In simple words, cryptocurrency mining is a process of solving complex mathematical puzzle or problems. In fact, miners are the core of the cryptocurrencies’ network. Miners contribute in mining process by sharing their computing power to the network in order to solve the mathematical problem. They provide a so called “proof-of-work” for the network. In this process, for example, miners verify the Ether (ETH) transactions and get some amounts of Ether in return. As a result, they are responsible for creating new Ether tokens through mining process. The more miners join the network, the more complex the problem becomes. It means that miners require to put more computing power to the network in order to mine a block successfully. In this article, we are going to have an explanation of how to mine Ethereum?
Actually, proof-of-work (PoW) relies on hash functions. Hash function is an “encrypted” piece of data, which practically derived from some random input. The process of hashes goes only one way. As a result, the only relevant way to find what input was used in order to generate a given hash is to try all the possible hashes to find out, which one fits. When the miner could find out the desired hash, the block will spread through the network and the nodes create a copy of the block and save it on chain of blocks. As a result, the mining is a time and energy consuming process.
In addition, the difficulty of mining is adjustable. It means that it can be easily regulated by turning difficulty lower or higher.
Bitcoin Vs. Ethereum
Although Bitcoin is still the most valuable cryptocurrency in the market, its network is facing with problems. One of the main problems is the increase in mining difficulty. Back in early days, miners could simply use their lap top or the PC to mine Bitcoin. However, today miners require using special hardware called ASICs in order to be able to contribute in mining process. In fact, they need to create mining farms to have profitable mining. It’s notable that those hardware costs the miners, and they have high energy consumption as well. Therefore, mining is a costly process.
Ethereum mining is a quite different compare to Bitcoin mining. Although Ethereum also uses proof-of-work, it encourages solo mining. It means that Ethereum mining doesn’t essentially require any specific hardware. However, it would be still costly to set up a computer, which can provide enough processing power for Ethereum mining. Additionally, it’s a high energy consuming.
Bitcoin mining reward halve every four years. Halving applies into the network in order to limit the supply of Bitcoins.
The mining reward for Ethereum is three Ether per block. On the other hand, it’s 6.25 (at the time of writing) for Bitcoin.
It’s notable that it takes 10 minutes to mine a block in Bitcoin network. However, it estimated that it would become only 12 seconds for Ethereum in its new update.
The differences between Ethereum mining and Bitcoin mining
At the time of writing, around 18.5 million out of total 21 million of Bitcoins mined so far. However, after five years 92 million Ether mined.
Additionally, the transactions costs are different in these two networks. Ethereum transaction fees called “Gas”. In order to perform a transaction in Ethereum network, it requires to pay some amounts of ‘Gas’ fee. The ‘Gas’ fee depends on the required bandwidth and the complexity of the process.
In Bitcoin network, the transaction volume is limited to the maximum size of each block. On the other hand, Ethereum is capable of processing any transaction with any volume as long as there is enough processing power in the network. Although Ethereum has many advantages over Bitcoin, the complexity of the network created some security issues.
Ethereum mining hardware
In order to start mining Ethereum, you need to set up a powerful computer. For this purpose, you have three choices. You can use a CPU (Central Processing Unit), GPU (Graphic Processing Unit), and ASICs (Application-specific Integrated Circuit).
It’s notable that using CPU to mine Ethereum is low efficient and is not profitable. In fact, GPUs can perform 200 times faster and more efficient compare to CPU. When you are going to buy a GPU to mine Ethereum you should consider the energy consumption of the hardware as well as its performance in related to hash function. For instance, Nvidia GTX 1070 GPU has the hash rate of 30 MH/S or AMD RX 570 GPU has the hash rate of 27 MH/S.
In fact, Ether is designed in a way to be minable only through using GPUs. However, the new generation of ASICs, which are designed specifically to mine Ethereum released in 2018. ASICs are designed in a way to do only one task. Therefore, they are more efficient compare to GPUs.
Ether ASICs have a better performance over GPUs. However, they have some disadvantages. The ASICs can use only to mine Ether and few other cryptocurrencies, which work based on the same hashing algorithm. On the other hand, GPUs can mine many other coins as well as can use them for gaming or other activities that require high performance GPU. In addition, ASICs cost higher than GPUs and is quite hard to find them in the market.
As a result, GPUs remain the most suitable choice due to their high performance and flexibility compared to price.
A short guide for beginners
In order to mine Ethereum, it would be more profitable to join one of the mining pools rather than go solo. In mining pools, the miners share their processing power in order to find the right hash faster and have more chance to solve a block and add it to the blockchain. However, the reward will be shared between miners based on their contribution. It means that each miner receives reward based on how much processing power they contributed in.