Mining ether is the process of leveraging computational power to solve complicated puzzles and verify the “blocks.” Miners earn incentives for their services, making Ethereum mining a popular crypto venture. This post will review crucial aspects of Ethereum, Ethereum mining, and how to become an Ethereum miner on the network.
What Is Ethereum?
After Bitcoin, Ethereum is the second most popular cryptocurrency. It’s the first cryptocurrency that integrates “smart contracts” and has the second-largest market capitalisation. Smart contracts are coded agreements that are autonomous, decentralised, and self-executing on the blockchain network.
Developed by Vitalik Buterin, Ethereum was released with a beta version in 2015. It includes the Ethereum virtual machine (EVM), which can execute smart contracts representing financial agreements like swaps, options contracts, and coupon-paying bonds.
Ethereum is a general-purpose blockchain because it can be used for several diverse applications. It is capable of supporting applications with real-world use cases. For instance, the Ethereum blockchain is used for trading non-fungible tokens (NFTs). It may facilitate financial transactions, sports betting, and fan interactions without a trusted third party.
We can think of Ethereum as the base layer on which other decentralised applications (dApps) can be developed and executed.
What Is Ether Mining?
Like Bitcoin, Ethereum is a decentralised blockchain updated and validated by network participants. Only via mining can new blocks be added to the Ethereum network. Mining is an analogy derived from obtaining valuable metals from the earth, which requires the expenditure of labour and energy.
To mine Ethereum, miners solve complicated puzzles using the computational power of specialised hardware. This procedure enables the network to operate and safeguards it against hacking and other hostile attacks. Miners earn a transaction fee in return for their services, which is a predetermined amount of ether upon the successful validation of a block.
The current mining reward is two ether for every block, and any priority fees are included in the block. A new block is added to the blockchain every 15 seconds.
How Much Do Ether Miners Earn?
The amount of money an Ethereum miner can receive depends on various factors, including power usage, fees, and the cost of the mining hardware. In general, three variables influence the profitability of Ethereum mining.
- Rewards per block: Unlike Bitcoin, Ethereum was initially conceived as an inflationary currency with an unfixed supply. The supply would increase annually via block rewards granted to miners, so investors fear that Ethereum may be perpetually inflated and lose buying value one day. In response, Ethereum reduced its block rewards for miners from five to three ether in 2017. In 2019, block incentives were reduced by a further third to two ether per block. Another Ethereum upgrade (EIP 1559) was launched in August 2021, which substantially altered ether’s tokenomics. After the upgrade, miners now earn two ether in addition to any priority fees included in a block.
Network difficulty: The mining difficulty of Ethereum refers to the complexity of a puzzle that miners must solve to create a block. In general, the greater the number of miners in a network, the higher the mining difficulty becomes and the more significant the decline in profitability is. To determine the current network difficulty of Ethereum, you can visit sites such as ethstats.net, which gives daily statistics on network difficulty.
- Hardware: Miners must constantly look for updates and changes in mining rigs and GPU models. This proactive attitude helps them save a significant amount of money by improving the hash rate or reducing energy consumption. Alternately, miners might choose mining pools to mine Ethereum profitably.
To determine your potential earnings, input your specifications into an online mining calculator. You can use various ETH mining calculators, such as Miningbenchmark.net, Whattomine, and CryptoCompare’s calculator.
Why Should You Mine Ethereum?
Ether values were low when the Ethereum network was introduced in 2015 ($1). Ether mining was not a get-rich-quick venture. Many of the first miners were developers or crypto enthusiasts who believed in the concept and wanted to support its cause.
As ether price rose rapidly, mining became more profitable, attracting tech-savvy individuals who recognised the network’s potential and could operate their nodes. While the ether values are in the four-digit range, mining ether is profitable, despite harsh competition among miners. As Ethereum transitions to Proof of stake (PoS) in 2022, new mining equipment investments are unlikely to prove lucrative.
Individuals with access to unused GPU processing power and wanting to earn additional money would also find mining a viable alternative. With PoS on the horizon and ether staking accessible, staking is unquestionably the more straightforward, less hardware-intensive, and a more future-oriented way to earn ether.
There are other reasons why a person mines Ethereum. As each new hash contributes to the network’s security, an altruistic community member decides to mine at a loss to secure it. Mining can also be used to obtain ether without requiring direct investment.
What Are The Different Ways To Mine Ethereum?
There are three distinct approaches that miners can adopt to mine ether.
Pool Mining
Ethereum pool mining is the easiest method to get started. You collaborate with other miners to join a mining pool in pool mining. They agree that if one of them solves the cryptographic puzzles, the profits will be split among them based on their hashpower. The size of the pool, measured in hashpower, influences the average number of blocks mined by the group.
