How to Mine Ethereum: Detailed Guide
Mining of EThereum is one of the most popular means of investing in Ethereum. Mining is the art of using computing resources for the verification of digital transactions and the creation of new Eth blocks. It is also involved in the security and management of the network.
Here we will go through the peculiar features of Ethereum mining and how it is different from mining Bitcoin. We also look at things to put into account before venturing into the mining of Ethereum, such as hardware, software, and the mining community.
✴️What is Ethereum?
Ethereum is a blockchain network that is self governed and managed by a community (decentralized) and comprises of these three parties:
✔️. The developers are those whose duties are to generate the programmable code and perform technical changes to the network.
✔️. The miners assist in generating new coins, confirmation of digital transactions and help in the management of the blockchain.
✔️. Users make use of trading positions of smart contracts hosted on the Ethereum platform to make profit.
❎Smart contracts are pieces of codes that operates on its when certain set of conditions are met. They take advantage of Ethereum’s global computing network to operate.
Ethereum also offers a decentralized virtual currency known as Ether (ETH) to carry out value exchange within the network..
These three components of the Ethereum network depend on each other and work in harmony all the time, for the network to keep functioning. If any one out of these three components stop contributing to the network, the network will cease to work.
✴️What is cryptocurrency mining?
Digital currency mining means making use of computing resources to provide solutions to complex mathematical challenges. However, there are a lot of miners in the network, therefore the first miner to provide a solution to generate blocks will be given a new ETH coin as a reward. This type of mining is usually called PoW (Proof of Work).
In addition, mining in the Ethereum network also means the art of verifying and validating transactions in digital currencies. Every transfer made has to be verified before it’s added to the blockchain. Miners are rewarded with transaction fees for this service rendered.
Users and smart contracts alike must pay network fees to have their transactions added in the blockchain.
From what we’ve gone through we pinpoint three types of rewards given to Ethereum miners:
- Block rewards – block rewards are given to miners who generate new blocks.
- Transaction fees – these are fees for the verification of transactions paid by users.
- Gas fees – these are fees made for the verification of transactions by the smart contracts.
We earlier made mention that Ethereum uses the popular PoW consensus mechanism to carry-out block generation. The particular method has its advantages and disadvantages. But, according to the core developers of the network, there are bigger disadvantages than there are advantages.
The biggest disadvantage is that it is not scalable in its current implementation. Ethereum is a network that hosts other decentralized applications (dApps) and allows them to operate on it. It needs speed to reach its goal.
To put an end to this problem, the developers upgrade the network to Ethereum 2.0 which uses the Proof of Stake (PoS) consensus mechanism. Rather than mining, PoS uses staking as a means to secure and scale the network.
◽Ethereum’s Proof of Work
PoW mining has 2 important aspects we need to understand. They are:
- Hashrate – it is the total number of the calculated miners or computers on the network that works in a second measured in hashes per second (H/s). That’s to say the higher the number of miners in the network, the greater the hash rate and vice versa.
- Network difficulty – the difficulty level of providing a solution to a complicated mathematical problem measured in hashes per solution.
These two factors are directly interconnected, they go hand in hand. The level of difficulty determines the hash rate, an increase (or decrease) in the level of difficulty causes a rise (or fall) in the hash rate.
Network difficulty is important in monitoring block creation time. Ethereum’s blocks are generated every ~14 seconds, and when this number increases or decreases, the level of difficulty adjusts automatically to suit the situation.
◼️Ethereum mining 🆚 Bitcoin mining
✔️. Both Bitcoin and Ethereum have so many things in common. ❎The 2 are public blockchains. ❎They individually have their own native cryptocurrencies used for value exchange, and
❎Each one of them make uses of Proof of Work consensus mechanism.
This is all they all have in common. There are more differences than similarities. These are several of them:
- ◾Mining algorithm. Notwithstanding the fact that Bitcoin and Ethereum both use the PoW consensus mechanism, they don’t make use of the same hashing algorithms. Bitcoin goes with the SHA-256 encryption algorithm, while Ethereum makes use of Ethash.
Bitcoin’s SHA-256 permits the use of highly specialized equipment known as ASICs “Application Specific Integrated Circuit chips”. Meanwhile Ethereum, make use of Graphical Processing Units “GPUs” to mine. ASICs are a lot more powerful and costlier than GPUs.
The core developers of Ethereum are making an upgrade to the network to create Ethereum 2.0, which will put an end to mining in favor of staking via the PoS consensus mechanism. With this method, individuals or institutions that desire to verify Ethereum transactions will need to stake Ether.
