Ethereum is a decentralized blockchain platform that provides a peer-to-peer network that securely runs and verifies application code, known as smart contracts.
Ethereum, created by Vitalik Buterin, went online with a test version in 2015 and it is the second most popular cryptocurrency after Bitcoin.
The Ethereum virtual machine, or EVM, allows smart contracts to be operated as a representation of financial agreements like swaps, options contracts, and coupon-paying bonds. Ethereum may be used to execute wagers and bets, as well as to fulfil employment contracts and operate as a trustworthy escrow.
Users can transact with one another without the need for a trusted central authority. Participants have full ownership and visibility of transaction data since transaction records are immutable, verifiable, and securely distributed across the network.
User-created Ethereum accounts are used to send and receive transactions. As a cost of processing transactions on the network, a sender must sign transactions and spend Ether, Ethereum’s native coin.
Ethereum’s creators claim that everybody, regardless of background or location, may use digital money and data-friendly services, which is perfectly correct. It’s the technology that powers the cryptocurrency ether (ETH) and thousands of other apps available today.
Key features of Ethereum
1. Accessible by everyone
The Ethereum blockchain assures its users of seamless access to financial services. All you need to access Ethereum and its lending, borrowing and savings products is an internet connection as opposed to the traditional banking system where a lot is required to get access to such services.
2. Secure and private transactions
To utilize an Ethereum app, you do not need to submit all of your personal information. Ethereum is developing a value-based economy rather than one based on surveillance.
3. Operates a peer-to-peer network
Users of the Ethereum app can move money, or make agreements, directly with someone else, and do not have to go through intermediary companies to get these transactions done.
Ethereum is not under the authority of any government or corporation. As a result of its decentralization, it is practically hard for anyone to prevent you from accepting payments or accessing Ethereum services.
5. Ethereum Virtual Machine
Ethereum provides the technology, architecture, and software that allows users to engage with smart contracts.
6. Decentralized applications (DApps)
Ethereum allows users to build centralized applications, also known as decentralized apps.
Understanding cryptocurrency mining
Before moving on to discussing Ethereum mining, it is necessary to provide a basic description of what cryptocurrency mining entails.
Miners compete to prove their computational effort in exchange for a block reward, which is referred to as cryptocurrency mining. A block with related cryptographic hash functions containing transaction data becomes accessible to the blockchain’s P2P network after a sequence of transactions for a certain coin.
In clear terms, crypto mining refers to computationally intensive activity that necessitates a significant amount of computer processing power and time. The miner is an investor who contributes energy, computer space, and time to sort through blocks in the mining process. When the mining process reaches the correct hash, they send their solutions to the issuers.
For participating in the mining process, miners receive incentives in the form of portions of the transactions. Cryptocurrency miners are in charge of increasing the market’s circulation of a particular cryptocurrency. The maximum number of coins that can be mined is set by each cryptocurrency. As a result, as rewards are lowered, so is the inflow of new coins.
Competing pools of nodes employ high-performance computation to solve a challenging mathematical problem and validate the block’s integrity. The mining party cements the blockchain addition and earns the mining reward for allocating the pool after successfully demonstrating the block’s validity.
Individuals who want to mine cryptocurrency can either own and operate a mining gear or buy hash rate from a third-party rig, often known as cloud mining. The initial cost of specialized hardware, as well as continuing operational costs such as energy, are all part of owning and maintaining a mining rig. Miners, on the other hand, have the most control and profit possibilities.
One of the major drawbacks of cryptocurrency mining is that it is time-consuming, expensive, and only seldom profitable.
Mining, on the other hand, has a magnetic appeal for many cryptocurrency investors because miners are rewarded with crypto tokens in exchange for their efforts. This could be because, like California gold prospectors in 1849, entrepreneurs perceive mining as a gift from above. Why not pursue mining as a source of income if you are technologically inclined?
Cloud mining, on the other hand, does not require an initial investment and allows miners to contribute only what they can afford. New miners, in either case, will require cryptocurrency mining software to participate.
What is Ethereum mining?
Ethereum mining is the process of generating a block of transactions that will be put to the Ethereum blockchain in order to be rewarded.
