For the past several months, miners around the world have been extremely active, which can be seen through spikes in hash rates that coincided with a significant increase in the prices of cryptocurrencies. At the beginning of 2020, Ether (ETH) could be bought for $130, and now, ETH has reached $500. The king of cryptocurrencies, Bitcoin (BTC), added almost a cool $10,000 to its price.
So, how can users engage with the industry? What has been obvious for some time now is that solo mining is not the way to go. For Bitcoin, Ether and every major altcoin, the blockchain is built in such a way that the complexity of finding blocks is constantly increasing, which means that a pair of GPU cards is not powerful enough to generate one block.
The point is not that the rig is insufficiently powerful to mine Ether, rather it’s impossible mathematically. One rig can sit there searching for a block for several months. If we are talking about mining Bitcoin on ASICs, then it will take even more time. It’s easier to go bankrupt on equipment and electricity than to mine crypto solo. The calculation is simple: divide the total hash rate of Ether by your hash rate and get the number of seconds it will take on average to find a block.
So, it seems logical that miners would flock to mining pools, especially today, as even non-mining companies are starting to launch such products. For example, Binance recently launched its own mining pool for Ether.
What to know before joining a mining pool
A mining pool is a server that combines the computing power of all the participants connected to it. Miners join the pool over the internet, reallocating their hardware to the pool. They jointly perform mathematical solutions to find blocks of a specific cryptocurrency. When the pool finds a block, the pool obtains a consensus from other network participants, then receives a reward. This reward is shared among all members of the pool in accordance with the amount of hash rate provided.
Before choosing a pool, it’s important to know the size of the pool. When a pool grows, the chances of discovering a block increase. But the more people join the pool, the less profit each participant receives. This is a double-edged sword: small but frequent payments, or bigger payments, but less often.
Before joining the pool, users need to find out the minimum payment, which is the minimum amount of crypto that must be mined before it will be sent to the users’ wallet. If the minimum payment is high, then the user will have to be part of the pool for a long time before receiving any income.
Another important thing that should be mentioned is that participation in any pool is not free. Users pay a certain percentage of their income for participating. Usually, such commission varies from 1% to 3%. In general, participation in any pool does not require serious investment and knowledge, and if the user has already put together a rig, then it will not be difficult to figure out which pool to choose. Here is what to pay attention to when choosing a pool, regardless of the cryptocurrency mined:
- The number of participants in the pool, which affects individual income.
- Ping time, or time delay, which is a result of the user’s computer needing to transfer information to the pool. Ping time depends on territorial distance — the lower the ping, the lower the time delay and the faster the data is transferred. A high ping is not appropriate because there are pauses between block changes in cryptocurrency networks, and with high ping, the user’s computer can go over the values for the old block and mine in vain. Usually, a comfortable ping is up to 10 milliseconds;
- The size of minimum payout, which should not be too large, otherwise the payment may not take place for a very long time.
- There are many pools that are fraudulent or take a larger amount of income. Users need to find out the pool’s reputation in advance.
After constructing a rig, it’s time to choose a mining pool. Of course, most of the pools work for Bitcoin or Ether mining. Below are some of the most popular pools used to mine the top two cryptocurrencies. For Bitcoin, almost all the main pools are based in China, which is not surprising, as the country produces most of the Bitcoin mining hardware.
Founded in 2013, F2Pool is one of the oldest Chinese pools, and it’s of primary interest for Bitcoin miners. The pool accounts for almost a fifth of the total amount of BTC mined. The pool uses Pay Per Share+, or PPS+, as the payout model in which the miner receives a reward for each share accepted by the pool, regardless of the blocks found by the pool. The pool determines the cost of each share independently, taking into account the network complexity, reward, block time and the pool’s own power.
In addition to Bitcoin, the pool mines more than 40 coins. The commission, depending on the coin, ranges from 1% to 5%. As for Bitcoin, the pool takes 2.5% of the rewards as a commission, and payments are made once per day. Users must withdraw the earned money within 90 days, otherwise the pool will keep it for the development of the service.