- ◾Block rewards. When Ethereum was first launched in the year 2015, its block reward was 5 ETH. In 2017 it was reduced to 3 ETH and later in 2019 it was brought down to 2 ETH. Meanwhile Bitcoin was launched with a 50 BTC block reward. The reward is halved every four years or at every 210,000 blocks, and is presently at 6.25BTC.
It’s also important to note that Bitcoin’s supply will stop at 21 million coins meanwhile the supply of Ethereum’s coin is virtually limitless. However, there is a yearly coin issuance limit at 18 million Ethers.
- ◾Block generation. Miners generate new blocks every ~13-14 seconds in Ethereum, meanwhile Bitcoin’s miners are able to create new blocks in about every 10 minutes. That’s to say that roughly 6,600 Ethereum blocks are generated every day while 144 blocks are generated on the Bitcoin network daily.
In addition, an Ethereum block is much smaller compared to Bitcoin blocks respectively at roughly 45Kb and 1.0Mb.
- ◾Repurposing equipment – Ethereum’s mining equipment (GPUs) have a wide application spectrum. If mining Ether becomes unprofitable or stops for whatever reason, it is doable to redirect the equipment towards mining other digital coins or gaming. But it is different for Bitcoin’s mining equipment (ASICs). They are made specifically for the purpose of mining Bitcoin and its limited variants.
There are other dissimilarities between Ethereum mining and Bitcoin mining. But, these ones are the major dissimilarities.
◼️Ways of mining Ethereum
There are 3 means to mine Ethereum or any other virtual currency that uses the PoW consensus. Here they are:
- ▪️Solo mining – this is when a miner mines on his/her own (alone). No second or third party involved. The point is that the miner single handedly contributes hashing resources directly towards solving the complicated mathematical challenges and verifying transactions.
Venturing into ETH solo mining is greatly discouraged except you are prepared to set up an industrial-grade mining operation. The required hash rate to mine a block on the Ethereum network has grown bigger than the hobbyist level, and whoever is trying to mine solo may have to exercise patience for a long time before seeing any result.
- ▪️Pool mining – this has to do with being a part of a team of other miners and putting one’s hashing power towards a common pool. Miners forming a team increases their joint hashing rate, increasing their chances of generating the next block.
Although, not all pools are advised to join. There are a few factors to consider when joining a mining pool:
- ◽Geographical location. Join a mining pool close to your location.
- ◽Pool size. The bigger the mining pool, the bigger the joint hash rate that’s to say the higher the chances of generating more blocks.
- ◽Minimum distribution. The smaller the minimum distribution rate, the faster you can get your rewards from mining.
- ◽Pool fees. Basically the cost of joining a pool goes between 0.5% and 1.5%. Ideally, the lower the fees for joining a pool the better, however, it may not always be that way. There are other factors that need to be considered before making a decision that works for you.
- ▪️Cloud mining – it works in the same concept as pool mining, but rather than contributing hashing power, you put in funds. With the money, the cloud mining provider will buy Ethereum mining equipment and mine in your place. The rewards are shared amongst the investors, and the company receives a service fee.
Advantage: one good reason you might decide to fund a cloud mining company:
- Besides buying, installing, and maintaining the equipment, which is the best selling point for cloud mining. Most people who would like to venture into Ethereum mining are not technically minded, so having to fund this activity could be attractive.
- It’s both easier and cheaper to start and run. Taking away previous selling points, by involving in cloud mining, the investor will not be affected by the mining inconveniences of Ethereum, like the noise from the GPU cooling fans. Most times the GPUs overheat when operating. You also don’t need to deal with doing away with worn-out miners.
Disadvantages: The cons of cloud mining are:
- ◽Lack of control over the mining equipment. Those who invest in Cloud mining often have little to no say in the application of their mining equipment. GPUs can be easily redirected to mine other digital coins other than Eth, and investors may not have an idea of exact coins being mined by their equipment.
- ◽Too risky for investors. The ratio of risk to reward in Cloud mining is greatly against investors, with little or no risk faced by the company operators.
- ◽Scam associations – this business concept is well known for scamming individuals and, because of this reason, we do not suggest it.
◼️Best Ethereum wallets ideal for mining Ether
There are various wallets in the market currently that will help you store your Eth coins. But most of them are not suitable for a miner’s needs. Miners most times hold their mined coins for a medium to longer-term time frame. The security of these virtual assets is of utmost importance.
In this particular section, we will go through the subtypes of cold wallets that are suitable for miners.
◼️Things to look out for when selecting a wallet for mining Ethereum
- ◾Hot or cold
A wallet is said to be either hot or cold, relying on its connection to the internet. Hot wallets are remotely accessed via the internet, making them not so secure to hold Ether for the medium to long term. Hot wallets are; mobile, desktop and web wallets.
