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Looking at cryptocurrency mining in 2022

Author: LB 2021-11-26 595

There are several things to consider when we want to imagine what the cryptocurrency mining future will look like in the upcoming months. First of all, it’s advisable to clarify the difference between cryptocurrency mining algorithms. Well-versed in computer science have a great advantage in this aspect. Next, it might be expedient to iterate through some of the factors that can influence market price. Lastly, I would like to mention a few thoughts on secondary factors cryptocurrency miners have to consider in addition to their profits.

The PoW (proof-of-work) algorithm itself has already proven its merits in numerous cryptocurrency networks. Although PoW as a tool has been invented for spam filtering it turned out to be very useful in cryptocurrency networks as well. The fundamental idea behind PoW is that participants are required to do some kind of work in order to vote. This might not be in complete accordance with what we see in modern societies where everyone is allowed to vote, even unemployed citizens. Anyway, we cannot let useless participants reproduce in cryptocurrency networks, because that would lead to a phenomenon called “Sybil-attacks”. In order to protect against such attacks bitcoin and PoW based ethereum uses the concept of mining. During mining, users are required to compute millions of hash values and this burns a lot of electricity. So energy consumption is indeed a problem in PoW networks, however ethereum, ethereum classic, bitcoin gold, bitcoin, ravencoin, beam, ergo, cortex and several other currencies seem to operate flawlessly. Measures to protect the networks against 51% attacks are still under development and some smaller currencies have been targeted using this technique (Double Spend Attacks on Exchanges).

These attacks target cryptocurrency exchanges and individual accounts cannot be accessed by the adversaries during these attacks. If PoW networks required less energy to operate there would be less motivation to design new methodologies to protect against Sybil attacks.

GPU mining is one of the most outstanding results of the “protecting-against-ASIC-miners” propaganda. The core principle of the crypto world is decentralisation. In other words, participants should be able to join the network any time they wish to do so and the same should be true when the users want to leave the network. Bitcoin mining in 2021 is only feasible using specialized hardware and Chinese ASIC manufacturers putting great effort into developing semiconductor chips for the sole purpose of calculating billions of SHA-256 hashes to create money making machines. Smaller participants can no longer keep up with the hashrate growth and natural selection forces IT specialists to come up with new solutions. As a result, memory-hard mining algorithms are invented. Dagger-Hashimoto is one of the most prominent examples of memory hard mining algorithms and its mutation, ethash is still being used in the Ethereum network. Although GPUs are getting more and more efficient in crunching numbers there is still no ASIC miner for the ethash algorithm. So good news for ethereum miners, because even in 2021, if you have a GeForce RTX 3090 card you can mine ethereum with a daily profit of around $10. Bad news for gamers though, because most of the video cards that were manufactured in 2021 are sitting in cryptocurrency mines and not many of them landed in gaming PCs.

Mining with LHR cards

The largest GPU manufacturer in the world decided to introduce hardware limitations to make Ethereum mining less profitable. According to rumours, their goal is to reconcile the unrest between miners and gamers. Whether this makes sense from a completely for-profit corporation remains a question, but LHR (low hash rate) cards are actively being manufactured in the GPU factories of Nvidia. Now gamers can buy LHR cards at a moderate price, as their market price is not necessarily influenced by the market price of Ethereum anymore. The first version of LHR however was not a success story by the way. At least from the manufacturer's standpoint. Crypto enthusiast who know all the ins and outs of the Dagger-Hashimoto algorithm did a good job on cracking the first version of the low hash limitation. As a result the price of the 3000 series, even with LHR (V1) increased significantly and not many gamers were able to get hold of them. An RTX 3070Ti LHR V1 for example produces 50MH per second with the latest nbminer of gminer as the LHR unlocking functionality seems to work very effectively against the limitations introduced by Nvidia.

LHR V2 mining performance

So developers at the largest GPU manufacturer had to restructure their LHR implementation, because the first version turned out to be too easy for miners to crack. LHR V2 cards are shipped with the latest LHR implementation and the details on how this low hash rate limitation is enforced when the ethash algorithm is executed are kept in secret. As long as no one divulges this secret, the LHR V2 cards will mine ethereum with a low hash rate and even the latest lolminer, gminer or nbminer will fail at unlocking the second version of the LHR limitation. A Geforce RTX 3060 LHR V2 card for example reaches roughly 30MH/s on the ethash algorithm without overclocking. The card itself is still available, at least on European markets, so seemingly it is a good choice for ethereum mining, however when the LHR V2 performance is compared to the original performance of the Geforce RTX 3060 cards, the results are not that attractive. Miniz miner is rumored to reach better performance on the Geforce RTX 3060 LHR V2 cards, but the users are reporting contradictory results. It will take some time to unlock the full potential of these cards and we are going to see more of these LHR V2 cards in gaming PCs in the forthcoming months.

New era of HDD mining

Running a GPU farm can be painful in some sense. These high performance GPUs consume more electricity than you would need on a daily basis, so with adding more cards to your system, you need to replace your electric wires in the walls. You also have to think about how to cool your GPUs, especially if you use overclocking. As soon as the ambient temperature goes up, the fans on the cards start spinning and they do make noise. If you have more than let’s say 10 cards in one room, these problems arise. If you put your rig next to your bedroom, you’re not going to sleep well at night. I could enumerate these issues endlessly, but instead of doing that let’s see an alternative cryptocurrency.

HDD mining has been around for years, but prior to the advent of the chia network it had close to no popularity. Setting the profitability aside, HDD mining is much more convenient than GPU mining. Not even speaking of the availability of the mining hardware. You can still buy HDDs on the Internet and you can store them in your own room without experiencing any of the nuisance I mentioned about GPU mining. Unfortunately the ROI on chia farming is not as attractive as for Ethereum mining, but this is due to market price fluctuations. The chia network seems to solve many of the issues that were prevalent in the bitcoin or the ethereum consensus algorithm, including centralization, mining oligopoly and ASIC development. The crypto community has not yet realized the full potential of the chia network, but I believe that as intrinsic problems in the PoW/PoS networks become more and more prevalent proof-of-spacetime based cryptocurrencies will gain more attention and this will result in market price elevation and farming profitability increase as well.

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