Ethereum is arguably the second most popular cryptocurrency after Bitcoin. With the second largest market capitalization in the whole cryptocurrency market, it was the first cryptocurrency to feature “smart contracts”. Smart contracts are individual, decentralised and self-executing agreements which are coded into the blockchain.
Developed by Vitalik Buterin in, Ethereum went live with its beta version in 2015. It features the Ethereum virtual machine, or EVM, capable of running smart contracts as a representation of financial agreements such as swaps, options contracts and coupon paying bonds. One can use Ethereum to fulfil employment contracts, as a trusted escrow and to execute wagers and bets.
Cryptocurrency experts and analysts are of the opinion that Ethereum mining is more profitable than Bitcoin mining. According to the latest statistics, Ethereum miners are earning an average of $77 million in daily revenue, compared to $67 million that Bitcoin miners have earned. Thus many experts in the field believe that it is generally more profitable to mine Ethereum instead of Bitcoin.
In this Ethereum tutorial, you will learn
- What is Mining?
- What is Ethereum Mining?
- What is Ethereum Proof of Work?
- Profitability Factor of Ethereum Mining
- Types of Ethereum Mining
- Which mining method is best for you?
- Mining Software & Hardware requirements
- How to Mine Ethereum
- Mining Ethereum using GPU(step by step)
- Calculating Profits
- Wrap Up
Before we begin discussing what Ethereum mining is, we must first understand mining as a process means. Mining refers to computationally intensive work that requires a lot of computer processing power and time. In the mining process, the miner is an investor that provides energy, computer space, and time for sorting through blocks. They submit their solutions to the issuers when the mining process hits the right hash. Miners get rewards which are portions of the transactions for taking part in the mining process. Miners in cryptocurrencies are responsible for increasing the circulation of a particular cryptocurrency in the market. Every cryptocurrency has an upper limit of the number of coins that can be mined. So when rewards are reduced, the inflow of new cryptocurrencies also reduces.
Mining Ethereum means more than just increasing the volume of Ether in circulation. It also means securing the Ethereum network while creating, verifying, and ad blocking the blockchain.
Compared to mining Bitcoin, Ethereum mining takes up a lot of electricity and computational power. The difficulty level adjusts itself dynamically to produce one block after every 12 seconds.
The mining process for Ethereum uses the Proof-of-work system (POW).
Like Bitcoin, Ethereum also uses a consensus protocol to operate, known as Proof-of-work(PoW). The Ethereum network uses this protocol for its nodes to agree on the state of information recorded on the blockchain. It is the mechanism that allows the Ethereum network nodes to come to a consensus on data.
The protocol aims to deter or curb blockchain network attacks or abuse. They do this by forcing all participants to solve moderately hard calculations or computations to verify blockchain transactions for a reward. PoW is also responsible for releasing new currency into the system. In the PoW system, no one can erase or create fake transactions.
PoW miners have to use their computational resources to solve hashes to verify transactions. It is done to prevent double-spending. Proof of Work also helps you to ensure that the network functions without relying on any third party or middleman.
Some of the Proof-of-Work functions miners execute include puzzles, integer factorization, merkle tree-based puzzles, hash sequences, and functions. The completion of these activities helps in producing blocks, after which the network rewards the miners.
How much money an Ethereum miner makes depends on several costs, including electricity consumption, fees, or the cost of hardware being used.
Generally, three factors affect the profits of Ethereum mining.
- Rewards per block: At the moment, miners get 2 ETH plus the transaction fees for each block mined. You can check out the rewards per block for Ethereum from sites such as etherscan.io , which provides updated statistics daily on block rewards for Ethereum.
- Network difficulty: Every cryptocurrency has a mining difficulty of its own, and so does Ethereum. Ethereum mining difficulty refers to the difficulty of a problem that miners can solve to produce a block. As a general rule, the larger the number of miners in the network. The more difficult it is to find a block, which increases the more difficult. The more miners with powerful hardware enter the market, the more difficulty will decrease the profits significantly. To check the present network difficulty of Ethereum, you can visit sites such as ethstats.net , which provides updated network difficulty stats daily.
- Uptime: The amount of time that the miner’s rig is online and mining is called uptime in this context.
- Pools: Miners use Mining hash pools to bring together their hash rate to rapidly find blocks and get rewards. It is much more efficient compared to solo mining. It is considered one of the most profitable and reliable ways of mining Ethereum.
- Hardware: Miners always have to be on the lookout for updates and innovations in mining rigs and GPU model, which can save them a lot of money by either increasing the hash rate or consuming less electricity. Alternatively, miners can opt for mining pools for effectively mining Ethereum for a profit.
- Network Changes: Ethereum’s transition to the Proof-of-stake model will have an effect on mining profits. PoW (Proof of Work) mining is expected to be effective till 2023.
Depending on the type of processes and hardware used, there are several different ways you can mine Ethereum. We will now cover each of them briefly.