Poolin is a pool owned by parent company Blockin that launched in 2017. The pool is popular among Bitcoin miners. Poolin offers quite a few coins to choose from: Ether, Bitcoin Cash (BCH), Bitcoin SV (BSV), Litecoin (LTC) and so on. Commission fees are not fixed; rather, they are set for each cryptocurrency separately, with a 2.5% fee for BTC.
The payment model depends on the chosen coin: PPS or Full Pay Per Share, known as FPPS. Under the latter method, the pool also distributes transaction fees among miners, which adds 10% to 20% to their income. This method is used to pay for Bitcoin mining.
A notable feature is that Poolin provides mining on ASICs and GPUs from Nvidia and AMD. The development team regularly updates the software every couple of weeks to ensure the stability of the service.
BTC.com is one of the largest international cryptocurrency mining pools. It’s controlled by well-known manufacturer of mining equipment Bitmain, which produces a line of ASIC miners under the Antminer brand. The China-based platform was launched in 2013.
The commission for each block mined by the pool is set at 4%. Besides Bitcoin, a number of other cryptocurrencies can be mined through BTC.com, including Bitcoin Cash and Litecoin. Mining pool representatives keep records of its users’ income.
AntPool is a Chinese project that was launched in 2014. Just like BTC.com, the pool is controlled by Bitmain. In addition to BTC, AntPool can mine seven more cryptocurrencies, including the privacy-oriented coins Dash and Monero (XMR).
Payments are made daily, and the service has low commissions, with some payments made with zero fees. In AntPool, payments are mainly made using the standard method, Pay Per Last N Share — or PPLNS — in which users get payments for the last share based on pool luck.
With this method, there is no fixed payment for the share, and the main issue is the speed of finding a block. When a pool uses the PPLNS method, the payment comes from “time shifts” between searching two blocks. It means that if the block is not found for a long time, the payment gradually increases.
A distinctive feature of the pool is the ability to work in “solo” mode — but not in the literal sense. The pool makes it possible to carry out “solo” mining through joint efforts. This means that the user whose rig has discovered the block will receive the payment.
SparkPool is registered in China and was launched in January 2018, and half a year later, the pool has entered the list of leaders in mining Ether. Additionally, SparkPool allows the mining of coins such as Nervos’ Common Knowledge Base (CKB), Grin, and Beam.
Mining takes place using the Ethash algorithm, and payments occur using the PPS+ method. Payments are made every day, based on Singapore Standard Time, and the minimum amount for payments is 0.1 ETH. On the 28th of every month, funds are withdrawn automatically if the balance is more than 0.0105 ETH, and the withdrawal fee is 1%.
Registering with the pool is optional. Users can mine anonymously, but if so, not all the functions of the pool will be available.
Ethermine is one of the most popular pools dedicated to Ether mining. This pool is the largest for Ethereum. Pool servers are located in Europe, Asia and the United States.
The pool uses the PPLNS payout model. The minimum payment amount is the equivalent of 0.5 ETH, and the maximum amount is 10 ETH. There is no commission for the withdrawal of funds, and payment comes instantly if the blockchain network is stable. The pool is intended only for mining cryptocurrency on GPU processors.
SpiderPool is a five-year-old Chinese project that only supports four coins: ETH, BTC, BSV and BCH. Nevertheless, the pool is quite popular among Ether miners.
There is not much information available for non-Chinese users, but the pool’s commission is 2%. The minimum payout amount depends on the coin, but once per week, users can apply for an amount that is below the minimum threshold. Otherwise, payments are made automatically once per day.