Ethereum, like Bitcoin, is currently governed by a consensus method known as proof-of-work (PoW). Mining, as all miners are aware, is the lifeblood of the proof-of-work system.
More than merely raising the amount of Ether in circulation, mining Ethereum has a number of other benefits. It also entails maintaining the security of the Ethereum network while simultaneously producing, verifying, and ad blocking blocks of the blockchain.
When compared to Bitcoin mining, Ethereum mining consumes a significant amount of electricity and computational resources. It is dynamically adjusted to make one block every 12 seconds, with the difficulty level increasing or decreasing as needed.
The Proof-of-Work (PoW) technology is used in the Ethereum mining procedure (POW).
What is Proof-of-Work (PoW) in Ethereum mining?
Proof-of-work is the method that allows the network to reach consensus, or agree on things like account balances and the sequence in which transactions are executed.
Additionally, it prohibits users from “double spending” their coins and assures that the Ethereum chain is extremely difficult to attack or otherwise influence.
Bitcoin and Ethereum both function via consensus protocols, known as Proofs-of-Work, in order to achieve their goals (PoW). This protocol is used by the Ethereum network to ensure that all of its nodes agree on the current state of the information stored on the blockchain. It is the method that allows the nodes of the Ethereum network to reach an agreement on certain data points.
Bitcoin’s core algorithm, known as proof-of-work, determines the difficulty and rules for the work miners perform. Mining is the “labor” in and of itself. Making new valid blocks for the chain is what it is called.
This is significant because the length of the chain aids the network in determining the proper Ethereum chain and understanding Ethereum’s present state of affairs. The greater the amount of “work” completed, the longer the chain and the greater the block number, the more confident the network can be in the existing state of affairs.
Ethash, the proof-of-work protocol, requires miners to compete against one another in a race of trial and error in order to determine the nonce for a block. Only blocks with a valid nonce can be added to the chain, and no other blocks can.
The miner will repeatedly run the dataset that can only be obtained by downloading and running the entire chain (which the miner does) through a mathematical function while racing to build the next block in the race to be the first to create a block.
The dataset is used to build a mixHash that is less than a target nonce, which is defined by the block difficulty of the transaction. The most effective method of achieving this is by trial and error.
The target for the hash is determined by the difficulty level. Because of this, the collection of valid hashes decreases as the target decreases. Once generated, it is extremely simple for other miners and customers to validate the information. No matter how many times the hash of a transaction changes, fraud is detected since the hash is absolutely different.
Fraud is easier to detect when it is hashed. However, proof-of-work as a mechanism serves as a significant disincentive to attempts to assault the chain.
Costs to consider when mining Ethereum
- The hardware required to construct and operate a mining rig has the potential to be expensive.
- The cost of electricity used to power the mining rig
- For those that mine as part of a pool, mining pools typically charge a set percent fee on each block that the pool generates.
- The expense of equipment to sustain a mining rig is a possibility (electrical wiring, ventilation, energy monitoring, etc.)
Factors that affects the profitability margin of Ethereum mining
The amount of money that an Ethereum miner earns is determined by a variety of factors, including the amount of energy or electricity consumed, the amount of fees charged, and the cost of the hardware utilized.
There are several ETH mining calculators available that can describe potential returns, such as Miningbenchmark.net, Whattomine, and CryptoCompare’s calculator. These values can also be calculated independently. Calculator websites utilize a straightforward formula:
This is a rough estimate of how much a miner will make in a day. In essence, a miner’s revenue is equal to the network’s total issuance multiplied by their portion of the overall hash rate.
To generate a profit, one must deduct the cost of the miner’s electricity (i.e., the cost of Ethereum mining). A device that consumes 1.5 kWh of electricity at $0.10 per day, for example, will cost $3.6 per day.
In general, there are four factors that influence the profitability of Ethereum mining.
1. Rewards per block
As of the time of this writing, miners receive 2 ETH in addition to transaction fees for each block that is mined. However, when there is a lot of activity on the network, transaction costs can be quite high, resulting in miners receiving a considerably larger reward than the 2 ETH that we should receive.
Looking at the current reward per block using Etherscan, we discovered that the reward per block is just over 4 Eths at this very moment, which is double of what we should receive in theory. As a result, I believe that the reward per block is an important factor in how many coins we receive daily or monthly, or however you prefer to calculate it.
