02 May 2022

Mining ether is more profitable than mining bitcoin

Bitcoin is twice as big as ether by market cap. Nevertheless, ether miners have consistently earned more than bitcoin miners since the beginning of 2021. Why?
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Source: CoinMetrics. *7-day average
To understand why ether miners' revenue is higher than bitcoin miners', we must understand the differences in ether and bitcoin mining economics. Most of the bitcoin miners' revenue come from the block subsidy, at 6.25 bitcoin per block. Bitcoin transaction fees have been minuscule since the summer of 2021, only making up around 1% of miner revenues, while the rest comes from the block subsidy. On the other hand, ether miners earn a large part of their revenues from transaction fees. The Ethereum transaction fees are determined by the demand for making computational operations on the Ethereum network. This demand wildly fluctuates, making for a massive variance in the daily Ethereum transaction fees. An example is last Sunday, which saw $231 million in transaction fees, while the daily average in 2022 is $27 million. Importantly, not all the Ethereum transaction fees go to miners, as a portion of transaction fees are burned according to the EIP-1559 update. On Sunday, 72,000 ETH was burned as part of the massive surge in transaction fees. In short, ether miners earn more than bitcoin miners, but their earnings are also much more volatile. In addition, the future of ether mining is uncertain because of Ethereum’s planned transition to proof-of-stake in Q3 this year, making miners obsolete. Learn more in this article.
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