Ethereum is one of the easiest cryptocurrencies to mine, and by using a standby desktop computer you can earn money in the form of ETH. This is possible especially if you own a high-end computer system, as they usually have the necessary hardware needed for the Ethereum mining process.
Ethereum is the cryptocurrency that powers the Ethereum Network; a decentralized smart contracts platform for developing and running decentralized applications (dApps) and decentralized finance (DeFi). One of the interesting facts about open-source blockchains is that, in theory, anybody can set their computers to concentrate on cryptographic puzzles as a way to earn rewards.
Can Ethereum be mined?
Same as Bitcoin, Ethereum can be mined and also employs a proof of work protocol, like Bitcoin. The only means to update a new block of Ether transactions is only through Ethereum mining. Ethereum mining refers to the process of maintaining the Ethereum ledger through solving complex mathematical problems.
In other words, an Ethereum miner runs the block’s unique header metadata (including timestamp and software version) through a hash function (which will return a fixed-length, scrambled string of numbers and letters that looks random), only changing the ‘nonce value’, which impacts the resulting hash value.
If a miner finds a hash that matches the latest aim, they will be rewarded using ETH, and relay the block across the entire blockchain for each node to confirm and record in their smart ledgers. For instance, if miner Y finds the hash first, the other miners will stop work on the block at hand and start targeting the upcoming block.
It is impossible for miners to cheat their way through. There is no way you can fake the puzzle and guess the correct mathematical answer, explaining why it is dubbed proof-of-work. After finding the hash, the other nodes instantly confirm the correct answer, which is a key reason as to why they exist.
After roughly every 12–15 seconds, and ETH miner finds a hash. If the miners begin solving the mathematical calculations faster, or even slower than standard, the algorithm is programmed to alter the mining difficulty so that miners maintain the about 12- seconds designated task time. Miners randomly earn ETH and the profitability of each miner is based on luck and their computer hash rate.
Miners are essentially the spine of any cryptocurrency network, as they use their time and computing power to solve the mathematical problems, providing what is called the “proof of work” for the blockchain, which in turn confirms Ether transactions. On top of that, Ethereum miners are also responsible for developing new Ether tokens, through the mining procedure as they are rewarded in new Ether tokens for successfully finishing a proof of work.
As more miners join the network, the problem becomes even more difficult to solve, demanding additional computational power, as rewards decrease. However, as the value of Ether keeps rising, the rewards that miners receive remain sufficient. In addition, the majority of the individuals visualize mining as an ideological incentive, a method of directly contributing to the development of the Ethereum Network.
Ethereum mining vs Bitcoin mining
The Bitcoin Network is one of the most valuable and dominant digital currencies in the world. However, there are problems that have started infesting the network. One of the biggest challenges the network is facing right now is the centralization of Bitcoin mining. About ten years ago when the network was invented, people could mine Bitcoin using a strong desktop computer or even a laptop.
Currently, with the development of advanced ASICs mining rigs, the only outfits with the ability to make a profit from mining are giant institutions equipped with massive mining equipment. These rigs are very expensive to buy, maintain, and operate. They require a lot of electric power to run.
On the other hand, the process of mining Ethereum is quite different from Bitcoin mining. The Ethereum Network rewards miners depending on the proof-of-work algorithm dubbed Ethash. This algorithm supports decentralized mining of Ether by individuals and does not support ASICs mining. However, securing a powerful enough computer unit can be expensive, and it will add to your electricity bill.
The Bitcoin Network halves its mining rewards every four years to control the inflation rate of the scarce supply of Bitcoins. The current price of successfully mining a Bitcoin block is 6.25 BTC. On the Ethereum blockchain, the successful mining of one Ethereum block is priced at three Ether inclusive of all transaction fees and code-processing fees, basing on the Ethash algorithm
It takes about ten minutes or more on average to successfully verify and mine one block of Bitcoin transactions. On the other hand, the Ethereum network takes about 12 seconds or more to mine a block of Ether transactions. This high speed is enabled through the blockchain’s GHOST protocol which facilitates fast verification, and also makes sure more blocks are left orphaned. This means you can mine more blocks of Ether transactions in the same amount of time taken to confirm and mine one block of Bitcoin.
There are currently about 18.5 million Bitcoins of the total 21 million Bitcoins supply in circulation. On the other hand, only half of the total supply of Ether is indefinite while there are a total of 111,152,327 Ether tokens in circulation. By the time Ether is five years old, only half of its total supply of tokens will have been mined.
The pricing of transactions on the two networks is also done in a different manner. On the Ethereum blockchain, transactions are referred to as ‘Gas,’ which basically powers all the activity on the network. In other words, for a user to carry out any activity on the Ethereum blockchain, they are required to spend some Ether. Gas is calculated depending on the storage space used, the complexity of the task, and the necessary bandwidth. On the other hand, BTC transactions are bound to the one MB maximum block size. All Bitcoin blocks compete equally with one another.
