What is Ethereum Mining?
What comes to mind when we talk about mining? For most people, it’s the extraction of valuable material such as gold from the earth, right? So how then do you extract Ethereum from the Earth? Well, it doesn’t happen that way here. Ethereum mining is the process of creating Ether. We often refer to Ether as Ethereum, and it’s widely accepted, but these are two different things. Ethereum is a blockchain network that different technologies such as dApps, and its native token is called Ether. So whenever we talk about mining Ethereum, we mean Ether, since it is not possible to mine the blockchain. So Ethereum mining increases the supply of Ether, just as gold mining makes more gold available for consumption. The process involves solving complex puzzles with computer power and validating blocks in the Ethereum network. So far we have learned that we need computer power to do so, the other requirement is energy.
Ethereum uses a proof-of-work (PoW) system, which is a cryptographic proof that validates and secures transactions on its blockchain network. Another digital currency that uses the same mechanism is Bitcoin. The computer owners that validate transactions are the miners. Miners earn rewards in the form of Ether for validating transactions and facilitating efficiency in the Ethereum network. So instead of investing in buying Ethereum at a high price, you can be a miner today and earn Ether every time your computer secures transactions on the Ethereum blockchain. You don’t need to do any calculations or use physical energy as the process is 100% automatic.
Ethereum’s Proof of Work
Let’s dwell some more on the proof of work mechanism for Ethereum. As mentioned earlier, it’s simply a form of validating and securing transactions. The process involves different nodes, or mining computers agreeing about certain transaction information records on the network. Each block on the network stores data from the previous block. A new block can’t be formed before nodes agree on the status of information in the current block. A successful consensus represents a complete transaction that’s validated. It’s theoretically impossible to change the information in the future once verified and secured in this manner. The proof of work protocol deters or prevents attacks or abuse targeting transactions on the blockchain. This is why Ethereum is inherently safe. Proof of work also eliminates the need for a third party in the network.
Mining Software and Hardware Requirements
Now you’re becoming a pro at this. You can teach your friends a few things about mining Ethereum already. Impressive! Let’s now look at what’s needed to start mining Ethereum in 2022
We recommend having a dedicated desktop for mining. This doesn’t mean that laptops can’t do the work. A proper gaming laptop can be mine too.
Make sure to install an OS that’s not less than Windows 10 (64bit). Some tech gurus use Linux, but we think you shouldn’t make this complicated if you’re just starting. So stick to windows.
You need an Ethash-hash algo software to mine Ethereum. Ethash is used to adjust the difficulty level of mining. There are many programs such as GMiner, NBMiner ETHMiner, WinETH, and more. All it takes is some little research to find out which one is appropriate for you.
Ethereum mining is facilitated by GPU power. Higher hash power eases the mining process. So having a graphics card with 30MH/s will be more effective than with 10MH/s. Although GPU with 3GB RAM can mine effectively, you may go a higher one if you can afford it.
Businesses have a business bank account. Now that you’re just getting into the crypto business, you need a wallet to receive the Ethereum you earn from mining. A Coinbase of Binance wallet will suffice.
The mining software you pick will play a big role in how effective you’ll mine Ethereum. If you’re looking for the best software to mine Ethereum in 2022, consider these two factors.
- Type of mining: The software requirements will vary depending on the type of mining you go for.
- Maximum hash rate: Evaluate the capabilities of the mining hardware you want to use to determine what kind of software will be appropriate for you.
Start mining Ethereum: Step by Step Guide
The long-awaited moment has come. It’s time to get down to business. You have prepared your computer, installed the necessary software, and are now ready to start making money by mining the cryptocurrency Ethereum. Here is a step-by-step guide for mining Ethereum 2022.
Step #1: Select a mining pool
There are several methods of mining Ethereum. Some of them have either gotten obsolete or are soon doing so. The main active methods you need to know about are:
- Pool mining
- Solo mining
- Cloud mining
Pool mining refers to mining in a group, which we refer to as a pool. Here you put your resources together with other individuals to mine. You all agree on how rewards will be split, normally according to the hash power provided by each individual. There will be a pool administrator who’ll be responsible for making sure puzzles are solved and each member receives their share. Pool administrators charge a fee for their work. We don’t recommend joining a mining pool whose administration fees are more than 3%. Also, consider the pool size and minimum pay-out. The bigger a pool, the higher its hash power, and the faster it will solve puzzles. You want to be part of a pool that allows even small cash outs. Don’t forget you’re in business and you need to start enjoying your profits.
Solo mining is for loners who love to walk alone. Here you’re on your own. You set up the hash power required and manage your resources to solve puzzles. The advantage that comes with this type of mining is that you don’t pay an administration fee, joining fee, or any kind of fee to anyone, and when the rewards come, you pocket all of them. No sharing. Sounds interesting? On the flip side, it might cost you a little more to be a solo miner as compared to joining a pool. A dozen of GPUs are necessary to give you the right hashrate for solving puzzles quickly. You also need good tech skills to go for this method. It’s mostly preferred by professionals.