However, cold wallets are a much safer choice to use since they are inaccessible over the internet. These are; hardware wallets like;
and paper and steel wallets like;
- ◼️Full or ‘Light’ node
Wallets can be full or lite nodes. Full node wallets are created to be able to access the complete ledger onto the device where they are installed. For instance; Mist, the official Ethereum wallet, is a full node.
Lite node wallets can not access a complete copy of the Ethereum ledger. Rather, they use other trusted complete nodes. It makes them easier to obtain and operate. Most of thre Ethereum wallets are light nodes, these includes the Trezor and Ledger Nano S wallets mentioned above, both the mobile and web and wallets are light nodes.
✴️Ethereum mining setup (5 steps)
◾Step 1. Choosing the hardware
It is really important to select the right hardware for your Ethereum mining activities. Because selecting the wrong hardware could lead to little or no profit or losing your investment.
When thinking of the perfect hardware for you, the major factors to consider are; ☑️price, ☑️availability, and ☑️performance. There are two main brands to pick from: AMD and Nvidia. These 2 are recognized by their graphics cards which are popular with gamers.
AMD cards are basically less expensive but more versatile compared to Nvidia, that’s to say that they can mine a few other virtual currencies. On the other hand, Nvidia cards are more effective than AMD’s in terms of performance.
Better performance often leads to increased energy consumption which will then lead to increase in cost of mining and decrease your profits. To have a profitable business, a miner is required to find the right balance between these factors. To determine which card best compliments your situation, make use of a profitability calculator.
You can easily get profit estimates for almost all the mining equipment online. If the card you are planning on using is relatively new with no initial metrics, you can make use of the profitability calculator mentioned above from CryptoCompare. All you have to do is plug in the paper specifications from the manufacturer’s website and cost of energy in your region.
A profit calculator is necessary in determining which mining equipment to invest in depending on your profitability targets.
Another important factor to look at when considering mining hardware is; the number of VRAM that appears onboard the graphics card. There is a directed acyclic graph “DAG ” file that must be stored on every card because of the mining algorithm used by Ethash. The DAG file will be updated at every 30,000 blocks, and its size is currently just over 4Gbs. That’s to say that every GPU is a possible choice and must have at least 6GBs of VRAM to mine Ether coins.
◾Step 2. Installing the hardware
A large number of computer hardware components need software to accompany them to effectively work with a computer’s other components. The softwares created to achieve this task is known as a driver.
A manufacturer creates an accompanying driver for its hardware. Both AMD and Nvidia have such softwares for every version of their hardware plus target operating systems.
Check out the support pages from any of these manufacturers to get the latest versions of drivers for your choice hardware: AMD or Nvidia
Ensure you get the appropriate driver depending on the operating system you are using and the GPU card.
We encourage you to watch these two clips below:
CLip 1: How Much is the cost of mining cryptocurrency
Clip 2: how you can build a mining rig
◾Step 3. Choosing the mining software (client)
Mining drivers and mining clients are not the same. Although drivers assist the graphics cards to effectively communicate with the computer, the mining software (also known as client or miner) helps the computer to better communicate with the Ethereum blockchain network.
Here are a few list of the mining clients to consider:
Claymore’s software regularly gets an update and is among the most advanced Ethereum miners. It is a popular choice. Go through most of these choices and select the one that is best suited for your mining setup. Every software comes along with well detailed instructions on how to carry-out installation and how to set up the computer for mining.
⭕Note: Make sure that you get the right miner from the official repository using the URL we provided above. Ensure not to download any miner from a third-party.
◾Step 4. Operating system settings
Presently, Ethereum mining can be carried out on Windows or Linux operating systems. Windows is the more suggested choice because it is effortless to use and it has an appealing interface, meanwhile Linux offers more advanced settings and greater control of the mining rigs. It’s the most suitable for advanced miners.
As you currently have everything prepared; you have your wallet installed, your computer hardware installed and configured, and finally your mining client installed – there is one final step to take.
The default settings of your operating system may not be suitable for mining and therefore require some adjustments. These changes are:
- ▫️Control Panel settings – improve system operations by increasing the size of virtual memory.
- ▫️Power Settings – to better improve system settings and to hinder the computer from activating the ‘Sleep mode’ when mining.
- ▪️Registry tweaks – also to better improve the system operations by disabling background services that are not needed like; Windows updates.
▪️Step 5. Join a mining pool
The last step to mining Ethereum is to be a part of a mining pool. We made mention of how being a part of a mining pool is the best way to mine Ether. Actually It is possible to mine ETH on your own, but it is highly unlikely that you will succeed.
Go back to the section about “Ways of mining Ethereum” above for some factors to consider when selecting a mining pool to join.
