Why is ETH profitability so low?

Every time the ETH profitability is extremely high a new wave of miners joins the network with the hope of rewards staying at such high levels. However, soon (after few days or a week) they get disappointed because rewards are not keeping up the levels they want, so they often quest why Ethereum profitability dropped so much. In this article we will briefly explain what is happening when ETH profitability drops so low.

ETH estimated rewards are calculated based on different network factors, but the factor that mostly affects the estimated rewards (in ETH) is block reward.

Block reward is what miners on a pool find and gets divided between miners that found it as a reward. On ETH network, the reward is currently divided into two parts:

ETH block reward = 2 ETH + Dynamic transaction fee

2 ETH is base reward miners always receive, while dynamic transaction fee depends on how much users of network are paying for transaction to get confirmed. If a lot of users want to send out the transactions, they will have to pay more to miners for their transaction to get confirmed.

On normal days dynamic transaction fee is 0.5 ETH, but there were times where this was steady 2 ETH and times when it jumped to 20 ETH, 30 ETH, or higher. This was an anomaly and not something that is expected or wanted by the users of Ethereum network.

The dynamic fee solely depends on activity on Ethereum blockchain and if there is not much activity, rewards are "low" like that.

If you joined when the dynamic transaction fee was 3 ETH and is now 0.5 ETH, you have seen 50% drop in earned ETH (2.5 ETH v.s 5 ETH). This is normal and expect.

Furthermore, with EIP-1559 coming soon, the rewards won't have such jumps anymore and will be more steady, but at lower levels. You can read more about EIP-1559 here.

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