Examining three characteristics: pool size, minimum payout, and pool fee when selecting a pool is essential. The pool fee defines the amount the administrator receives for managing the pool. If a pool’s fees are more than 3%, you had better seek another pool. The minimum payout is the minimum amount that can be withdrawn from a pool. For example, if the minimum payout is one ether, it might take weeks or months to receive the minimum payout of one ether and cash out.
Solo Mining
Solo mining is more complex and takes a substantial amount of hashpower. A miner needs hundreds of GPUs to solve one of the cryptographic challenges as quickly as possible. If you select this method, you must evaluate the financial and spatial factors. In addition to the equipment cost, which might range from hundreds to tens of thousands of dollars, you need also consider ventilation, noise, electrical bills, and space.
Due to these factors, solo mining is often advised only for expert miners who can make a substantial capital investment. However, this method might be more lucrative in the long term since you don’t need to share your earnings with others.
Cloud Mining
Cloud mining is often the ether mining method with the lowest entrance barrier. Instead of owning and operating your mining hardware, you rent the computer power of a third party and delegate the task to them. In exchange, you get the mining rewards. However, cloud mining involves faith in this third party, particularly when renting equipment online. There is no assurance that the money paid upfront will be utilised to operate mining equipment or that such equipment even exists. Therefore, it’s advisable to opt for well-established, trustworthy cloud-mining systems.
How To Mine Ethereum Using a Mining Pool
In Ethereum pool mining, you need to carefully consider the pool fees, pool size, and minimum rewards offered by the mining pool to choose the one that best suits your needs. Use the instructions below to begin mining Ethereum using a mining pool.
Step 1: Check your GPU and drivers
A Graphics Processing Unit (GPU) with at least 3GB of RAM and the updated drivers is required to start ether mining. Major GPU manufacturers, such as Nvidia, have software that alerts you when there’s an available upgrade. You can also check the developer’s website to see whether you’re running the most recent version.
Step 2: Set up a crypto wallet
You will need an Ethereum wallet to hold the ETH you earn as mining rewards. Crypto wallets keep your cryptocurrencies, similar to how a bank account keeps your paychecks. There are two primary kinds of wallets: hardware wallets and software wallets.
- Hardware wallets: Physical devices, often referred to as “cold wallets,” keep your crypto accounts’ private keys offline. They frequently appear like high-tech USBs.
- Software wallets: Digital applications that keep your crypto, generally needing an internet connection to access. These wallets provide public and private keys.
Each varies in terms of usability and security. A trustworthy Ethereum wallet, such as Metamask, should be sufficient for most ether mining beginners. MetaMask is very simple to configure and is available as an extension for Chrome, Brave, Firefox, and Microsoft Edge.
Suppose you may feel worried about the security of your Ethereum mining earnings. In that case, you can establish a hardware Ethereum wallet using a device such as the Ledger Nano S or Nano X. Keep in mind that Ledger had a history of data breaches that compromised the email addresses and personal information of one million consumers.
Step 3: Install the Ethereum mining software
You will need mining software, often known as an Ethereum miner, capable of communicating with the Ethereum network. For the sake of this instruction, we will use lolMiner. The newest version of lolMiner’s miner can be downloaded from its GitHub source as a zip file. Currently, lolMiner only supports the Windows operating system.
Step 4: Join a mining pool and get server coordinates
You can choose one of the mining pools, such as Ethermine, F2Pool, SparkPool and Nanopool, then navigate to its website to begin. For this instruction, we are utilising Ethermine.
On the homepage of Ethermine, click on “Start Mining.” You will be directed to a page with server coordinates and other port-related information. Keep this page open since we’ll need these details later to set up the downloaded mining software.
Step 5: Configure the .BAT files
Locate the downloaded zip file from lolMiner and unzip it. The unzipped folder must have a “mine eth.bat” file. Right-click on “Edit” and see a notepad with some code on it as below.
You need to pay attention to only the content inside the specified user-editable part of the document. It lets you input the coordinates of your mining pool and wallet address and configure the Ethereum miner before mining.
You can follow the simple steps to set up your miner:
- Replace “eth.2miners.com” with the address of your mining pool under set “Pool” and set “Pool2” If you are using Ethermine, this information will be on the page you had previously visited. Select the server’s address that is closest to your location.
- After “:” (often 2020), the numbers show the port address. Replace this with the address of your mining pool’s website.
- Replace the wallet address in the set “Wallet” setting with your own Ethereum wallet address. It is featured on the Metamask addon and should be easy to locate. Do not remove the content after the “.” i.e. “lolMinerWorker”.
- Save the modifications to the .bat files and close the notepad. Your miner is now completely configured for Ethereum mining. So let’s begin the mining process immediately.