Nanopool specializes in coins that are mostly mined using GPU cards. Currently, Ether, Ethereum Classic (ETC), Zcash (ZEC), Monero, Ravencoin (RVN) and Pascal (PASC) mining are supported. The pool allows users to mine not only a single cryptocurrency but also two different cryptocurrencies simultaneously, with a proportional distribution of power between them. Like any other mining pool, Nanopool has a fee that is charged based on the income of its users. The pool uses the PPLNS payment method.
Withdrawing Ether from a miner’s account balance to their wallet is carried out in Nanopool automatically when the minimum payment is reached, which is 0.05 ETH.
Nanopool does not have a clear payment schedule, but payments happen in several stages throughout the day. As soon as the miner’s account balance exceeds the set minimum value, it will be paid during the next round of payment.
To mine or not to mine?
When choosing a pool, each person should pay attention to the list of available coins to make sure their coin of choice is on the list. Also, consider the payout and commission model, as a pool that offers the lowest commission and pays for transactions is preferable. Another issue is the proximity of the pool servers: the closer the server, the more stable the mining process will be.
Related: The top crypto-mining graphics cards to get a big bang for your buck
In general, it can be said that no matter what coin the user chooses, they are unlikely to lose out when using a mining pool. According to Chun Wang, co-founder of F2Pool, the entire mining industry is currently on the rise:
“Bitcoin and other cryptocurrencies mining are continuing to grow, just the same as last year. Thanks to DeFi, there has been a period of high transaction fees in the ETH network in the past few months, leading to the ETH mining revenues much higher than usual. People were attracted to buy related mining machines to mine ETH. With the decline in mining revenue, miner’s passion for ETH mining participation fades recently. But BTC and other coins’ price rising rapidly makes mining more profitable, more people are willing to participate in mining now.”
Ethereum investment products see largest weekly outflows on record — CoinShares
Institutional investment managers continued to sell cryptocurrencies like Bitcoin (BTC) and Ether (ETH) last week, though the magnitude of the outflows have declined substantially from previous weeks, offering early signs that the worst of the market sell-off has subsided.
CoinShares’ weekly fund flows report showed a $21.4 million drawdown over the previous seven days, compared with a $94 million outflow the previous week. Ether products registered their biggest weekly drawdown at $12.7 million. Funds dedicated to ETH had been outperforming Bitcoin in recent months, reflecting pent-up demand for the second-largest cryptocurrency.
All said, institutional investors have been net sellers of digital assets in four of the past five weeks. The period ending May 24 saw the biggest weekly outflow at $97 million, according to CoinShares data.
Related: Record $141M outflow from Bitcoin products signals institutions are bearish on BTC: CoinShares
“While sentiment has weakened over the last month investors on the whole remain committed given the magnitude of inflows seen this year,” the report says, alluding to the fact that crypto investment funds have raised $5.8 billion this year alone. That’s within 13% of the $6.7 billion inflows registered in all of 2020.
As Cointelegraph reported, crypto holdings among institutional managers reached record levels during the height of the bull market earlier this year. Naturally, many investors have been taking profits following the most recent bout of market volatility.
Nevertheless, the weekly fund flows report suggests market sentiment is gradually improving. Case in point: The Bitcoin Fear & Greed Index has rebounded from extreme lows despite remaining on the bearish side. Meanwhile, Bitcoin’s price pierced above $41,000 on Monday, marking a 12% gain as markets eyed recovery above key technical levels. The price of Ether also recovered 9% to hit $2,566.
How the NFT market leveraged blockchain tech for explosive growth
It’s fun to talk about nonfungible tokens, or NFTs, because they are the perfect example of how the impact of blockchain technology in people’s lives goes way beyond the financial market. As we could see in hundreds of headlines in the past few months, they have gripped the world’s attention because they are a new manner of interacting with culture, music, sports and the media.
This article will clarify what NFTs are, how they work, how the NFT boom started, and why blockchain technology has made it possible for NFTs to create a new economy.
Related: A cure for copyright ills? NFTs promise to empower creative economies
Why is there such excitement around NFTs?