Uptime is critical to maintaining a constant flow of rewards and avoiding days with little or no mining. When I speak to uptime, I mean the length of time that the mining rig is online and mining.
Not only is it simple to monitor the uptime and performance of your mining rig using Simple Mining, but it also contributes to a far more reliable uptime when compared to other operating systems, particularly Windows.
Without updates, driver installation, antivirus, or annoying warnings that require troubleshooting and configuration each time the rig reboots, simple mining ensures that your rig will boot and begin mining in seconds. If you haven’t already, you should give it a try for free for the first 30 days.
Every cryptocurrency, including Ethereum, has its unique mining difficulty, which is different from one another. The complexity of a problem that miners must solve in order to produce a block is referred to as the Ethereum mining difficulty. As a general rule, the greater the number of miners in the network, the higher the difficulty of mining.
The greater the difficulty in locating a block, the greater the difficulty in locating a block. The more miners with powerful hardware who enter the market, the greater the difficulty, and the lower the rewards will be.
In order to determine the current network difficulty of Ethereum, you can consult websites such as ethstats.net, which gives up-to-date network difficulty statistics on a daily basis.
A pool is where miners pool their hashrate in order to find blocks and receive rewards more quickly and reliably; if a miner mined alone, it would take significantly longer to locate a block and the mining profitability would vary greatly. The miner would receive a large amount of Eth when the blocks were discovered, but we would also have many days with no rewards at all.
Nowadays, it is simple to find a pool, and the most well-known is Ethermine, Nanopool, 2 miners, and 2fpool, but there are many others.
When choosing a pool, we should examine the ping from us to the pool, the payment method, and the charge.
The pool’s payment type is also crucial, as it can be PPLNS or PPS. PPLNS pays based on the number of shares discovered over a specific time period, whereas PPS pays based on the number of blocks discovered while mining. I like to recommend PPLNS because it pays better when utilizing a huge pool with greater luck, but as usual, conduct your own research and determine what works best for you and your mining rig.
Types of Ethereum Mining
CPU mining is a method of mining Ethereum that makes use of the miner’s central processing unit. CPU miners have declined in use due to diminished profit, however, it was one of the best options about six years ago.
It is an exceedingly slow process that can take several months to complete without yielding any noticeable results. CPU mining Ethereum may be done with only a computer and a few software tools, which is all that is required.
It is necessary to use geth in order to mine Ethereum with a computer. As soon as you start your Ethereum node with geth, the mining process stops by default.
Cloud mining is perhaps one of the finest ways to mine Ethereum. It’s a system in which miners pay a third party (usually a large corporation) to rent out their mining equipment. This is frequently spelt out in a contract that stipulates that all profits generated by the rig be delivered to the miner’s cryptocurrency wallet.
Cloud mining is the use of cloud computing to create blockchain-based coins. Cloud computing, in general, is one of the fastest-growing technology trends, in which computing services such as processing, server capacity, database services, software, and file storage are accessed via the Internet via the cloud. These businesses bill on a use basis, similar to how we pay for water and electricity.
The majority of cloud mining providers have big mining facilities with several mining machines. They can provide superior mining services on a big scale using this combined computing value. This service for mining bitcoin is available to people who do not have enough money to invest in their own mining rigs.
Graphics processing units (GPUs) are computer processing units made up of electronic circuits that are more efficient and powerful than their CPU equivalents.
Although they are designed to speed up the processing of image generation in a computer by changing or speeding up the computer memory, they are also used in cryptocurrency mining since they speed up the process.
Even more than the most powerful ASICs or lower-end CPU miners, graphics processing units are the most frequent technique of mining cryptocurrencies. With these devices, we can still mine hundreds of cryptocurrencies using proof-of-work methods, and they are now the primary mining machines for the majority of users. It’s no surprise that GPU prices remain high.
Even if bitcoin can be mined with a CPU, a GPU is better because it increases the earnings. You can utilize up to 9 GPUs for GPU crypto mining, but only two CPUs unless they are virtual CPUs.
A mining pool is a collective group of cryptocurrency miners who pool their computational capabilities over a network in order to increase the chances of finding a block or otherwise successfully mining for cryptocurrency.