Step 6: Run the miner
Double-click the file “eth.bat.” and you will see a command prompt that shows lines of code similar to the following:
The GPU we tested with no longer has sufficient hashing power to perform Ethereum mining. If your GPU is strong enough to mine Ethereum, you should see the line of code “Started DAG gen on CPU 0” in the source code.
Following that will be lines of code beginning with “New job received.” When the message “GPU 0: Share Accepted” appears, you have started mining successfully. Once this occurs, you may leave the mining application running, and it will continue the mining operation.
Step 7: Calculating Profitability
As seen below, the command prompt window will periodically display the average speed of your CPU.
Take note of the speed, and then visit an ETH mining calculator, such as whattomine.com, to determine your revenues from ether mining. Input your average download speed (in Mh/s) from the command prompt and your energy and power consumption (in $/kWh) into the corresponding fields.
This ETH mining calculator will display your possible mining rewards and earnings. Subtracting the pool fees and hardware expenses from these figures will allow you to establish whether mining Ethereum is a lucrative endeavour for you.
How To Mine Ethereum Solo
Why share the benefits of mining Ethereum with others if you can do it yourself? You can attempt ether solo mining if you have the necessary specialised mining equipment.
The typical mining payout for a single Ethereum block is 2 ETH plus transaction fees, bringing between 3.5 and 4 ETF. Considering that the price of Ethereum is now close to $3000, solving a block might result in substantial mining payouts.
However, be realistic about the viability of solo Ethereum mining. Even if you have an Ethereum mining setup with a dozen GPUs, there is little probability that you will have sufficient mining power to get a block reward on your own effectively. Most Bitcoin and Ethereum miners are professionals with massive mining farms, including hundreds of GPUs.
Additionally, mining Ethereum on your own will result in significant energy usage. Therefore, unless you reside in a country where power is cheap, your total gains from mining Ethereum are modest.
Due to these challenges, we do not advise novice Ethereum miners to set up their mining rigs.
How To Mine Ethereum Using the Cloud
Cloud mining refers to renting cloud-based computer power or mining rigs for use in mining activities. Customers do not need to configure their hardware for GPU mining or install any mining software by mining in the cloud.
To rent computing capacity in the cloud, consumers must instead pay a fixed monthly or yearly cost. This seems risky because the cryptocurrency price constantly fluctuates while the cost of mining equipment is constant. In the worst circumstances, your expenditures will likely exceed your mining revenues.
There are both free and commercial cloud mining services for Ethereum. Swiss Gold Global and Nice-Miner are two of the top free providers for cloud mining. Genesis is among the most lucrative Ethereum cloud mining services that provide advanced mining equipment at low prices.
It appears to be enticing to mine Ethereum without major hardware costs, but cloud mining is solely predicated on trust. Users must ensure that the cloud mining provider they choose will mine Ethereum and not utilise the funds for other purposes.
FAQs About Ether Mining
What is Ethereum 2.0?
Ethereum 2.0 is a new version of the Ethereum blockchain that verifies transactions by staking using a proof of stake consensus mechanism.
The projected 2020 launch of Ethereum 2.0 Phase 0 is a separate blockchain that will not affect mining. Only with Phase 2 will mining be depreciated, although there are no definite plans for this transition.
Phase 2 is anticipated by the end of 2021 or the beginning of 2022. However, it is essential to note that Ethereum’s roadmap has a lengthy history of delays; in 2017 and 2018, it was commonly expected that the shift would be finished around 2020. However, nobody fully knows when Ethereum 2.0 will be completed. Still, as of October 2020, most estimates indicate that new miners should have sufficient time to repay a substantial percentage of their hardware investments.
How Ethereum mining works
Mining has two purposes; it helps create new Ether into circulation and secure the Ethereum network by creating, verifying, and adding blocks into the blockchain.
The Ethereum mining process uses a proof-of-work (PoW) consensus protocol. This protocol involves the various nodes agreeing on the data to include in a blockchain. Once included, the data cannot be altered or deleted in any manner. It thus helps keep the network free from attack or abuse.
To verify the blockchain transactions, various computers compete to solve arithmetic puzzles. These computers act as nodes, with the first node to complete the puzzle getting rewards in the form of Ether.
The PoW ensures the release of new tokens in the network. It also avoids the need for reliance on any third party for operations.
How does Ether mining differ from mining Bitcoin?
Even though the Ethereum blockchain is based on Bitcoin’s innovations and concepts, its creators did not just duplicate Bitcoin’s technology. Instead, they made several fundamental improvements to make it more suitable for its intended use. This affects Ethereum’s mining process.
Ethereum was deliberately built to resist ASICs (specialised mining hardware) since it only permits practical mining using GPUs and rejects AISC hashes. This is in sharp contrast to Bitcoin, which is currently virtually entirely mined using ASICs. Such a restriction was included in Ethereum’s codebase to prevent the concentration of hash power as seen on the Bitcoin network.
