Ethereum is a sleeping giant and a close competitor of bitcoin. This is said to be next in line to the king of cryptocurrency which has drawn people towards ethereum mining. This year,Ethereum has seen an almost 20 times jump in price. This increase has led people, who hadn’t considered cryptocurrency, to sit down and become suddenly extremely interested. When this happens, most of the biggest profits have already been made.
People have been mining the coin for months or years, and they have probably seen some tremendous gains, especially if they have a decent-sized operation.If you are just hearing about Ethereum and interested in maybe jumping onboard, this can be a very difficult question and the answer depends on a lot of factors.
What is Ethereum?
Ethereum is an open software platform based on the blockchain technology that enables developers to build and deploy decentralized applications.Like bitcoin, Ethereum is a distributed public blockchain network. There are, of course, some significant technical differences, but the most important is that they differ substantially in purpose and capability. Bitcoin offers one application —a peer-to-peer electronic cash system that enables bitcoin payments. The Ethereumblockchain can support many different types of decentralized applications.
If someone says that he or she has invested in Ethereum, they have actually bought Ether (ETH). Ethereum is a network, whereas, Ether is the fuel that powers it. Ethereum, of course, cannot be traded, but Ether is traded and it appreciates and depreciates in price. The price of Ether is what fluctuates based on demand.
Applications of Ethereum to Real Life
Ethereum has a lot of real-life uses like supply chain, healthcare, and banking. More applications require more Ether, and this causes the price to increase.Mining seems to be a good proposition, and we could achieve breakeven in about six to seven months. However, just like any computer that operates consistently, factory parts can malfunction, and we have not included maintenance costs such as this as well as the electricity consumed. If these expenses will be covered, it is safe to assume a breakeven to occur after one year. As the difficulty increases, the profitability of mining Ethereum drops until it is no longer profitable to mine.
Profitability with Bitcoin
Moreover, Ethereum will be switching from a proof-of-work to a proof-of-stake framework sometime this year. This could mean a hard stop for mining. If and when proof-of-stake hits, all of the hash rates of ETH would instantly move to other coins. The difficulty of those coins would immediately quadruple and the profitability would reduce massively. People would all be trying to mine from a smaller pot of cash. A switch to proof-of-stake could also mean a higher demand for ETH resulting in a significant increase in the price of ETH.
With all of these points taken into consideration, it would be wise to conclude that profitability from ETH mining will reduce significantly over the next few months. There are a lot of moving parts that affect the ROI. Soon enough, all the casual miners will be squeezed out and only a group of large firms will remain.