NFTs are such an exciting and fun subject to talk about because almost everyone likes music, arts, games and the internet. The feeds of every social media platform are full of people who, having shown no prior interest in crypto assets or decentralized finance, eagerly talk about nonfungible tokens. In the first half of 2021, we saw a lot of celebrities and memes endorsing NFTs.
Jack Dorsey, Twitter’s CEO, sold his first tweet as an NFT for the incredible amount of over $2.9 million this past March. Edward Snowden’s NFT, a portrait of Snowden himself, was sold for about $5.4 million, or 2,224 Ether (ETH).
The NFT of the Zoë Roth meme, better known as “Disaster Girl” due to the 2005 (and beyond) meme of her malicious smile looking at the camera while a house is on fire in the background, was sold as an NFT for 180 ETH, equivalent to almost $500,000.
Related: When dollars meet the hype: The biggest NFT hits from celebrities
Furthermore, companies from the traditional market have decided to surf the NFT wave. For example, in Brazil, the first collection in NFT of Havaianas was auctioned off last month.
NFT transaction volume has multiplied by more than 25 since December 2020, as NFTs are in people’s daily routines and lives. It could be one of your favorite songs, a cartoon of your favorite superhero or a tool in a game that your children wish to acquire. In the following chart, we can clearly see the increase of NFT transactions in the last six months, as well as business volume since the end of the third quarter before the recent pop.
What are NFTs? How do they work?
We can conceptualize an NFT as a piece of software code that verifies the property of a nonfungible digital asset, or the digital representation of the physical nonfungible asset in a digital medium. For those who prefer a more technical view:
“An NFT is a pattern of smart contracts that provides a standardized way of verifying who owns an NFT, and a standardized way of ‘moving’ nonfungible digital assets.”
In this case, any nonfungible asset may be the object of an NFT, be it domain names, tickets for an event, digital coins in games, and even identifiers in social networks like Twitter or Facebook. All those nonfungible digital assets could be NFTs.
An NFT has a data structure (token) that links metadata files that may be fixed in an image or file. That token is carried and modified to accommodate the requirements of blockchain networks such as Ethereum, Kusama and Flow, among others. The art file is uploaded in a blockchain network that creates a metadata file in the data structure of the token.
As a content creator, such as the digital artist Beeple or the rock band Kings of Leon, you upload your art file to a platform that takes your file’s metadata and passes it through the whole back-end process of a product, otherwise known as your NFT.
Your NFT then gains a cryptographic hash (a key) — a tamper-proof register with the date and time stamp carried on the blockchain network. Following the valuable data and seeing that it had not been modified at a later date is essential for any artists out there.
Loading your art on-chain may give you a better perspective of when the metadata of the art file was tokenized. Since the data of the piece of art is uploaded, nobody can retrieve it or delete it, and the chance of your artwork disappearing is practically nonexistent if your NFT is registered on a blockchain.
How has blockchain technology amplified the possibilities of NFTs?
Up until 2008, traditional NFTs did not have a unified representation in the digital world. As a result, they were not standardized, and the NFT markets closed and were limited to the platforms that issued and created a determinate NFT.
The first NFTs in blockchains started with the advent of colored coins on Bitcoin’s blockchain. Although originally designed to enable Bitcoin (BTC) transactions, their script language stores small amounts of metadata on the blockchain, which can be used to represent asset management instructions.
On the other hand, the first NFT experiment based on the Ethereum blockchain was CryptoPunks built by Larva Labs, which consisted of 10,000 collectible, “unique” punks. The fact that the punks “live” on the Ethereum network made them interoperable with digital markets and wallets.
NFTs reached the mainstream on the Ethereum blockchain in 2017 with CryptoKitties, allowing users to create digital cats and reproduce them with varying pedigrees. This was a pioneer project for creating a sophisticated system of incentives, determining that NFTs could be used as a promotional tool. This led to the fostered interest of auction contracts, which lately have become one of the primary mechanisms for pricing and buying NFTs.