What are Ether staking and Ethereum classic mining?
As previously said, Ethereum mining is anticipated to finish shortly. Ethereum has begun transitioning from a Proof-of-Work (PoW) consensus mechanism to a Proof-of-Stake (PoS) consensus mechanism. The Ethereum Foundation estimates that the transition from PoW to PoS will occur in the second or third quarter of 2022. This fundamental change renders miners redundant since PoS no longer requires mining in the form of solving cryptographic puzzles.
Users may now stake their ether to receive staking rewards instead of mining it. Investors can stake Ethereum by operating their own Ethereum validator, which requires a minimum of 32 ether. They can also stake any quantity of ether using a staking service. Many cryptocurrency exchanges in Australia, including CoinSpot, provide ether staking.
After the transfer, miners who continue using their hardware can divert their computational power to other blockchains using a PoW consensus method. The most straightforward alternative is Ethereum Classic (ETC), which uses a nearly identical hashing method as Ethereum, thus supporting the same hardware. Miners need to migrate from an ETH mining pool to an ETC mining pool.
How to build a rig for Ethereum mining?
Mining Ether requires you to build a custom mining rig. Every mining rig contains a power supply, motherboard and operating system, computer memory, and a GPU.
The mining rig is like any other regular computer, except you don’t have everything set inside a case. You have to keep it open as the mining process releases a lot of heat.
Creating Ethereum mining rig Australia is possible given the legality of cryptocurrencies use and mining in the country. However, you have to cater to all the associated costs like electricity bills.
In the end, such costs might be too much to get any meaningful gains. That is why most people in Australia join Ethereum mining pools. Ming pools like Mining pool hub Ethereum allow you to include your processing power with other units to increase chances of solving the arithmetic puzzles. You then get rewarded depending on your input in the mining pool.
Joining a mining pool is the most viable way to mine Ethereum for beginners.
Which mining method is best for you?
You will depend on some criteria, such as your willingness to buy a mining rig and your initial investment budget. Specifically, it will rely on the following variables:
- The amount you want to invest
- Whether you wish to mine with a rig or not
- If so, what rig do you own?
Cloud mining and GPU mining are standard Ethereum mining methods. Nowadays, ASIC mining is unpredictable, while CPU mining is not financially feasible. According to experts, one of the best methods to mine Ethereum is via an Ethereum mining pool. Mining Ethereum in a pool provides smaller but more regular rewards than a considerable sum when each block is solved. It’s better to always select a mining pool with the lowest costs and the most trustworthy conditions.
What is the Ethereum merge?
The “merge” of Ethereum is an effort to transition from a proof-of-work to a proof-of-stake mechanism. Ethereum depends on proof-of-work, where miners must solve challenging puzzles to confirm financial transactions on the blockchain. This method consumes a tremendous amount of computer power and is often criticised for its negative influence on the environment.
With the proof-of-stake improvement, users can verify transactions based on the number of coins they donate or “stake.” In exchange for staking more coins, users have a greater chance of being selected to verify network transactions and get a reward, i.e. more ether.
Currently, both proof-of-work and proof-of-stake chains are operating in parallel on Ethereum. While both chains include validators, only the proof-of-work chain executes user transactions. Upon completion of the merging, Ethereum is expected to entirely transition to the proof-of-stake chain, known as the Beacon chain. This would altogether abolish mining.
Should I mine Bitcoin or Ethereum?
Unique to PoW blockchains is that the mathematical problems that must be solved become more complex over time. This implies that miners of Ethereum and Bitcoin will need to improve their hardware to guarantee the profitability of mining regularly.
Since Bitcoin has existed since 2008, it is one of the most challenging coins to mine. Most Bitcoin miners use specialised equipment, such as Application-Specific Integrated Circuit (ASIC) miners, which is not ideal for beginners.
Unlike Bitcoin, Ethereum is easier to mine and can be performed on a reasonably capable laptop (though returns will be scarce). The Ethereum blockchain is transitioning to PoS, which is supposed to render mining obsolete. The mining difficulty of Ethereum has increased dramatically over the last year.
The Final Thoughts
Although Ethereum is a famous cryptocurrency, mining ether has notable perks and downsides. NFT markets perfectly illustrate how this platform has progressed in application and development. Consequently, Ethereum has gained considerable interest from both miners and investors. However, if you would only like to speculate on the future of Ethereum, you may be better off purchasing ether rather than mining it.
Additionally, it is essential to keep track of changes to the Ethereum protocol. Although Ethereum is a decentralised platform, its creators continue to improve its mechanics, affecting block validation processes and mining profitability.
Before investing time or money in mining Ether, you should examine the ramifications of any forthcoming network updates.
