Ethereum update: New mining strategy for profit: burst mining
Let’s say the network is operating at equilibrium: it costs you just as much electricity to mine as you get in rewards. How do you profit?
Answer: burst mining.
In burst mining, we start at equilibrium. Then withdraw significant hashpower from the network. The price of ETH remains constant and the difficulty algorithm adjusts downwards. All the other miners now make more ETH and are profitable. We aren’t losing money. But we aren’t making money either.
Then, once the difficulty has adjusted, we turn on the electricity and jam on the mining power. Because the difficulty algorithm adjusted to be lower, we are now solving blocks at a faster rate, and getting more ETH per megawatt than we would have at equilibrium.
We make more money when our electricity is on, and we don’t lose money when it is off. And everyone else makes more money too.
I suspect this accounts for the reason that hashpower is going up and down like a yoyo right now, and will continue to do increase as ethereum rewards are squeezed.
What do you all think?
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.
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