The pool members are rewarded for discovering a block, in this case, ETH. You always have the option of going it alone with your dedicated servers or joining a mining pool with other miners to pool your hashing power.
Combining 6 mining devices in a pool, for example, may provide 335 mega hashes per second, or 2 giga hashes of mining power.
Solo mining, as the name implies, entails mining cryptocurrency on your own. This implies you’ll have to handle the full mining procedure by yourself. When Bitcoin mining first started, it was done by its mystery founder, Satoshi Nakamoto, on an individual basis. Nakamoto did this with a CPU, which was the standard for a long time before GPU, ASIC, and pool mining gained popularity.
If you wish to mine on your own, you’ll need all of the usual equipment, including mining hardware and software, as well as a wallet to hold your mined tokens or mining incentives.
Mining alone, or solo mining, appears to be the most viable option. However, due to the large number of players in the network, there is a lot of rivalries. This strategy is only profitable if you have adequate resources to have a large network presence. For example, if you’re running a mining farm with over a hundred GPUs.
However, there are numerous drawbacks to owning and operating a mining farm. They may experience problems with heating and ventilation. Maintaining several mining rigs also means spending a lot of money on electricity, especially if you have more than ten graphics cards installed.
ASIC stands for Application-Particular Integrated Circuits, and it refers to specific crypto mining machines. As a result of its superior computational/processing capability, ASIC mining can create a lot of ETH when compared to the other ways.
Usually, when a company announces a new version of its ASIC miners, the crypto community slams them.
There is concern that because ASIC miners have more processing power than other miners, they would deprive other miners of equal possibilities. CPU and GPU miners are unable to compete with ASIC miners in terms of hash rates and revenue.
According to reports, ASIC miners have influenced the economies of several cryptocurrencies by investing in ASIC farms. Ethereum, on the other hand, is not included in the list of cryptocurrencies.
ASICs are expensive and difficult to develop and manufacture as mining machines. ASICs are faster than less powerful computers since they are designed specifically for mining cryptocurrencies. ASIC processors for cryptocurrency mining have been more efficient in recent years, with the most recent iteration consuming only 29.5 joules per terahash.
How to choose the best Ethereum mining method
It’s a good idea to properly plan out how you’ll mine Ethereum or any other cryptocurrency before getting started.
Keep in mind that your decisions will be based on essential aspects such as whether you want to purchase a mining rig or how much you want to invest at first. Particularly,
It will also be determined by the following factors:
- The amount of money you want to put into it
- Whether you choose to mine using a rig or not is a personal choice
- If so, what kind of rig do you have?
Among the four techniques of mining Ethereum already described, cloud mining and GPU mining are prominent. Mining using an ASIC is unreliable these days, while mining with a CPU isn’t cost-effective.
However, researchers concur that using an Ethereum mining pool is one of the best ways to mine Ethereum.
You can reduce the volatility of your Ethereum earnings by mining in a pool. This is accomplished by providing you with smaller but more frequent payouts rather than a big sum payment only after a block has been solved. Always strive to pick a mining pool with the lowest costs and the most stable terms.
Software and Hardware required for mining Ethereum
You will need the following hardware and software to be able to efficiently mine Ethereum.
- Mining application: Ethereum uses the Ethash algorithm
- Mining pool address
- Graphics Card: GPU with 3GB RAM may be used. Note: We recommend that you use a desktop computer preferably a gaming computer
- GPU drivers
- Crypto Wallets
- Operating System: You should choose Windows 10(64bit). Alternatively, you can use various Linux distributions.
How to Mine Ethereum
This is a step by step guide to mining Ethereum
Step 1: Create a crypto wallet
If you do not already own a crypto wallet, it is important you get one before proceeding with it as you will need it to store your earnings.
Crypto wallets are similar to bank accounts in that they keep your currency. Wallets can be divided into two categories: hardware wallets and software wallets. Any of these options are available to you.
Step 2: Install graphics card drivers
This step entails installing a graphics card driver on your computer. You can use either Nvidia or AMD graphics cards as they are some of the best in the market.