Related: Art reimagined: NFTs are changing the collectibles market
The exciting part about applying blockchain technology to NFTs is that it has considerably amplified their advantages and possibilities. It has brought forth the standardization of digital, nonfungible asset representation through the ERC-721 standard. Similar to the ERC-115 and the ERC-998 standards, ERC-721 is a pattern of smart contracts on the Ethereum blockchain that brings a standardized way of verifying who owns an NFT, and a standardized way of “moving” nonfungible digital assets.
It’s worth mentioning that although Ethereum is where most of the action currently happens, there are several NFT patterns emerging on other blockchains. For example, dGoods created by Mythical Games focuses on implementing a cross-chain standard using the EOS blockchain. Also, TRON’s first NFT standard, TRC-721, was officially announced in late December 2020. The introduction of this standard is expected to help the Chinese-centric blockchain utilize various distributed ledger technology-based apps and keep up with the pace of Ethereum’s growing NFT sector.
Since then, an NFT registered on a blockchain has truly become a “unique” asset that cannot be faked, tampered with or spoofed.
Related: Experts debate whether NFTs really need blockchain
What are the main benefits blockchains bring to NFTs?
As explained above, the first benefit of NFTs backed by blockchain technology is standardization. Besides the standardization of the primary attributes of NFTs — such as property, transfer and access control — blockchain technology allows NFTs to incorporate additional features, like specifications on how to acquire an NFT, for example. Other benefits include interoperability, marketability, liquidity, immutability, proven scarcity and programmability. We will explain each one by one.
The NFT patterns make interoperability feasible so that the NFTs can move more easily among several ecosystems. In a new project, nonfungible tokens may be visualized immediately in dozens of different wallet providers, negotiable in several markets and with the ability to be acquired in several virtual worlds. That interoperability is only possible because of the open patterns allowed by blockchain technology that provide a clear, consistent, reliable application programming interface, and with the authorization to read and record data.
Interoperability, in turn, has amplified the marketability of NFTs by enabling free trade in open markets. NFTs based on blockchains allow users to move their nonfungible assets outside of their original environments. They also have the advantage of sophisticated negotiation resources, such as auctions and bids, as well as the ability to transact in any currency, from cryptocurrencies like Bitcoin and Ether to stablecoins and specific digital currencies from a determined application.
The instant marketability of NFTs based on blockchains brings greater liquidity to markets that can serve a greater variety of public, enabling significant exposure of nonfungible assets to a broader group of buyers.
The fifth and sixth advantages of the use of blockchain technology in NFTs are immutability and proven scarcity. This is because the smart contracts allow developers to set severe limits on an NFT’s supply and impose long-lasting properties that cannot be modified after a token has been issued. Therefore, one can guarantee that the specific properties of an NFT will not change with time, as they are codified in the blockchain. This is especially interesting for the physical art market that depends on the proven scarcity of an original piece.
An interesting trajectory in this new NFT world based on blockchain appeared because of recent trends and new markets, such as programmable art — which allows collectors to interfere in the original design of the art piece.
In the market of NFT-represented art, immutability and scarcity are essential. In the digital art market, the advantage of programmability could be something to consider. We can find examples of programmability at Async Art, a platform to negotiate and create NFTs that enables the owners to change their images whenever they wish. Another example of the programmability feature is the ability for a song to change its composition. That means that the music may sound different each time you listen to it. These two examples are possible by dividing a piece into separate layers called stems. Each stem has several variants for its new owner to choose from. That way, a single track of Async Music could contain many exclusive combinations of sounds.
Many people have yet to understand the dimension of the NFT boom and how blockchain is revolutionizing the way we consume the arts. Perhaps the subject deserves a more thorough conversation.
However, the hole-in-one of NFTs is the programmability of smart contracts on the blockchain, which always guarantees a reward to the content creator whenever their work is negotiated.