The key difference between the two procedures is that the Ethereum Network has its own Turing complete internal code; meaning that anything can be calculated given there is sufficient time and computing power. The Bitcoin Network does not provide this alternative. Although it’s important to install the Turing-complete code, its complex mechanism involves some security vulnerabilities which were explored during the famous DAO attack and the ensuing hard fork of the network.
How does Ethereum mining work?
Ethereum mining hardware
Before you commence the mining ETH, you will need to purchase strong hardware in order to prepare your computer for dedicated mining. Currently, there are two options to choose from; i.e. the Central Processing Unit (CPU), and the Graphics Processing Unit (GPU) which will require purchasing an expensive graphics card. However, it is worthwhile noting that mining ETH using a CPU is not rewarding or effective.
Keeping in mind that even the most novice GPU is almost 200 times faster than CPU’s in mining, they are the most preferred. Moreover, before you buy a graphics card, you should review the expense of getting one, plus energy consumption. Significantly, you are supposed to consider the performance of the hash rate, which determines the speed of resolving the mathematical calculations.
Additionally, you should also explore the possibility of establishing a mining rig, a unit consisting of a number of GPU units to boost your hash rate and your prospects of success in mining Ether.
Ethereum mining software
After securing the perfect hardware for your Ether mining ventures, you are now required to download and install the software. The first thing you will be required to do is install drivers for your graphic cards, which can be obtained from the developer’s website or will be provided together with the graphics card.
In the next step, you will be required to establish your node and connect to the network; by downloading the full Ethereum platform. The network is currently more than 20 GB big and still expanding. Next, you can link your node with the network using any of your preferred methods. You can either use Geth or install other alternative services such as MinerGate or Etherminer.
Once everything is in place, your node will link with all the other nodes, and the Ethereum network itself. This will make sure you start mining Ether on top of launching your own smart contracts, and developing DApps and sending transactions.
Ethereum mining testing
Before you initiate your mining operation, it is possible to establish a private test network to make sure everything is working well. This is a massively important tool in the event you want to test public contracts, to try out new technology or even to examine your ETH mining aptitude. In the test tool, you are the sole user, which means you are tasked with finding all blocks, confirming transactions, launching your smart contracts, creating DApps, and initiating transactions.
Having an idea of your average hash rate could be of massive importance when it comes to speculating the potential gains. This profitability calculator automatically aids in your hash rate depending on the hardware you are utilizing and the price of electric consumption in your country. Basically, aim for the highest possible hash rate, since the higher it is, the quicker the process of mining Ether.
The next step after establishing your node and linking it with the network, to mine Ethereum, you are supposed to be a mining software dubbed Ethminer for windows operating system. Instructions for mining with other non-windows operating systems can be obtained from here. Ethminer software enables your mining computer unit to run the hashing algorithm necessary to secure the network via proof-of-work.
The primary user interface of its blockchain is a command line, but with the imminent launch of Ethereum 2.0 you can anticipate a friendlier interface.
How to get paid to mine Ethereum
After successfully completing mining one block of Ether transactions, the miner is qualified to receive a reward of three Ether tokens. On top of the mining reward, they are also entitled to get the fees associated with the transaction. Those fees serve as incentives to motivate the miners to continue doing their work, as the majority of the miners focus on transactions with higher fees. The rewards are afterward transferred to the Ethereum wallet address associated with the miner or mining pool instantaneously.
The average income generated can be calculated depending on your total hash rate and electricity consumption. Besides, you should also remember to include the cost of your mining hardware and the probable bandwidth upgrade. A number of Ether profitability calculators can be obtained from the internet availed by platforms like Cryptocompare, MyCryptoBuddy, CoinWarz and WhatToMine.
How to join a mining pool
For the newbies, joining a mining pool can translate into more profits compared to a solo Ether miner. A miner’s pool refers to a group of miners who combine their cryptocurrency mining resources including computational power to raise their speed of solving mathematical problems to earn rewards. The proceeds are then split between the participants depending on the amount of computational power contributed.
It is simple to join a mining pool since most of them do not even need registration. However, to join some of them you have to undergo a registration on the pool’s website. Ethpool and Ethermine is currently the largest Ether mining pool contributing to about 25 percent of ETH’s hashing power. Despite having two different websites, it is one giant mining pool.
Some of the other notable mining pools include DwarfPool, the third-largest Ether mining pool contributing about 13 percent of the network’s hash rate, and Ethfans and f2pool, the second and fourth-largest pools on the network. The latter two mining pools are only available in Chinese, which might not be suitable for some of the readers. The lastly named two are only available in China which might inconvenience some of the readers.
Is Ethereum worth mining?