These are three well-known mining pools (TH/s):
- ▫️Nanopool – 20.62 TH/s (total hash rate)
- ▫️F2Pool – 42.71 TH/s (total hash rate)
- ▫️Ethermine – 84.59 TH/s (total hash rate)
Every pool will have a particular setup guide and probably a list of stratum servers you will need to connect. You can get these details on their websites. Within those instructions, you will find other informations, like instructions for editing your miner files,
Make changes to your mining address and the mining rig name.
◼️How to check how much you’ve mined?
All mining pools ensure to give their users a balance inquiry feature. In Ethermine, you need to enter your wallet address on the search bar at the top on the right-hand corner, you will be shown how much ETH you have mined.
In addition, when coins are transferred to your wallet, you can use normal blockchain explorers like Etherscan.io to check your balance.
◼️What you must know about Ethereum 2.0
The upgrade to Ethereum 2.0 that is taking place, the well known PoW consensus mechanism will be replaced with Proof of Stake (PoS). According to Ethereum’s core developers; PoS has lots of advantages over PoW. They include:
- ▪️Energy efficiency – the Proof of Work consensus mechanism (because of its size or scalability) has mostly been accused of not being efficient in terms of energy consumption. Both Bitcoin’s ASICs and Ethereum’s GPU tend to use a lot of energy. This leads to several issues, which includes fire outbreak risk if the machines are not properly cooled. Meanwhile Staking, do away with miners.
- ▪️Lower entry barriers – GPU miners are very expensive, which creates a huge hindrance for people who want to venture into mining Ether. However, in the upgraded version, validators only need to stake ETHER tokens. Staking does not need a huge sum in terms of buying and installing the necessary hardware.
- ▪️More decentralization – because of it’s low entry barrier, it is expected that ETH 2.0 will lead more stakers to the network. More stakers will lead to less centralization placed against the current Ethereum version.
- ▪️More scalable – the greatest concern or reason to move from PoW to PoS was to increase the scalability of Ethereum. As of now, with PoW, Ethereum can only go through a maximum of about 30 transactions every second. But with Ethereum 2.0 there is a guarantee of increasing this number as high as 100,000 transactions every second.
Ethereum 2.0 will be released in three phases which are; 0, 1, and 2. Phase 0 (known as BeaconChain) launched in December of 2020. Phases 0 and 1 will see both Eth1 and Eth2.0 operate together. In Phase 2 the Eth1.0 will be completely out of market and replaced by Ethereum 2.0.
With the Ethereum core developers’ history of making changes to the Ethereum roadmap, it is difficult to determine when the remaining phases will be launched. However, phase 1 and 2 are both expected to roll out in 2021 and 2022 respectively.
This brings us to the conclusion that if you are mining Ether using GPU or thinking about it, you have up until 2022 to mine Ether. After Ethereum 2.0 is launched, ETH miners will have to redirect their machines towards mining other PoW coins or rather think of becoming stakers.
✅. we gave you A detailed information on mining Ethereum. You know what it means to mine ETH, the different ways to do it, and factors to consider before starting.
✅. We also looked at the mining setup from selecting the best Ethereum mining equipment, installation, to configuration.
✅. Finally, we went through the highly expected upgraded network (the Ethereum 2.0), that utilizes PoS rather than PoW for the verification and validation of transactions.
You are now prepared enough to venture into; mining and staking Ethereum.
🔲Ethereum Mining in 2021 | FAQs
✳️Is it worth mining Ethereum in 2021?
It is totally worth mining Ethereum in 2021. Mining Ethereum is still a valuable activity until Ethereum core developers fully release Eth2 which replaces mining with staking. The roll-out of Eth2 has until at least 2022. Which means miners are still able to mine ETH within this time frame.
✳️Is Ethereum mining profitable in 2021?
Ethereum mining sure is profitable, but that relies on some factors like:
- ▫️Price of Ethereum
- ▫️Network hash rate
- ▫️Equipment (mining hardware)
- ▫️Mining pool costs
It is suggested to use a profitability calculator to check if your mining setup would be profitable or not.
✳️Can I mine Ethereum on my phone or PC?
It’s a capital NO. Mining Ethereum is a very competitive economic action, and the best means to be part of it is to invest in GPU miners like AMD and Nvidia graphics cards.
✳️How can I start mining Ethereum?
✔️. The best way to venture into mining Ethereum by taking these following steps:
- ❎Be part of the Ethereum community via forums like Reddit and get as much information as necessary.
- ❎Do your own research (DYOR). Always do your research to prevent accidents from occuring.
- ❎Get the right mining equipment (buy right materials needed for mining). Nvidia GPU and AMD cards are both popular choices in mining Ethereum.
- ❎Be part of an acknowledged mining pool like Ethermine, F2Pool, or NanoPool.
- ❎Create an account on an exchange (in the event that you need to trade your coins).
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