Ethereum's digital system is based on blockchain technology. It's most known for its own cryptocurrency, ether, and blockchain network capability.
The Ethereum network's overall goal is to enable decentralized Android applications (Apps), such as nonfungible token marketplaces (NFT art).
Transactions in these systems are open to the public and are not governed by a central authority. As a result, the Ethereum network requires a global system of computers to construct and validate each batch of transactions (i.e., a block) within the blockchain of the platform.
This is where mining enters the picture. Miners, in essence, solve complex riddles using the computational power of dedicated hardware. This process not only keeps the network running but also keeps it safe from hackers and other hostile attacks.
Miners are compensated for their work by receiving a transaction fee — a fixed amount of ether if a block is successfully validated.
At some time in 2022, the Ethereum network is expected to switch to a different incentive mechanism known as proof of stake (PoS). In the interim, if you want to learn more about Ethereum mining, we've described the setup process and best practices.
Step 1: Pick your mining approach
There are three different ways to mine Ethereum at the moment:
- Mining in the cloud
- Mining in a pool
- mining on my own
The most straightforward approach to mine ether is to join a pool, especially if you don't have much hardware. That's because, as more currencies have entered circulation, mining Ethereum has become more difficult and time-consuming.
Pool mining enables miners to pool their computer power in order to solve Ethereum blocks faster. As a result, the prizes are divided among the participants based on their power contribution, which is measured by hashpower.
Important: The computing power needed by your device to solve crypto algorithms is known as hashpower.
Solo mining is more difficult and needs a lot of computing power. You'd need a farm of complicated mining rigs powered by hundreds of graphics cards to tackle riddles in a reasonable period of time by yourself.
It's essential to think about the financial and spatial implications when you go this route. You should consider factors like ventilation, noise, electricity costs, and physical space in addition to the equipment cost, which may be hundreds if not tens of thousands of dollars.
As a result, solo mining is usually only recommended for experienced miners who are willing to invest a considerable amount of money. However, because you would eliminate costs and shared earnings, this technique may be more profitable in the long term.
In terms of entry barriers, cloud mining is generally a fast special process. You won't need to invest in a good machine or dedicate your personal computer to mine if you are using this method. Instead, you hire another miner to mine coins for you for a price up the advance.
They'll conduct the mining, and you'll get the freshly minted money. Renting another miner's computer power, on the other hand, comes with its own set of hazards, including frauds and fraud.
Step 2: Open a crypto wallet
Because cryptocurrency is digital, there are no loose coins to worry about. However, you'll still require a place to store your belongings.
This is when cryptocurrency wallets come in handy. Crypto wallets are similar to bank accounts in that they keep your currency. Wallets could be classified into two parts: physical wallets and digital wallets.
Hardware wallets: These are physical devices, sometimes known as "cold wallets," that hold the private keys to your crypto accounts offline. They frequently resemble high-tech USBs.
Software wallets are computer apps that store your cryptocurrency and require an internet connection to utilize. Both public and private keys are available in these wallets.
Both have advantages and disadvantages. Because they are not tied to an online platform, hardware wallets are generally thought to be safer. However, they are frequently more costly and inconvenient than a software wallet.
Software wallets, on the other hand, are significantly more convenient because they can be accessed via a web browser or a mobile app. As a result, they're more vulnerable to hackers than an offline wallet.
So you'll need an Ethereum wallet if you wish to mine ether. You'll get a public key once you open a wallet, which you can use during the mining configuration procedure.
If you join a mining pool, for example, you'll be able to link your wallet and receive regular currency distributions based on your hash power contribution to the pool.
Step 3: Make sure you have the right hardware and software
Try joining a mining pool if you're a more active miner. In that case, you'll almost certainly need a mixture of the following:
- One or more graphics rendering units in a computer or dedicated mining equipment (GPUs).
- Mining software for Ethereum. In terms of functionality and ease of use, these can vary.
- GPU drivers enable your graphics hardware and operating system to interact with one other.
- To store your earnings, you'll need to have a wallet, which can be a physical device or a digital program.
If you want to be a hardcore miner and go solo, you'll need to set up a significant amount of money for equipment, not to mention physical storage space.
While GPU mining is still an option, you might want to think about a more expensive but perhaps more efficient alternative: Application-Specific Integrated Circuit (ASIC) mining.
ASIC mining machines are made exclusively for mining cryptocurrency. As a result, they have a tendency to create greater processing power and solve blocks faster.
There are, however, trade-offs. ASICs can cost tens of thousands of dollars, making them prohibitively expensive for the average miner.
"With the PoS model on the horizon, I would advocate buying a GPU over an ASIC rig," says Jeff Adams, MineHog's data center operations and crypto mining strategic adviser.
"Unfortunately, when Ethereum 2.0 is adopted, ASIC miners' rigs will become outdated. Because you won't be able to sell any of its parts for more than a few dollars, using it as a space heater during the winter months may be the best use you can make of it in the future "Adams continues.
Step 4: Choose a mining pool
A mining pool is the simplest method to get into crypto mining unless you're ready to invest tens of thousands of dollars in equipment. Nevertheless, interested miners must review their pool options before going further.
Pool structure might differ in terms of pool size, hash rate, payment, and fees. Ethermine, for example, has over 400,000 active miners as of this writing, whereas 2miners has over 80,000.
This has an impact on the pool's block-solving pace and, as a result, on its payout. However, there are more than two pools to choose from, and PoolWatch can help you compare and monitor active Ethereum mining pools.
Here's a rundown of some of the most prevalent mining pool factors:
- The number of active miners in the pool determines the pool's size.
- Hashrate: As previously stated, the hash rate represents the mining pool's aggregate computer power.
- The minimum payout is the amount that must be paid before you may receive your ether rewards.
- The pool's mechanism for delivering rewards to its members is known as the payout method.
- Fees: A fixed proportion of each solved block is collected by the pool administrator as payment for running the pool.
Step 5: Reap your rewards
It's finally time for your hard work (at least on your computer) to pay off. You can start passively collecting ether once you've set up your mining operation and created a wallet.
Unless you're a part of a mining pool, you'll get paid in periodic installments based on your group's square success. Users have access to digital dashboards for most mining pools to monitor mining results, like productivity and revenue.
"Historically, Ethermine, F2Pool, Nanopool, and FlexPool have been the most successful pools," says Chris Kline, Chief Operating Officer of Bitcoin IRA.
"These pools give normal blocks, with relatively low fees, and frequent software upgrades to make the pool run smoother," he writes.
The assumption that a cryptocurrency will rise in value is, in general, a primary motivator for mining it. As a result, you're in charge of managing your crypto assets right now and in the future. To put it another way, you're both a crypto miner and an investment.
