Ethereum Mining Vs. Bitcoin Mining: Which Is More Profitable?

There are some critical differences between Ethereum vs. Bitcoin mining, which originate from the fact that these two cryptocurrencies developed with very different purposes in mind. At first glance, it may be difficult to determine the variances between these cryptos, but dig a little deeper, and you discover a glaring contrast between them. Let’s take a moment to discuss the critical differences between these cryptos and how they affect the Ethereum vs. Bitcoin mining processes.

Understanding Bitcoin Mining

Bitcoin is a decentralized peer-to-peer electronic cash system as described by Satoshi Nakamoto, the cryptocurrency’s anonymous creator. The protocol functions by utilizing a mathematical equation that adds blocks to a chain of transactions known as a blockchain. Each block uses a hash code from the previous block to timestamp the newly added block.

Blocks are added to the blockchain every ten minutes via miners who compete against each other to figure out a mathematical equation (SHA-256) whose answer must begin with four zeroes. The process requires extensive computer processing power, which equates to electrical usage. The first miner to discover a suitable solution to the equation receives an award of 12 BTC.

Every miner (node) on the blockchain works together to ensure the longest chain of transactions is the valid chain. As long as fifty-one percent of the nodes are honest, the blockchain remains honest. The act of validating the chain is called consensus. This proof-of-work system is at the core of Bitcoin’s protocol.

Bitcoin UTXO Blockchain

Bitcoin utilizes the unspent transaction output (UTXO) scheme to eliminate double spending on the network and track the database. In this protocol, users don’t send Bitcoin during their transaction. Instead, what they are sending is the hash of the previous block, digitally signed, and the public key of the new owner.

In essence, Bitcoin holders don’t hold their Bitcoin per say. In the Bitcoin UTXO blockchain protocol, users keep the output to a specific number of tokens, which can be signed over to a new owner to transfer control over the Bitcoin. If this sounds confusing, let’s examine the three basic rules of this protocol to get a better understanding.

Every transaction’s sum of inputs must be greater than the sum of its outputs.

All referenced inputs must be valid and not show as spent.

Every input requires a signature that matches the owner of the input.