Here you delegate all the work and become the boss. Cloud mining involves paying a third party to mine for you. So you don’t need to invest in computer software and hardware. There are lots of companies with massive computing power which you can rent. They hence do all the work for you and since you already paid rent, simply wait for the rewards. Cloud mining however is done on a trust basis. There is no way to prove that the person or the company you paid mining. So if you’re to go for this option, make sure it’s through a long and established platform. You may use a referral from friends that have gone ahead of you and succeeded.
We recommend pool mining for beginners so that’s what we will focus on. Pool mining comes at a low cost since resources are being shared, and you can only invest what you’re comfortable with. Also, the chances of solving puzzles are highly enhanced depending on the hash power of the group you join. Remember what we talked about earlier. Pool size, hash power, payout methods, minimum payout, and fees are key factors to look into while looking for a mining pool.
Some good mining pools to consider include Ethermine, Cruxpool, MinersGate, MaxHash, F2Pool, and Nanopool.
Step #2: Create a Crypto Wallet
Binance and Coinbase are some of the best cryptocurrency wallets 2022 for Ethereum. You need a proper wallet to store your coins after earning your rewards. Crypto wallets are like bank accounts except that they are used for DeFi. You’ll come across two main types of wallets.
- Cold wallets: These are hardware wallets held in physical devices.
- Hot wallets: Crypto wallets stored on the internet are referred to as hot wallets.
Cold wallets are considered safer as they store private keys offline and aren’t linked to the internet, while hot wallets are susceptible to hacking. That said, the former is more expensive and can be lost if not carefully stored, unlike the latter, which is most popular for convenience. Nonetheless, always store your private and public keys safely. Coinbase is our most preferred choice for beginners as it’s easy to use.
Visit https://www.coinbase.com and download the Android /iOS app if you prefer a mobile platform.
- Hit the “Get Started” button to sign up.
- Set up your pin code.
- Verify your email and personal detail.
- Wait for an email confirmation informing you that your account is fully set up.
Step #3: Set up and mining
Now that you have all the prerequisites, make sure everything is set up. First, ensure your computers are ready to work. Install your graphics card properly. AMD or Nvidia graphics cards always work perfectly. Run tests to make sure your window software has no glitches. Login to your software provider and follow the prompts to connect with your client. Most providers will offer default settings that are easy to follow while executing a mining batch file. Don’t forget to submit your ETH crypto wallet address.
On successful completion of setup, joining the mining pool, and software execution, you should see a hash rate running on your screen. Mining will start automatically within a few minutes.
Enjoy your Profits
Hurrah! That was some hard work but you pulled through seamlessly. Now you can sit back, relax and monitor your computer do the work for you. Check your console occasionally to see how much Ether has been collected. Mining pool pay-outs will be streaming in periodically based on how fast your team is solving blockchain puzzles. Ethermine, F2Pool, and Nanopool have been the leading mining pools according to historical data. Don’t hesitate to cash out once you meet the minimum withdrawal threshold.
Calculating Profits
You were not getting into all this hustle for fun. Well, there’s a lot of fun in the process but our greatest motivation in mining Ethereum is making money. This is an investment, therefore it’s essential to calculate profits and losses. Your main fixed expenditure will come from power consumption. Profit calculations may seem complex but that shouldn’t scare you. One doesn’t need to be a mathematics professor to do this. Many free websites such as cryptocompare.com will automatically do the dirty work for you. All you need to do is to key in your GPU’S MH/s, power consumption, and mining pool fee.
How was that? Anyone can start mining Ethereum today in very simple steps as outlined in this article. Remember there is more than one method of mining Ethereum. Pool mining is however safe and sustainable in the long run. Soon solo miners will struggle to find alternatives as the difficulty levels of mining increase. So stick to pool mining, unless you have massive resources to set up your own mining farm and keep upgrading it. We hope you did not only learn, but also enjoyed reading our article. Feel free to share this link with your friends and family.
Additional resources
We never get tired of bringing you on-demand info. Click the links below to expand your scope of knowledge about Ethereum.
FAQs
Proof-of-stake, also called proof-of-work is simply a consensus of a blockchain’s nodes about the state of transactions in the network.
As the name implies, Ethereum mining pools are groups of miners who come together to combine their computing power to generate the necessary hash power for mining Ethereum effectively.
Investing in Ethereum mining should be a no-brainer. It’s a leading crypto with great future potential. Analysts foresee the price of Ether peaking at $11,000 by 2024.
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Reviewed and Fact Checked by Kevin O'Brien , Web3 & DeFi Writer