- CPU Mining: CPU mining utilizes the miner’s central processing unit for mining Ethereum. It used to be a viable option almost 5 to 6 years ago. However, it is declined in popularity due to dwindling profits.It is an extremely slow process to go on for several months without earning any significant gains.All one needs to start CPU mining Ethereum is just a computer and some software programs.
- GPU Mining: This is probably the most popular method of mining cryptocurrencies. Miners use one or several graphics processing units to mine Ethereum. It’s both relatively cheap and efficient to build a mining rig comprising of GPUs. A standard Ethereum mining rig consists of a motherboard, a processor, and a rig frame that houses the graphics cards.
- ASIC Mining: ASIC stands for Application-Specific Integrated Circuits, which refer to specific devices that perform crypto mining. Compared to the above methods, ASIC mining can produce a lot of ETH because of its higher computational/processing power.
- Cloud mining: Cloud mining is arguably one of the best ways to mine Ethereum alongside pool mining. It’s a process where miners pay an entity (normally a big company) to rent out their mining rigs. This is usually fixed in an agreement where all the earnings the rig makes, get transferred to the miner’s crypto wallet.Cloud mining services usually have large mining facilities consisting of several mining rigs. Using this combined computational value, they can offer mining services on a large scale better than others. Individuals who do not have sufficient money to invest in mining rigs themselves can avail this service for mining cryptocurrency.However, one disadvantage related to cloud mining is that you have to pay the money upfront means that you will not get your money back if the price of ETH drops. You also won’t be able to change the hardware and software provided by the cloud mining company.
- Solo Mining: Mining alone or solo mining seems to be the most plausible method of mining. But the degree of competition is high because of the number of participants involved in the network.This is only a profitable method if you have enough resources to have a big presence in the network. For instance, if you have more than a hundred GPUs as part of a mining farm.However, there are a lot of disadvantages related to maintaining a mining farm. They can be plagued with heating and ventilation issues. Maintaining multiple mining rigs also means that you have to spend a lot on electricity, especially if you want to install more than 10 graphics cards.
- Pool mining (recommended): Ethereum can also be mined using mining pools. A joint group of cryptocurrency miners combines their computational resources into a mining pool. This strengthens their probability of finding a block, leading to more profits.The participants in the pool receive a reward for finding a block, in this case, ETH. You always have the choice of either going solo with your dedicated servers or join a mining pool along with other miners to combine your hashing output.For instance, combining 6 mining devices in a pool can offer 335 mega hashes per second can generate 2 Giga hashes of mining power.
Normally companies who announce a new version of their ASIC miners are flaked with criticism from the crypto community.
Since ASIC miners have more computational power than other miners, there’s a fear that they rob other miners of equal opportunities. The miners who use CPUs and GPUs cannot keep up with ASIC miners in hash speeds and earnings.
There are reports that ASIC miners have influenced various cryptocurrencies’ economies by investing in ASIC farms. However, the list of cryptocurrencies does not include Ethereum.
The decision you make will be based on key factors, such as whether you are willing to own a mining rig, or how much you intend to initially invest. Particularly, it will also depend on the following factors:
- The amount you want to invest
- Whether you want to mine with a rig or not
- If so, what rig do you own?
Cloud mining and GPU mining are popular methods of mining Ethereum. ASIC mining is unpredictable nowadays, while it isn’t financially viable to mine using a CPU.
However, one of the best ways that experts believe one can mine Ethereum is through an Ethereum mining pool. Pool mining Ethereum allows you to lower the volatility of your payouts. This is done by offering you smaller but more frequent payouts instead of a lump sum amount that you receive only after a block has been solved. Always try to choose a mining pool that provides you with the lowest fees and reliable terms.
So before you start mining, you need to look at the software requirements and the operating system you need. You will need
- Mining application: Ethereum uses the Ethash algorithm. Thus the mining software you choose should be tailored to the algorithm.
- Mining pool address
- Graphics Card: GPU with 3GB RAM, can mine Ethereum. We always recommend that you use Desktop. However, there are gaming laptops capable of mining Ethereum because of their high-end cards.
- GPU drivers
- Crypto Wallets: You will also need a cryptocurrency wallet to receive the ETH.
- Operating System: You should choose Windows 10(64bit). Alternatively, you can use various Linux distributions. However, it is not recommended. You can easily configure windows and start your mining process faster.
To choose appropriate mining software for Ethereum, check the following criteria to take your final decision:
- Maximum hash rate: You should select your mining software after checking the mining hardware capabilities you have.
- Type of mining: Depending on the type of mining you choose, your software requirements will differ.
Among all the methods of mining discussed above, it’s pretty clear that GPU, CPU, and ASIC mining aren’t profitable as they were in the past. Thus, joining a mining pool is the preferred way of making more money while mining Ethereum.
Before we begin the pool mining process make sure you install all graphics card drivers.
Installing graphics card drivers
The next step involves installing a driver for your graphics card. If you have an AMD graphics card, you can download the driver from here.
