Ethereum’s $800 million January mining revenue surpasses 2018 highs
Ethereum miners have brought in $800 million in January revenue, which surpasses the previous record highs seen three years ago.
The Block’s Dashboard data shows that more than $311 million of Ethereum’s January mining revenue came from transaction fees on the network, which accounted for nearly 40%.
The increase of transaction fees and the price surge of Ether to all-time-highs above $1,400 last month have pushed Ethereum’s January mining revenue to surpass the previous record highs of $762 million seen in January 2018.
Ethereum miners' daily revenue per each megahash second (MH/s) of computing power also hit a level that is not seen since early 2018, based on The Block’s Dashboard.
According to F2Pool’s index, the most advanced Ethereum mining equipment on the market, such as Nvidia’s RTX 3080 or ASIC miner A10 Pro made by Wuhan-based InnoSilicon, is able to generate $62 in 24-hour gross profits per unit.
But similar to bitcoin miners, GPUs and ASIC miners on the Ethash algorithm are experiencing a significant supply shortage, which is causing headache for game players who are in need of Nvidia and AMD GPUs.
Bitcoin’s monthly mining revenue in January also hit its highest record since December 2017, per The Block’s Dashboard.
Bitcoin vs Ethereum: What’s the Difference?
As an educated crypto investor it’s crucial you understand the differences between Bitcoin vs Ethereum. Both of these coins are titans in the market, albeit for different reasons. Both coins are vital for the market’s development at this point. Here’s what makes these coins so different but, yet so important in the market.
Bitcoin
Bitcoin was the world’s first successful cryptocurrency. Satoshi Nakamoto changed the world when he introduced his revolutionary protocol. His goal was to create a “peer-to-peer electronic cash system” that was both censorship-resistant and decentralized.
He succeeded in his mission when he launched Bitcoin officially in 2009. Since that time, Bitcoin has seen tremendous growth both financially and technologically. However, at its core, it still remains accessible to anyone. Bitcoin changed the world forever and inspired a new industry. For these reasons, you can consider Bitcoin the first generation of cryptocurrencies.
Notably, Bitcoin is not stagnant and the protocol continually develops. However, it was built to serve its particular purpose. Consequently, it’s not the best option for features such as smart contracts or other next-gen blockchain functionalities. Notably, the introduction of second layer protocols such as the Lightning Network expands Bitcoins functionality considerably.
The Second Generation – Bitcoin vs Ethereum
Ethereum is a distributed, public blockchain. This decentralized network introduced the world to smart contract scripting functionality. These protocols allowed anyone to build decentralized applications and expand the use cases for cryptocurrencies. Today, there are thousands of different cryptos and blockchain projects. However, most utilize some forms of smart contracts to streamline network activities.
Not Exactly A Cryptocurrency
It’s important you understand that Ethereum isn’t a cryptocurrency. Ethereum is the platform that the cryptocurrency Ether functions within. This network functions as a programmable decentralized network for Dapp developers primarily. Additionally, Ether’s primary role is to compensate miners for performing EVM (Ethereum Virtual Machine) computations.
Ethereum was the first cryptocurrency network built specifically to support Dapp development. Dapps are applications designed to run on decentralized networks. The first Dapps ran on decentralized networks such as Tor networks. These networks are censorship-resistant due to their decentralized nature.
Dapps that run on blockchain networks are at the core of the blockchain revolution. In this way, Ethereum represented a fundamental shift in the development and functionality of cryptocurrencies moving forward. For these reasons, Ethereum is considered a second-generation cryptocurrency
Smart Contracts
To execute smart contracts, Ethereum introduces a unique protocol known as the EVM – the Ethereum Virtual Machine. Each full Ethereum node runs an instant of these virtual stacks. The main advantage of EVMs is that they improve on the process of building decentralized applications by improving the programmability and efficiency that the network executes contract byte code.
History of Ethereum
One of Bitcoin’s early followers was a computer developer by the name of Vitalik Buterin. In 2013, this advantageous individual decided to build a new cryptocurrency. This new project would share many technical characteristics with Bitcoin. For example, both coins utilize a Proof-of-Work (PoW) algorithm to validate the state of the network.
Consensus
Bitcoin utilizes the SHA-256 algorithm. This mathematical equation requires miners to prove their work through advanced calculations. The network automatically adjusts its difficulty to ensure that blocks of transactions only get approved in ten-minute intervals. This approach ensures a predictive monetary issuance strategy until the last Bitcoin gets mined sometime in 2140.
