After the godfather of all cryptocurrencies- Bitcoin made its spectacular hero-like entry, back in 2008, the concept of digital currencies backed by blockchain technology started gaining popularity. Following bitcoin, another acclaimed digital currency namely ethereum started rising based on its functionality to build decentralized applications on its platform.
A unique concept that has made cryptocurrencies intriguing is the incentive-based mining model in order to generate new coins as well as keep the inherent network honest.
In this comprehensive guide based on how to mine ethereum cryptocurrency, we are going to understand the ins and outs of ethereum. The key parameters that we are going to discuss are as follows:
- A Brief Overview of Ethereum Cryptocurrency
- What is Ethereum Mining
- How to Start Mining Ethereum
- Ethereum Mining Software
- Ethereum Mining Hardware
So even as the word suggests, miners don’t literally dig any mine in order to look for the precious block of ethereum. Mining ethereum is as simple as turning on your PC and running a program that basically solves computational problems.
But, before we dig deep on how to mine ethereum, let’s first start with the concept of ethereum cryptocurrency and what is ethereum mining.
The core of Bitcoin and Ethereum is basically the same. Both of them run on blockchain technology. However, while Bitcoin is limited to money transactions, with Ethereum you can do so much more. It is a decentralized platform, that can be used as money transactions, for building new decentralized applications, as well as write smart contract codes that further automate tasks. In fact, it is entirely possible to even build Bitcoin-like cryptocurrency on the Ethereum Platform.
Vitalik Buterin, a Canadian-Russian programmer, released the white paper for Ethereum in November 2013. Following this, it announced the launch of the platform in January 2014. The digital currency started gaining popularity following its capability to build blockchain applications. Currently, it also holds the second-highest market capitalization in the crypto market.
Alike the bitcoin network, where its native token is BTC, in the Ethereum network, the native token is Ether (eth). It is the crypto token coin which fuels the network and keeps it running.
Ether is the token used by developers to build Dapps (Decentralized Applications) on its network. Instead of building a different blockchain each time for various purposes, an Ethereum Virtual Machine (EVM) can help in deploying and building thousands of blockchain applications on one single platform.
Not only for developing apps, but you can also earn money by trading cryptocurrencies. A number of exchanges and platforms with innovative solutions have evolved. Monfex, a cryptocurrency trading platform is used for trading 12 coins, including popular cryptocurrencies Bitcoin and Ethereum.
What is Ethereum Mining
Till now, we have basically decoded the ethereum network, its native token Ether and its primary use function. Moving on, we are now going to discuss what is ethereum mining, the function of miners, and the parameters of mining.
The underlying process of Ethereum Mining is similar to that of Bitcoin. The transactions to transfer Ether on its blockchain first need to get verified. The authentication of these transactions is verified by miners of the network. They are presented with a complex mathematical problem. Miners attempt to solve computational problems using mathematical calculations. While solving the problems, miners have to verify if the transactions conducted on the network are genuine and legit. In return, for their work, one leading miner is rewarded with a block of Ethereum, which at present, contains 2 Ether. This whole process is known as Proof of Work.
The whole procedure if supremely intricate in a decentralized network. Miners are bound to produce honest work in order to receive a block of Ethereum. While simultaneously transactions are verified using consensus protocol. By consensus protocol, we mean that maximum miners approve that the transaction is indeed legit.
The miners have to pay a minimal transaction fee in the form of ‘gas’ in order to keep the network flowing. It is also meant to secure the network by ensuring that bad actors do not spam it.
Mining is one way to earn cryptocurrencies such as Bitcoin and Ethereum. However, the whole cryptocurrency industry has now substantially evolved. Also, nowadays trading bitcoin and ethereum is relatively easy and has good returns as compared to mining rewards. In UK, you can use Monfex to trade your fiat for cryptos. Alike stock exchange, on Monfex you can even trade your ether by leveraging 10 to 50 times what you have put in. Basically, with such platforms, it is now possible to trade more than what you have and in turn doubling your profits.
How to Start Mining Ethereum
Now that we have practically established the concept of mining, the first question that pops up in your head is how to start mining ethereum now! As we discussed before, in order to mine a cryptocurrency, you don’t need to take out any plowing tools. Mining ethereum is as simple as running code on a computer network.
Now, currently, there are multiple ways available if you want to become a part of Ethereum Mining. The first one is that you want to mine it independently and run it on your set of hardware systems. The second option is you can join a mining pool. The third option is cloud mining. But, whichever option you choose, the basic process on how to mine ethereum basically remains the same.
Take a look at this step by step process of how to start mining ethereum
- Create a Digital Ethereum Wallet- You have to create a safe and secure crypto wallet where you can store your ether holdings. Monfex exchange provides a secure way of storing your digital currencies including ethereum.
- Choose a graphics card/ Join a mining pool- If you want to mine ether from home, you have to choose powerful ethereum mining hardware like Graphics Processing Units (GPUs). Alternatively, instead of setting your own mining rig you can also join big mining pools for gaining steady rewards.
- Install Software: After choosing suitable hardware, you now have to install ethereum mining software. Based on your requirements, different kinds of options such as EthMiner, Minergate are available.
- Start Mining- There you go! Once installed, your node will now start mining Eth and you are a part of the ethereum network.
However, with the gaining popularity of mining and cryptocurrencies in general, it is not as profitable as it used to be as solving a complex code need more power and more mining equipment. In order to maximize profits, miners also choose to hold or trade coins for good returns compared to mining. You can store your ETH on Monfex exchange based in the UK with leading security measures.
Ethereum Mining Hardware
Choosing the right ethereum mining hardware is essential, more so now as you will be competing against the most powerful rigs and hardwares around the globe. The GPU is the most important parameter. It has a higher hash rate and hence can solve computational puzzles more quickly. This further increases your chance of receiving the block of ether.
However, it is a complex task and you also need to take costs and electricity consumption into account. Also, to maximize its potential, you need to have an efficient Power Supply Unit (PSU). This would not only reduce your electricity costs but would also enable to maximize the potential of your graphics card (GPU).
You can also consider setting up a mining rig, specifically to mine cryptocurrencies while using a single graphics card on your PC or laptop.
Check out this complete list of Mining Hardwares:
- GPU Cards (Graphics Processing Units)
- Internet Supply
- Temperature Checker
- (Only if) Air Conditioner If you are mining at big scale in hot weather
Ethereum Mining Software
After selecting the appropriate hardware, you now need to install ethereum mining software in order to start mining ethereum.
For starters, miners need to install a client so that you can connect it to the ethereum network like Geth, depending upon your OS. Once the download is complete, you now have a personal node with which you can be a part of the ethereum network.
But, that’s not it. In order to start mining for your eth coins, you now need to install mining software such as EthMiner. The software will authorize your GPU to run the hashing algorithms and solve problems to gain ETH coins.
One last step. After the required mining and software, you need to test your connection by establishing a private network. This would further test your overall mining capacity.
Mining cryptocurrencies such as ethereum have turned into massive businesses for all specifics. Whether it is for mining hardware, or for cloud mining operation- it has become an industry within itself. Overall, it is a method that involved making analyzed and researched decisions on mining hardware, location with respect to electrical consumption and mining software as well. If you know the game of mining, it is an efficient way to earn passive income in crypto sphere.