware
To get block rewards through Bitcoin mining, the mining machine generally operates the SHA-256 algorithm, because under the POW mechanism, the mining requires hashrate. At present, it is prevailing to calculate the Bitcoin encryption algorithm with ASIC chips, a more professional method.
Block rewards from Ethereum mining are generated by computing the Ethash encryption algorithm. The biggest difference between this algorithm and the SHA-256 algorithm lies in the mining process when the system needs to read the memory and store the DAG file. However, without material breakthroughs in the existing computer technology, there is still no much improvement in the computing efficiency and memory reading efficiency. For the time being, “graphics cards” play a dominant role as a mining machine, as Ethereum’s Ethash encryption algorithm is “ASIC resistant” to some extent.
The difference in electricity costs for mining
The Bitcoin ASIC mining machine boasts a high hashrate, and, as a result, costs more electricity. Take an Ant mining machine S19 with the rated power consumption of 3.25KW/h. If the annual electricity charge is $0.05/kWh, the daily electricity bill is $4.1, taking up around 24% of the single-day mining output of $16.86 (in reference to the BTC price: $33785). Bitcoin mining machines are very sensitive to electricity prices. If the cryptocurrency price drops, electricity costs will soon account for a bigger share.
Ethereum graphics card mining machine consumes less electricity. Take the Panda mining machine B9 for example. With the annual electricity charge of $0.05/kWh, the daily electricity bill is only $1.27, taking up a mere 5% of the daily mining output of $26.04 (in reference to the ETH price: $1316 ), which is relatively insensitive to electricity prices.
The difference in mines’ hosting preferences
Mines mainly profit from the spread in the electricity price. The more electricity sold per unit “volume”, the higher the profit ratio of the mine.
Bitcoin ASIC mining machine is popular among mines for its high power consumption and relatively simple maintenance, and, therefore, enjoys more choices of hosting.
The Ethereum graphics card mining machine consumes less electricity but is larger in size, which is as large as three times the Bitcoin ASIC mining machine. In addition, the graphics card mining machine has high requirements for the environment of the mine. Apart from the basic dustproof, moisture-proof, and internal temperature control, the mine also needs to meet anti-static treatment requirements.
Generally, mines prefer to host Bitcoin ASIC machines, and would charge more electricity fees in the case of hosting an Ethereum graphics card mining machine.
The difference in the residual value of mining machines
Chips of the Bitcoin ASIC mining machine are customized and can only mine cryptocurrencies of the fixed algorithm. For example, Bitcoin’s SHA-256 mining machine can only mine tokens such as BTC, BCH, and BSV.
The residual value of Bitcoin ASIC mining machines fluctuates greatly. When the machine is scrapped or the cryptocurrency price drops sharply, ASIC mining machines are often shipped far below the purchase price, sometimes even at a 95% discount. In this case, the residual value of the ASIC mining machine is at a negligibly low level; however, amid the Bitcoin market boom, the “premium” of the Bitcoin mining machine will be surprisingly high. Say S9, the top mining machine, has seen its market price rise seven-fold to 800 yuan in early 2021, compared with only 100 yuan or so during the slack season in 2020. It is thus hailed as a mining wealth management product by the public.
The residual value of Ethereum’s graphics card mining machine is relatively stable and predictable. If the graphics card mining machine cannot mine Ethereum, ETH, CFX, CKB, and other small cryptocurrencies are good alternatives.
Secondly, even if you don’t mine, you can resell the graphics card of the mining machine to consumers such as Internet cafes, gamers, or companies that need to process a large number of graphics images. Generally speaking, the residual value of the graphics card after two years of mining is about 30% of its new counterparts’ market price. Moreover, the remaining parts of the graphics card miner (the mainboard, power supply, hard disk, etc.), other than the graphics card, can be reused and thus have a high residual value.
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