Alternatively, in case you have an Nvidia graphics card, you can download their latest drivers from here.
Follow the steps below to begin your pool mining operation.
Step #1: Select a mining pool
The first thing you need to do is to join a mining pool. By using a mining pool, you are sharing resources which lowers the cost of running mining rigs. Depending on the quality and structure of the mining group, you chances of finding a block are massively improved.
Some of the best mining pools include the likes of F2Pool , Sparkpool , Nanopool and Ethermine. For this guide, we have chosen Ethermine because it is arguably the most popular mining pool. It possesses features such as anonymous mining, a real-time PPLNS payout scheme and a low fee of 1%.
To join the mining pool, all you need is your wallet address. There is no need to sign up which allows you to mine anonymously.
Step #2: Creating a cryptocurrency wallet
You will need to create a Crypto wallet to store your ETH if you don’t have one already. You can choose a software or hardware wallet depending on your preferences. Security should be your priority while choosing the best Crypto wallet. You can select any cryptocurrency wallet that supports Ethereum. For this guide we decided to use Coinbase.
- Go to https://www.coinbase.com/
- It is recommended that you download the Android or iOS. After downloading the App, open it on your mobile phone.
- Click on “Get Started”. You will be provided with several safety tips after the option for creating a wallet will come.
- Choose a strong pin code for your Coinbase wallet. You can also enable facial recognition or fingerprint authentication.
- Wait for your account to generate after which you will be ready to use it.
Step #3: Selecting mining software
Step #4: Creating BAT file
To start the mining process, you need to create a BAT file. ETHminer provides a default setting that works well for most Graphics Process Units. Go ahead and use that setting. Start by copying it from the website.
Navigate to the directory where you have download the Ethminer software from Github. Create a new text document by simply right-clicking on the directory> New> Text Document. Name the file as startmining.bat and click “yes” on the prompt that comes up.
Right-click on the file and select “edit”. Paste the above-copied information from the site into the batch file.
Next, select the server closest to your location along with a backup server.
For this guide, we are using Asia as a main server and EU as a back up server. Cope the information as shown above from the site and paste it in the BAT file as shown below.
Next, input your Ethereum wallet address where you receive your mining fee. Follow this by a dot and your mining machine name.
Save the file and execute the batch file to start mining.
Step #5: Starting the mining process
Once you execute the batch file to start mining, it will take about two minutes. Once you see the hash rate appear on the console, the process has begun.
Although pool mining is the most profitable method of mining Ethereum, many people still want to use their GPUs to mine. The following guide will help you begin mining using your GPU.
Step #1: Downloading and starting client
There are many mining clients you can download. We’ve chosen MinerGate for the purpose of this guide. You can download it straight from their official website. After installation is complete, launch the program.
Click on “create account” at the top right and enter your email address and password. Next, click on register to begin the mining process.
Step #2 Benchmark PC
It’s always a good idea to benchmark your PC before you start the mining process. This dispels any doubts on whether the machine is powerful enough to mine ethereum. Click on the “benchmark” option in the top bar followed by “start benchmark”.
Step #3: Beginning the mining process
To start the mining process, click on the “miner tab” found at the top of the screen. Choose Ethereum from the list of available cryptocurrencies that MinerGate can mine. Click on “Start Mining” next to the Ethereum option.
Make sure to always click on the “view” menu and make sure all other cryptocurrencies except ETH have been deselected. MinerGate will now begin loading a DAG or Dagger Hashimoto file. It’s a file that is 1GB in size and is a representation of the PoW algorithms necessary to mine ETH blocks.
Once the mining has started, you can click on the “Miner” tab to check your current balance, which is a representation of all the ETH you have mined till date. You can check your current hashrate from the GPU Mining section. To select the number of GPUs you wish you dedicate to the mining process, you can use the drop down menu in the GPU mining section.
Withdrawing Ethereum to your wallet
To withdraw your ETH from MinerGate, go to the “Wallet tab” and click on “withdraw”. Alternatively, you can go to the Dashboard and use the withdraw button next to ETH. Inset the desired amount of ETH. You can leave the field blank to withdraw all the finds.
In the address bar, insert your wallet address and hit the withdraw button again, to start the withdrawal process.
To calculate profits, simply open up your miner and check your Mh/s. After opening any of the calculators, you enter the cost of electricity and power consumption. Based on the value of 1 ETH at the time, it will retrieve the average results.
For this guide, the Mh/s that the GPU is delivering is 32.258 Mh/s; Power consumption in watts= 120; Cost per KWh = $0.10. 2miners pool fee: 1.0%
We get the following results:
Profit per day: $3.66
Profit per week: $25.59
Profit per month: $109.68
Profit per 6 months: $658.08
As mining difficulty increases in Ethereum, coupled by a global shortage of GPUs, its becoming increasingly difficult to find alternative ways to mine in order to keep the cost in check. Luckily, pool mining Ethereum is one such method which allows you to do exactly that.