Ethereum, like Bitcoin, currently uses a proof-of-work (PoW) consensus protocol. However, Ethereum uses the Ethash algorithm. Buterin decided on this mechanism to help reduce the advantage of specialized ASIC (Application Specific Integrated Circuit) mining rigs. ASIC mining rigs are built from the ground up to solve the SHA-256 algorithm Bitcoin uses. Critics of ASIC miners argue that these high-priced rigs cause centralization in the Bitcoin network.
Block Times
When comparing the transaction thru put of the networks, Ethereum comes out far ahead of Bitcoin. Bitcoin approves blocks every 10 minutes. These blocks hold no more than 1MB of data. Consequently, Bitcoin is only capable of around 7 transactions per second. This low data rate was built into Bitcoin’s core coding to ensure that anyone could use the network.
The Ethereum network is capable of approximately 15 transactions per second. These capabilities are set to improve significantly following the upcoming Ethereum 2.0 update. This upgrade would push Ethereum’s capabilities closer to 100,000 transactions per second according to developers.
Mining Rewards – Bitcoin vs Ethereum
There are different mining rewards paid out to nodes on each network. Bitcoin miners receive a reward of 6.5 BTC if they are the node that completes the SHA-256 equation first and adds the next block to the blockchain. Comparingly, Ethereum miners receive a reward of 2 ETH for their participation in validating blocks of transactions.
Total Supply – Bitcoin vs Ethereum
Bitcoin caps its supply of 21,000,000 coins. This strategy ensures that Bitcoin retains scarcity in the market. Reversely, there is no cap on the amount of Ether (ETH). The network must continue to produce ETH indefinitely to cover gas fees created by developers executing EVMs. Currently, there are 114,467,625.91 ETH in circulation today.
Ethereum to go to PoS
Interestingly, Ethereum is set to do a major upgrade this year to Ethereum 2.0. This hard fork would place ETH on a new blockchain that runs on a Proof-of-Stake (PoS) algorithm. PoS networks remove miners and rely on coin holders staking their tokens to validate the network’s state.
PoS networks are far more energy-efficient and cheaper to maintain. They also provide faster transaction times compared to PoW networks. Best of all, there is no need to purchase expensive mining equipment because all you need is a network wallet to stake your coins on a PoS system.
The ETH ICO vs Bitcoin’s Launch
Bitcoin had a quiet launch that was celebrated by only a select few in the cypherpunk and development community taking any notice of this monumental invention. Interestingly, Bitcoin’s journey officially began with the genesis block. This the first block of Bitcoin’s blockchain. While no one knows for sure how many Bitcoin’s Nakamoto mined, estimates put his rewards at 1 million Bitcoin.
In comparison, Ethereum entered the market with much more fanfare. The Ethereum ICO (Initial Coin Offering) raised $18 million. Ethereum continued this momentum into the launch of the first DAO (Decentralized Autonomous Organization). This event took place in April 2016. The launch of the DAO boosted Ethereum’s status and helped the network to secure $150 million in its public ICO. At the time, the DAO was the largest crowdfunding event to take place in the blockchain industry.
Bitcoin vs Ethereum – Apples vs Oranges
Now that you have a better understanding of the differences between Bitcoin vs Ethereum, it’s easy to see why both projects have longevity in the sector. As such, most crypto investors hold both of these coins in their portfolio.
Where to buy Bitcoin (BTC) & Ethereum (ETH)
These are two of the most popular cryptocurrencies in the world. The exchanges below enable the purchase of both of these digital assets.
Ethereum: what is it and why has the price gone parabolic?
The price of the world’s second largest cryptocurrency, ether, hit a new all-time high of US$1,440 (£1,050) on January 19. This breached a previous high set three years ago and gave ether a total value (market capitalisation) of US$160 billion, although it has since fallen back to around US$140 billion.
Ether, which runs on a technology system known as the ethereum blockchain, is worth over ten times the price it was when it bottomed during the COVID market panic of March 2020. And the cryptocurrency is still only five years old. In part, this remarkable rise in the value is due to excess money flowing into all the leading cryptocurrencies, which are now seen as relatively safe store-of-value assets and a good speculative investment.
Ether/US$ price
But ether’s price rise has even outstripped that of the number one cryptocurrency, bitcoin, which “only” had a seven-fold increase since March. Ether has outperformed partly due to several improvements and new features being rolled out over the next few months. So what are ether and ethereum and why is this cryptocurrency now worth more than corporate giants such as Starbucks and AstraZeneca?
