A Simplified Mining Ethereum Guide for Beginners
In cryptocurrency, mining refers to the use of computer hardware and special software applications to find blocks on a given blockchain or platform.
Ethereum mining: what is it?
To put it simply, Ethereum mining refers to the computational process of finding ether. Ether is required in the implementation of ‘smart contracts’ that are useful in verifying, approving and securing transactions of various applications that run on the Ethereum blockchain.
To engage in Ethereum mining, you need the following:
- An Ethereum wallet
- A mining pool
With the above in place, you can become a miner and get rewarded with ether every time you hit a hash. Let us look at the various ways of mining Ethereum.
Ways of mining Ethereum
There are two ways of mining Ethereum: GPU Mining and Cloud Mining.
What does GPU mining entail?
For you to engage in Ethereum mining, you need to have specialized hardware commonly called GPU, short for (graphics processing unit)
GPUs are preferred for Ethereum mining because they have more hashing power than the CPUs that were initially designed to do the mining. So, mining Ethereum requires you to have the best GPU and a rig.
With this software and hardware in place, you can go ahead and try solo mining.
Why GPU mining?
GPU Mining is the most effective and profitable method of mining since it is 200 times faster than any other existing mining method.
However, it needs a lot of electricity to run the hardware and software. It also requires high costs of maintenance when it comes to the hardware.
If you cannot easily access the best hardware, cloud mining is a better option that I recommend for Ethereum mining. To put it differently, cloud mining is what I would go for if I want to invest in Ethereum mining without having to go through the hassle of managing my hardware and software.
Cloud mining allows you to buy shares of mining powers (hash powers) of a hardware placed in a remote data center. You can then earn extra revenue with little risks.
Cloud mining comes with the advantages of:
- -low costs of entry,
- -minimal risks, as well as
- -minimal expenses.
There are a number of cloud mining providers including HashFlare, Genesis Mining, and Crypterra.
What about Mining Pools?
Use of pools is one of the most effective ways of mining Ethereum. Mining pools come with the advantage of frequent payouts in addition to getting paid when you solve an ether block.
- To join a mining pool, you need to have the necessary hardware and software.
- The software points the hardware towards your selected mining pool.
How do you choose the best pool? Find a pool that:
- charges low fees,
- has reviews that suggest its reliable
- And most importantly, whose servers are located near you.
There are a variety of mining pools in the market including Ethermine, dwardpool, bw, coinotron, among many others.
How to mine ether with GPU
- Firstly, you need to have the right hardware. Any computer with a graphics card (or multiple graphics cards), of four gigabytes (or more) of video RAM, will work.
- Then download a miner. It is recommended that we join a pool since it enables us to get more transactions going through our computer. An excellent example of a mining pool is Claymores Miner.
- Next, create an Ethereum wallet in which Ethereum payouts will be paid.
- Secure the wallet and save the credentials on different devices.
- Get an Ethereum address and link it up with your miner (as per the guidelines provided). -the address makes it possible to receive ether during from different transactions.
- Finally, choose the mining pool and link it to your Ethereum address.
After all the configurations are made, all you need to do is go to your miner and initiate the mining process as per the provided instructions.
The miner will execute a few commands and begin the mining process. To check your miner’s progress, just go to your miner’s website, provide your ether address, and track your solo Ethereum mining process.
What factors should you consider before choosing a mining pool or cloud mining site?
To get the best out of a mining pool, consider the following factors:
- the hash rate
- location of pool servers
On the other hand, if you choose Cloud Mining, be careful on the websites you plan to rely on before engaging any of them.
What should you do? Avoid those Cloud mining sites that promise an overnight fortune which is always too good to be true.
How mining Ethereum works
In a blockchain, there are different blocks of transactions. For every block of the transaction, miners manipulate computers to come up with answers to a puzzle, until one of them finally emerges the winner. They do this repeatedly and quickly (a matter of seconds).
In simpler terms:
- Miners run the block’s unique header metadata, using a hash function.
- Once a miner finds a hash that matches the puzzle, ether is awarded.
- The block is then broadcasted across the network for validation by each node and addition to their copies of the ledger.
Assuming Miner X finds the hash; Miner Y will stop working on the current block and move to the next block. It is difficult for any miner to cheat in this process as validation is done across the network. Coming up with the correct puzzle is what is referred to as ‘Proof of Work‘ (PoW), and is awarded ether.
Miners randomly solve the puzzles thereby earning ether. Their profitability largely depends on the computing power devoted to the mining exercise and luck.
Can mining Ethereum be profitable?
A very good question if you ask me.
The profitability of Ethereum mining majorly depends on hardware and electricity.
With the right hardware and electricity, mining Ethereum is a sure way of building a profitable income.
What could determine profitability? Consider the following factors:
- The hash rate
- the cost of electricity
- the cost of the hardware (regarding initial purchase and maintenance),
There are different methods of calculating profitability, depending on the software.
The major factors to consider while calculating profitability include;
- ether hash rate (MH/s),
- power consumption (in Watts),
- cost per KW/h, network hash rate (GH/s),
- average block time (in sec),
- And the price of one ether.
Is mining Ethereum safe?
Simply put, mining Ethereum is a safe task. There is a safety assurance as long as the right procedures are observed while mining Ethereum.
Most governments treat Ethereum, among other cryptocurrencies as property; any transactions on such virtual currencies are therefore taxed as property.
Therefore, general tax principles that apply to property, equally apply to transactions made via Ethereum.
To avoid being scammed, it is advisable that you be keen on ‘too good to be true’ Ethereum mining deals, especially those with suspicious cloud mining sites.
Is mining Ethereum legal?
Ethereum mining is 100% legal and largely depends on your location and what you want to do with the ether. Many governments are still learning the ropes of the risks and rewards of various cryptocurrencies including Ethereum. However, it always advisable to know what the law says in your country or state.
Does Ethereum mining damage GPU?
Up front, the answer is yes.
It makes a lot of sense to mine ether using graphics cards as a result of the profitability enjoyed from the process. However, most of the ether miners simply set up their rigs and leave their hardware hushing away.
It is good to note that despite the hardware not needing frequent check-ups, it remains under a lot of stress during the Ethereum mining process.
Since they are constantly under full load, their fans typically spin at their highest number of revolutions per minute.
Keeping GPU fans constantly running at their highest speeds will wear them quickly hence creating the need for constant replacements.
To sum things up
In a nutshell, mining Ethereum is good and profitable when done in the right way. As long as you have access to good hardware, software, and electricity, you can reap a lot from Ethereum mining.
I hope this page has given you the basics of Ethereum mining. For more information on Ethereum, check out our other pages. Gratitude!