Ethereum Mining and EIP-1559: Sustainability and the Environmental Impact of Miners
Ethereum has become a household name for crypto and NFT fanatics. The token has experienced record growth thanks to its smart contract technology and NFT marketplaces, with traders loading their wallets with as much ETH as they can get their hands on. However, purchasing through an exchange is not the only way a person can acquire Ethereum, it can also be mined.
Mining accomplishes two things: It creates new coins and also facilitates transactions sent through the blockchain, ultimately registering transitions of circulating tokens in the market onto a decentralized ledger. Like Bitcoin, Ethereum mining uses a consensus mechanism known as Proof of Work (PoW), which is the foundation of every PoW-cryptocurrency.
Off to the Races
Crypto mining involves using advanced computer technology to solve cryptographic equations. During this process, data or transactions on blocks are deciphered and added to their corresponding public ledger, otherwise known as a blockchain. For example, any NFT or token based on the ERC standard is on the Ethereum blockchain. Miners who have dedicated graphic card “mining rigs” work around the clock to add more transactions to the ledger in return for a new Ethereum through earning rewards from transaction fees.
Crypto Mining Equipment and General Costs
If you’re planning to take the plunge and become a crypto miner, you’re going to need more than a simple run-of-the-mill laptop. Cryptominers use custom built computer hardware known as “rigs”, that contain many of the same elements as regular computers. They include hardware such as a CPU, motherboard, storage, and RAM, but deviate from typical computers when it comes to power usage and graphics cards.
If you’re mining Ethereum or Ravencoin, it’s not the CPU that handles the difficult task of mining, it’s the graphic cards (GPUs). Therefore, if you’re planning to be a successful miner, you’ll need several high-powered GPUs attached to your rig. This also means you’ll need a motherboard with enough GPU ports, an adequate CPU chip with enough capacity to handle all of this data, and a few power supply units if you want to stay competitive with other miners in the industry.
The overall cost of mining depends on which cryptocurrency you’re working with. A rig with six 3070 Nvidia GPUs will cost approximately $6000 USD at retail price and, when powered to full capacity, can generate roughly 0.2 ETH per month. Electricity costs must also be factored in, and this can vary depending on the location of the rig. Cryptocurrencies such as Bitcoin require a specialised mining computer known as an ASIC machine that ranges in price, from $2,000 to $4,000 and sometimes higher. Like GPUs on Ethereum rigs, you’ll need to purchase more ASICs if you want to produce more Bitcoin.
The Green Matter
In May of 2021, Elon Musk fired off a tweet that sent the cryptocurrency market into a frenzy. In it, the world’s most environmentally conscious rocket scientist expressed his dismay over the energy used in Bitcoin mining and declared that Tesla would no longer accept the pioneer token as payment. The market crashed even further when Musk tweeted again in early June, this time sharing a break-up meme with the bitcoin hashtag and heartbreak emoji in the caption.
However, amends were made when research confirmed that at least 50% of Bitcoin’s mining resources came from renewable energy. In June, Musk attended the B Word cryptocurrency conference and confirmed that “Most likely the answer is that Tesla would resume accepting Bitcoin”. It is also worth noting that miners in countries such as Estonia, Iceland, and China, utilise unused energy sources, such as hydro, that would otherwise be disposed of.
EIP-1559: The Ethereum Upgrade
Ethereum Improvement Proposal (EIP)-1559 was the long awaited update for the Ethereum network and the crypto community had mixed opinions regarding it. This upgrade bolsters the Ethereum ecosystem and changes the way users bid for transactions. Rather than the process being handled by a miner, EIP-1559 will implement an automated system that sets a fee after gauging network congestion.
Further, EIP-1559 will permanently burn a small portion of every transaction fee. This upgrade bolsters the Ethereum ecosystem and benefits investors by reducing the supply of ETH circulating in the market. When taking into consideration the rising inflation in countries like the United States, holding a deflationary asset can be quite appealing, and lucrative.
How EIP-1559 Impacts Miners
While EIP-1559 has made many traders happy, Ethereum miners are less than pleased. Essentially, the portion of the transaction fees burned is part of the income they would have pocketed under normal circumstances. Popular miner and YouTuber VoskCoin, released a video about EIP-1559, explaining the dissatisfaction of miners with the direction Ethereum developers have taken. By his estimate, Ethereum mining will become obsolete by the year 2023.
Mining Chamber, another popular crypto mining YouTube channel, also expressed concerns leading up to the release of EIP-1559. In his video, Mining Chamber addressed how the EIP-1559 upgrade will negatively impact miners from a financial standpoint. While he could not predict an exact figure, estimations showed it could be significant for high-producers. Compared to mining profits of the April bull-run, miners have been earning half the ETH, while profits are also taking more time to generate. Meaning for smaller miners reaching the 0.1 withdrawal target takes longer leaving them more exposed to market movements. However, ultimately mining is still profitable, if a miner doesn’t end up paying extortive prices on building the rig it can still be worthwhile to keep mining Ethereum.
CoinBurp x Brokoli Partnership Contributing to the Green Economy
A CoinBurp partner, Brokoli Network is innovatively tackling climate change and making every transaction climate positive through their 1-click solution. The platform has a front-end API that can enable users to select whether they wish to contribute a percentage of the transaction fee to environmental efforts. Users are given NFT Trees that will grow in the metaverse and provide rewards. Brokoli is an impact-to-earn metaverse where users’ positive outputs are physically displayed as NFT Trees, and their growth and rewards represent the positive impact a user has provided to the environment.
While it is established that mining does still consume a percentage of energy that is not unused, renewed or sustainable, it is important for cryptocurrency companies to neutralize the carbon output of blockchain’s underlying functional architecture; the miner’s and transaction facilitating processors.
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Cryptocurrencies and crypto tokens are generally not regulated and investors do not have access to recourse or compensation schemes such as, for example, in the UK, the Financial Ombudsman Service or the Financial Services Compensation Scheme. Investing in cryptocurrencies and purchasing crypto tokens can be high risk and investors should carefully evaluate their appetite for risk and their understanding of trading cryptocurrencies prior to entering into a transaction.