On the subject of cryptocurrency mining, the mining difficulty and to some extent, expenses associated with mining are only surging. Back in October 2017, Ether mining difficulty reduced by half. This happened most likely due to mining reward dropping from 5 ETH tokens to 3 ETH tokens. Nevertheless, the mining difficulty seems to be regularly recovering its positions.
The more the miners joining the network, the more difficult and costly it becomes to mine Ether. In the meantime, the price of ETH is steadily surging upwards and it is likely it will keep doing so, thus making the process rewarding in the long term.
The daily rewards generated from mining differ every day. This is because the mining difficulty varies hence the daily reward. The revenue generated depends on the mining hardware used, with the ones with the higher hash rate mining Ether faster. There are currently two main GPU manufacturers; AMD and Nvidia.
The more powerful and expensive a GPU is, the higher the hash rate meaning more profits. For instance, the costly Nvidia RTX 2080 mines Ether at 36.90 MH/s while the cheap Nvidia GTX 1660 mines at a lesser rate of 20.50 MH/s.
However, it is not feasible to mine Ethereum individually using a single GPU currently. It would approximately take 67 years to mine a block alone (assuming 30 MHash/s and current total hashrate of 181 THash/s). This means it would take a solo miner a whole lifetime to find a single Ether block.
Furthermore, in the upcoming Ethereum 2.0, mining for Ethereum will eventually be phased out. Ether mining is expected to be deprecated in phase three of the Ethereum 2.0 road-map, which is anticipated to happen sometime in 2022 at the earliest. After this, there will be no more Ether rewards from mining as the network will be fully proof of stake.
Ethereum mining FAQs
Ethereum Cloud mining
Ether cloud mining contracts are not rewarding in 2020. This is as a result of the low margins due to the increasing competition, which is forcing the miners to lower the cost. Cloud mining is deemed the hardest due to extra expenses such as advertisement costs and legal expenses.
Ethereum ProgPoW is the proposed extension of the Ether mining algorithm tailored to resist the centralization of Ether mining through ASICs (specialized mining machines). The ProgPoW revamp is expected to increase competition among graphic cards by using more RAM and unique features to the GPU.
Generally, the upgrade will ensure the mining of Ether is more accessible and feasible through commercial off-the-shelf hardware. ProgPoW is currently in the ‘audit’ phase and will be included in the upcoming blockchain hardfork if successful.
Ethereum mining difficulty bomb
The Ethereum blockchain has an inbuilt mechanism to reduce the effectiveness of mining gradually called the “Ethereum Difficulty Bomb“. This feature is created as a hard mechanic to make sure that Ethereum goes back to proof of stake eventually, a protocol that does not need miners.
Proof of stake will be part of the new Ethereum 2.0 which will be released later in the year, at which point mining will be gradually phased out. Nonetheless, the Ethereum community is known for delaying the proof of stake protocol and as a result, the difficulty bomb is delayed as well. Early in January this year, the difficulty bomb was moved forward by an additional 600 days again through the ‘Muir Glacier’ update.
Is Ethereum mining profitable in 2020?
Although there are other profitable coins that you can mine easily, Ether is the best cryptocurrency to mine in 2020, considering the long-term potential of the blockchain. Ether initiated a program by publicizing the idea of its upcoming Ethereum 2.0 version, or using smart contracts to enable other applications of blockchain technology apart from crypto and payments.
Since Ethereum went live in 2015, it has successfully delivered that promise and then some, and it will most likely keep growing and developing. Due to Ethereum, products such as decentralized finance (DeFi) are now available in the market which recreates the traditional financial products and services using smart contracts.
DeFi enables transparent, censor-ship resistant, and trust-less of traditional products such as loans, marketplaces, and asset issuance without the need for intermediaries. Although the blockchain also has rivals who facilitate the development of decentralized applications, Ether has the advantage of being quick, the largest developers community, and the biggest community.
All the above make ETH the ideal coin to mine in 2020 in the long term, as its price and durability seem to get even stronger than the other digital currencies.
Updates August 20, 2020
In 2020, Ethereum Cloud mining contracts are not profitable. This is because mining has become more competitive with lower margins – forcing miners to reduce costs. In 2020, When Ethereum deploys the new consensus mechanism called Proof of Stake, mining will be a thing of the past. This will eventually phase out mining on Ethereum altogether.
On August 14, the Ethereum network struggled to reach finality for more than 90 minutes. ETH developers were aware that a severe bug is a reason behind the delay. Before the issue can be resolved, many Medalla testnet users saw their ETH holdings decline by as much as 75 percent.
The Medalla testnet crash has shown that there are many things that need ironing out before the due date for the ETH 2.0 launch which is sometime in the early months of 2021. The long-awaited ETH 2.0 may need to go through technical tinkering before it can be unveiled to the users. Phase 2.0 needs an in-depth study to be understood.