Ether and bitcoin
Blockchains are online ledgers that keep permanent tamper-proof records of information. These records are continually verified by a network of computer nodes similar to servers, which are not centrally controlled by anyone. Ether is just one of over 8,000 cryptocurrencies that use some form of this technology, which was invented by the anonymous “Satoshi Nakamoto” when he released bitcoin over a decade ago.
The ethereum blockchain was first outlined in 2013 by Vitalik Buterin, a 19-year old prodigy who was born in Russia but mostly grew up in Canada. After crowdfunding and development in 2014, the platform was launched in July 2015.
As with the bitcoin blockchain, each ethereum transaction is confirmed when the nodes on the network reach a consensus that it took place – these verifiers are rewarded in ether for their work, in a process known as mining.
But the bitcoin blockchain is confined to enabling digital, decentralised money – meaning money that is not issued from any central institution unlike, say, dollars. Ethereum’s blockchain is categorically different in that it can host both other digital tokens or coins, and decentralised applications.
Decentralised applications or “dapps” are open-source programs developed by communities of coders not attached to any company. Any changes to the software are voted on by the community using a consensus mechanism.
Perhaps the best known applications running on the ethereum blockchain are “smart contracts”, which are programs that automatically execute all or parts of an agreement when certain conditions are met. For instance, a smart contract could automatically reimburse a customer if, say, a flight was delayed more than a prescribed amount of time.
Many of the dapp communities are also operating what is known as decentralised autonomous organisations or DAOs. These are essentially alternatives to companies and seen by many as the building blocks of the next phase of the internet or “web 3.0”. A good example is the burgeoning trading exchange Sushiswap.
Ethereum has evolved and developed since its launch six years ago. In 2016, a set of smart contracts known as “The DAO” raised a record US$150 million in a crowdsale but was quickly exploited by a hacker who siphoned off one- third of the funds. However, since then, the ethereum ecosystem has matured considerably. While hacks and scams remain common, the overall level of professionalism appears to have improved dramatically.
Why the price explosion
Financial interest in ether tends to follow in the wake of bitcoin rallies because it is the second-largest cryptocurrency and, as such, quickly draws the attention of the novice investor. All the same, there are other factors behind its recent rally.
The first is the pace of innovation on the platform. Most activity in the cryptocurrency space happens on ethereum. In 2020, we saw the emergence of decentralised finance (DeFi). DeFi is analogous to the mainstream financial world, but with the middleman banks cut out.
Users can borrow, trade, lend and invest through autonomous smart contracts via protocols like Compound, Aave and Yearn Finance. It sounds like science fiction, but this is no hypothetical market – approximately US$24 billion is locked into various DeFi projects right now. Importantly, DeFi allows users to generate income on their cryptocurrency holdings, especially their ether tokens.
The second factor behind the ether surge is the launch of ethereum 2.0. This upgrade addresses major concerns impacting the current version of ethereum. In particular, it will reduce transaction fees – especially useful in DeFi trading, where each transaction can end up costing the equivalent of tens of US dollars.
Ethereum 2.0 will also eliminate the environmentally wasteful mining currently required to make the ethereum blockchain function (the same is true of many other cryptocurrencies, including bitcoin). Within the year, ethereum should be able to drop the need for vast industrial mining warehouses that consume huge amounts of energy.
Instead, transactions will be validated using a different system known as “proof-of-stake”. The sense that ethereum addresses problems like these quickly rather than letting them sit could prove a major differential from the sometimes sluggish and conservative pace of the bitcoin development culture.
A final factor is the launch of ethereum futures trading on February 8. This means that traders will be able to speculate on what ether will be worth at a given date in the future for the first time – a hallmark of any mature financial asset. Some analysts have said the recent bitcoin rally has been fuelled by traditional investment firms, and the launch of ethereum futures is often touted as opening the doors for the same price action.
However, as every seasoned cryptocurrency user knows, both currencies are extremely volatile and are as liable to crash by extremes as rise by them. Bitcoin’s price fell 85% in the year after the last bull market in 2017, while ether was down by 95% at one stage from its previous high of US$1,428.
Whatever the valuation, the future of ethereum as a platform looks bright. Its challenge is ultimately external: projects such as Cardano and Polkadot, created by individuals who helped launch ethereum itself, are attempting to steal ethereum’s crown.
But as bitcoin has shown, first-mover advantage matters in cryptocurrency, and despite bitcoin’s relative lack of features it is unlikely to be moved from its dominant position for some time. The same is most likely true for the foreseeable future with ethereum.