What is Ethereum Mining?
The proof-of-work consensus algorithm is currently used by Ethereum. To solve complicated cryptographic puzzles, this algorithm requires miners to use their computing power (hash rate). A specific hash for a transaction is generated by the cryptographic function; to generate a lot of hashes to guess this number, miners use their computers. The fastest miner to get to this number gets to add a block on the Ethereum blockchain. This process ensures that there is consensus on the state of the blockchain at all times, even if this may sound awfully complex. At the same time, as it would require a lot of hash power and hence money, it makes it virtually impossible to change the state of the blockchain retrospectively.
These miners are rewarded with newly formed units of Ether (ETH), which is the native currency of the Ethereum blockchain since maintenance of the blockchain’s security and integrity requires computing power. Therefore,
mining minerals, where work is done in exchange for valuable minerals are similar to mining. The transaction fees of the transactions within that block and the reward for adding one block to the blockchain is made up of 2 ETH. Today, as Ethereum transaction fees have skyrocketed this year due to increased usage of the network, these transaction fees make up a very large amount of Ethereum mining revenue.
The amount of electricity needed increases and more electricity means mining Ethereum in 2020 is not cheap, Since these validations require large amounts of computing power. Ethereum mining, however, still can be profitable. There are approaches to mining like hosted mining, pooled mining, and cloud mining that can yield better results for smaller setups, but let’s first examine the conventional way of mining at home.
How to start mining Ethereum at home
The beauty of mining crypto is that you can mine Ethereum at home with a GPU, even though there are mining farms and data centres around the world dedicated to mining these cryptocurrencies. The necessary steps involved in this process are given below:
- Create an Ethereum wallet
- Choose mining hardware
- Install mining software
- Join a mining pool
- Start mining
Create an Ethereum wallet
Ethereum wallet is the first thing you require to get your mining payouts. With your wallet, an Ethereum address is associated and this is where you can receive payments from other users as well as your mining rewards.
To create your Ethereum wallet, there are many options and the key decision is deciding between a hardware wallet or software wallet.
Making your wallet less prone to hacks, a hardware wallet allows you to keep the private key of your wallet offline at all times. Popular hardware wallets include Ledger and Bitbox. You can check out our Ethereum wallet page if you prefer a software-based wallet.
Choose mining hardware
The most critical step for any miner is the selection of mining hardware. There are plenty of hardware options available in the market, depending on the power cost in your area. looking for a miner that provides a high hash rate with low power consumption is the best way for a better mining experience.
To mine Ethereum, there are two different types of hardware machines: GPUs or ASICs. ASIC machines are limited to mining on one mining algorithm only, but they can produce a much higher hash rate. Specifically, to mine a particular cryptocurrency very efficiently, they are engineered. On the other hand, GPU cards have much more flexibility to mine different algorithms and blockchains. They can even be used in other non-blockchain applications and gaming. While NVIDIA produces excellent GPU cards, the Innosilicon A10 Pro is a popular ETH ASIC for Ethereum mining.
You can get a hash rate up to 56 MH/s with around 110 watts’ power consumption with GPUs like AMD Radeon RX 5700 XT. To determine how much ETH you can mine and the associated costs of running the machine at your electricity price, you can view a profitability calculator. Making a mining rig requires adding multiple GPUs to increase the hash rate and performance.
A good heuristic is to divide its price by its hash rate to get the cost of a hash rate unit when choosing a graphics card or ASIC. Generally speaking, the lower this number the better since it’s a measure of how cost-efficient the graphics card is.
Install the mining software
You also need to use mining software to utilize your GPUs for mining Ethereum. To solve the cryptographic puzzles, after which it effectively adds blocks on the blockchain, this software uses the GPU’s hash rate.
The market is full of mining software. Barfly’s ETHminer, CGMiner, BitMinter, and Claymore’s dual Ethereum miner are included in the most popular mining software. This mining software optimizes your GPU cards and allows an efficient mining experience. Instructions on how to install it are there in each of the software.
Join a mining pool
It’s important to remember that with a mining rig at home, you’re competing with mining farms and data farms worldwide. It is impossible to match the hash rate generated by these farms by a regular home-based miner.
You’d never know when you will be the lucky miner solving a block and earning the 2 ETH block reward plus transaction fees if you mine at home without joining a mining pool, due to the luck-based nature of mining. Just like it could not happen for an entire year, it could happen on your first day of mining. Joining a mining pool is the best way to ensure reliable mining revenue.
Even for people who can afford more ASIC miners or GPU miners, Pooled mining generally yields better earnings than solo mining. Increasing the collective team’s chances to mine a block and get the block reward, in a mining pool, the hash rate provided by an individual’s miner is added to the total hash rate on the mining pool contributed by other users. The advantage of pooled mining is that it provides a steady and stable inco, Due to the increased probability of the pool mining blocks.
On MiningPoolStats, you can view a list of active Ethereum mining pools, and each mining pool has detailed mining guides for mining on the pool. In general, to ensure regular payouts has a good reputation and charges reasonable pool fees, it’s good to choose a pool that has a reasonable share of network hash rate (e.g. greater than 10%).
Now you can begin mining when our wallet is set up, you’ve purchased your hardware, installed the mining software and joined a mining pool.
How Profitable is Ethereum Mining?
Every day, the Daily Revenue from mining rewards differ – this is because mining difficulty changes and hence the daily reward. With higher Hashrates being faster and more profitable, Revenue is dependent on the power of the Graphics Processor Unit (GPU) involved. There are two major manufacturers of GPUs: Nvidia and AMD. Normally speaking, the more powerful (and expensive) the GPU higher the Hashrate for mining Ethereum. For example, the less expensive Nvidia GTX 1660 mines at 20.50 MH/s, while the expensive Nvidia RTX 2080 mines at 36.90 MH/s.
If you have cheap electricity and join a mining pool, While mining at home is certainly an option, alternatives like pool mining, hosted mining and cloud mining have made mining Ethereum a lot easier. GPU mining equipment can also mine other proof-of-work cryptocurrencies and this is another piece of good news for Ethereum miners. So you can always switch to other cryptocurrencies.
Ethereum is looking to shift from proof-of-work to proof-of-stake in the next couple of years and this thing must be kept in mind when mining Ethereum in 2020. If proof-of-stake is implemented, the ASIC and GPU mining equipment would become useless for mining Ethereum, while proof-of-stake is another debate in itself.
This will shift to a whole new approach and this shift would eliminate this process of proof-of-work mining. Researching before putting lots of money into buying rigs is highly recommended, even though it is expected that proof-of-stake will be fully implemented well after 2021.