Suppose a determined content (music, art, domain name, photograph of a goal from Pelé, etc.) is transacted hundreds of times. In that case, the content creator is going to receive a commission.
This could completely change the dynamics of copyright and intellectual property because if a “division of income” is programmed into the NTF’s smart contract’s code, the content creators will no longer need to worry about the legal property of their artwork.
Indeed, nonfungible tokens and blockchain technology markets still need to embark on a long journey to solve scalability, marketing infrastructure and the applicable jurisdiction in NFTs with decentralized storage. Nevertheless, we shall not lose sight of the possibility to codify the rights of the determined digital asset behind the transaction of an NFT. This enables the appearance of new businesses and new markets governed not only by institutions or traditional validators of trust but by those who create the content appreciated in the social and productive hubs.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Tatiana Revoredo is a founding member of the Oxford Blockchain Foundation and is a strategist in blockchain at Said Business School at the University of Oxford. Additionally, she is an expert in blockchain business applications at the Massachusetts Institute of Technology and is the chief strategy officer of The Global Strategy. Tatiana has been invited by the European Parliament to the Intercontinental Blockchain Conference and was invited by the Brazilian parliament to the public hearing on Bill 2303/2015. She is the author of two books: Blockchain: Tudo O Que Você Precisa Saber and Cryptocurrencies in the International Scenario: What Is the Position of Central Banks, Governments and Authorities About Cryptocurrencies?
Ethereum’s $1.5B options expiry on June 25 will be a make-or-break moment
On June 25, Ether (ETH) will face its largest options expiry in 2021 as $1.5 billion worth of open interest will be settled. This figure is 30% larger than March’s 26 expiry, which took place as Ether price plunged 17% in 5 days and bottomed near $1,550.
However, Ether rallied 56% after March’s options expiry, reaching $2,500 within three weeks. These moves were completely uncorrelated to Bitcoin’s (BTC). Therefore, it is essential to understand if a similar market structure could be underway for June 25 futures and options expiry.
Recent history shows a mix of bullish and bearish catalysts
On March 11, Ether miners organized a “show of force” against EIP-1559, which would significantly reduce their revenues.
The situation worsened on March 22, as CoinMetrics launched an “Ethereum Gas Report,” stating that the highly anticipated EIP-1559 network upgrade would unlikely solve the high gas problem.
Things started to change on March 29, as Visa announced plans to use the Ethereum blockchain to settle a transaction made in fiat, and on April 15, the Berlin upgrade was successfully implemented. According to Cointelegraph, after Berlin launched, “the average gas fee began to decline to more manageable levels.”
Before jumping to conclusions and speculating whether these phenomena of the Ether price bottoming near the upcoming $1.5 billion options expiry are bullish or bearish, it’s best first to analyze how large traders are positioned.
Take notice of how June’s expiry holds over 638,000 ETH options contracts, totaling 45% of the aggregate $3.4 billion open interest.
Unlike futures contracts, options are divided into two segments. Call (buy) options allow the buyer to acquire Ether at a fixed price on the expiry date. Generally speaking, these are used on neutral arbitrage trades or bullish strategies.
Meanwhile, the put (sell) options are commonly used to hedge or protect from negative price swings.
For bulls, $2,200 is the line in the sand
As displayed above, there’s a disproportionate amount of call options at $2,200 and higher strikes. This means that if Ether’s price on June 25 happens to be below this level, 73% of the neutral-to-bullish options will be worthless. The 95,000 call options still in play would represent a $228 million open interest.
On the other hand, most protective put options have been opened at $2,100 or lower. Consequently, 74% of those neutral-to-bearish options will become worthless if the price stays above this level. Therefore, the remaining 73,700 put options would represent a $177 million open interest.
It seems premature to call who might be the winner of this race, but considering Ether’s current $2,400 price, it looks like both sides are reasonably comfortable.
However, traders should keep a close eye on this event, especially considering the price impact that surrounded the March expiry.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
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