Step 3: Select your preferred mining type
As mentioned above, there are various ways you can mine Ethereum. So, before you go on to mining, it is best you select your preferred mining type which could be ASIC, pool mining, solo mining, cloud mining, GPU mining or CPU mining.
For the sake of this tutorial, we would be explaining using a mining pool.
First and foremost, you must join a mining pool. Using a mining pool allows you to pool resources, lowering the cost of operating mining rigs. Your chances of locating a block are greatly boosted depending on the quality and organization of the mining group.
F2Pool, Sparkpool, Nanopool, and Ethermine are just a few of the greatest mining pools. We chose Ethermine for this instruction because it is undoubtedly the most popular mining pool. It has features including anonymous mining, a real-time PPLNS reward structure, and a 1% transaction fee.
Step 4: Select the right hardware and software
This step is very important as you need the required software and hardware with the appropriate compatibility in order to proceed with mining.
You’ll need the following:
- A desktop computer or dedicated mining rig with one or more GPUs (higher the better)
- ETH mining operating system
- GPU drivers
The next step is to choose the mining software that will be used. EasyMiner and Ethminer are two excellent examples of such programs. For the sake of this tutorial, we will be using Ethminer, which you can easily obtain from the Github repository.
Step 5: Create a BAT file
You must first create a BAT file before you can begin mining. For most Graphics Process Units, ETHminer has a default configuration that works well. Use that setting if you like. Begin by copying it directly from the website.
Go to the directory where you saved the Ethminer software you downloaded from Github. By right-clicking on the directory and selecting New> Text Document, you may create a new text document. Give the file the name startmining.bat and answer “yes” to the prompt that appears.
Select “edit” from the context menu when you right-click on the file. Copy the information from the website and paste it into the batch file.
Select the server that is nearest to your location, as well as a backup server.
For the sake of this tutorial, Asia will serve as the primary server and Europe will serve as the backup server.
Copy the information from the website as stated above and put it into the BAT file as shown in the example below.
Then, enter your Ethereum Wallet address, which is where your mining fee is sent. Then add a dot and the name of your mining machine.
Then, to begin mining, save the file and run the batch file.
Step 6: Start mining
It will take approximately two minutes to begin mining after you have executed the batch program. When you see the hash rate displayed on the terminal, you know that the process has started.
FAQ On How do I start mining Ethereum?
How long does it take to mine 1 Ethereum?
At the time of this writing, it would take 29.5 days to mine 1 Ethereum at the current Ethereum difficulty level, taking into account the mining hashrate and block reward; an Ethereum mining hashrate of 2,500.00 MH/s, using 1,200.00 watts of power at $0.10 per kWh, and a block reward of 2 ETH are all necessary conditions.
How much does it cost to start mining Ethereum?
The rig will cost around $1,400 with just one graphics card. If you add five additional GPUs, the price jumps to $4,400.
Is Ethereum mining profitable 2022?
Of course yes! It is still profitable to mine Ethereum in 2022. The profit margin is determined by the cost of electricity. The higher the profit margins, the cheaper the electricity price.
Can I mine Ethereum on my phone?
Yes, it is possible to mine Ethereum on your phone even though it is not always advisable considering the technicalities involved. However, bear in mind that Ethereum mining on the phone is way different from the traditional mining done with crypto mining rigs.
How many GPUs do I need to mine Ethereum?
GPUs are the most important component of a mining rig because they are the component that creates profits. It is suggested that you buy six GTX 1070 GPUs.
You can mine Ethereum as long as your system fits the general criteria and has at least one GPU with at least 3GB of RAM. Although some gaming laptops feature high-end graphics cards, the significant heat generated by mining may have negative consequences for your laptop, so it’s preferable to go with a desktop build.
More and more people are looking for profitable ways to mine Ethereum. In this article, we’ve broken down the simplest way for novices to start mining Ethereum, which is through a mining pool. It’s also the most cost-effective method because it doesn’t necessitate a large investment in hardware.
As Ethereum mining difficulty rises, along with a global shortage of GPUs, it becomes increasingly difficult to find alternate ways to mine in order to keep costs low. Fortunately, pool mining Ethereum is one such technology that allows you to do just that.
Hence, if you’re looking to start mining Ethereum, you might want to join a mining pool.