The world of cryptocurrencies is a very diverse one. There are a lot of cryptos out there for you to mine and sell! Same is the case for Ethereum.
Ethereum is infamously the digital silver. So, there is a huge buzz around this currency. After bitcoin, Ethereum is the most powerful currency.
Looking from the aspect that Bitcoin mining has gone sky-high in terms of expenses, most of the miners prefer to mine ethereum. However, for some people even the meaning of the word mining is troublesome. If you are such a person, then don’t worry!
This guide is made specifically for the people who are not familiar with ethereum mining. So, today we’ll be explaining how it works in a low-jargon way!
Interestingly, mining ethereum is strikingly comparable to mining the Bitcoin.
What is Ethereum Mining?
Although ethereum is one of the mainstream currencies but still often people ask this question, “What is ethereum mining?”
Well folks! Ethereum mining is a process that involves all of the computers on the “ethereum blockchain” to mine ethereum by solving complex formulae.
This greatly answers the question, “What is Ethereum Mining?” However, the real process is more sophisticated and hence requires further insight into the matter.
At this point, you might be thinking that this is exactly how we mine Bitcoin. However, there is a difference between the two (I said comparable up there!). Surprisingly, the difference is of the back-end algorithms that power both of these networks.
Ethereum Mining: How it Works?
Folks! Mining ethereum is a very simple step. This part will explain how you can get into the mining business.
An important Note: Follow “How to Start Mining Ethereum” first to know about the basic requirements before attempting the below steps. How to start mining ethereum steps are super-important!
In order to mine ethereum in a better way, we will set up client applications (like Minergate, Claymore miner etc.). These softwares are important as they can set you up in mining the ethereum very easily and you’ll have to do nothing anymore.
Here is how to start mining ethereum.
Go to a client applications’ website and download the application. If required, then also make an account.
When the application downloads, proceed to the ethereum section.
Use the instructions to start mining ethereum. Normally, you have to copy the code (it should contain your wallet address into command prompt) for command line client applications. For the GUI ones, the entire step is done via graphics and icons.
If you have gone through these steps, then you have started to mine ethereum!
Also, keep in mind that mining is a heavy process and it will drain your computer speed and capabilities if you try to overdo it.
Algorithmic Difference between Bitcoin and Ethereum
If you talk about the basic difference in Bitcoin and Ethereum mining then it is of SHA-256 and Ethash. As Bitcoin works on the SHA-256 algorithm, the Ethereum uses the Ethash algorithm. This is a memory-hard algorithm, meaning that ASICs cannot work on this algorithm.
To sum things up, if you are a person who is thinking of mining Ethereum then Application Specific Integrated Circuits are incompatible!
Systematic Difference between Bitcoin and Ethereum
Now, another way ethereum is different from bitcoin is how it works. Bitcoin works as a decentralized digital currency. On the other hand, the ethereum follows the World Computer concept!
In ethereum, most of the work done is in the form of Smart Contracts. Take smart contracts as line of code that machines process on the ethereum blockchain
How to start mining Ethereum?
Mining ethereum is not a hard process at all! However, just like every other cryptocurrency in the market, you need to fulfill a number of requirements first.
Here are some of the requirements that need we have to fulfill before we start mining ethereum:
Get Ethereum Wallet
An ethereum wallet stores the ethereum that will come in while you’re mining. It will provide you with an address where you can receive your hard-earned coins.
In terms of security and expenses, there are two wallets. One of them is the software wallet, while the other is the hardware wallet. A software wallet is mostly free but it is less secure. We’d require you to use a software wallet if you’re new to the mining and are starting off.
For experienced people, we recommend hardware wallets because they provide higher security. However, you’ll have to put in some bucks for the hardware wallets
Build Ethereum Mining Rig
This is the complicated part! Mining ethereum also requires its users to build ethereum mining rigs. These rigs are specific-purpose equipment loaded with graphic processing units (GPUs) to ensure that fast processing is taking place.
If you are to start mining, then you will have two choices to process the blockchain:
Using Traditional Devices
Traditional devices are the devices that we are generally using. Examples of it would include laptops, smartphones etc.
Interestingly, these traditional devices can take you into the mining business. These devices will be low on the expense, which means you’ll have to pay lower bills as compared to GPUs. However, the processing power of these devices will be negligible.
Bluntly put up, you’ll make nothing out of the traditional devices if we look at the complexity of the present day ethereum blockchain.
Using Ethereum Mining Rigs/GPU Rigs
Ethereum mining rigs or GPU rigs are actually specialized devices that can mine ethereum at a very high speed. These devices are high on the bills! You’ll also have to invest money if you want to build ethereum mining rigs.
However, they do make an earning through the ethereum blockchain.
To sum things up, you might have to pay more bills if you build ethereum mining rigs for yourself. However, the earnings they make can not only compensate for those bills but also earn you some cryptos in return!
If you’ve gone through both of the above choices, then you’ll already know what to do!
Additionally, ASICs ARE NOT A CHOICE because of the Ethash algorithm.
Folks the best choice is to build a GPU rig due to the reason that it will actually get you somewhere in your ethereum mining business!
So, get yourself an ethereum mining rig. That is how it works!
Building GPU Rig
Ethereum Mining Pool
Joining a pool has somewhat become vital considering the fact that mining ethereum has become hard over time.
A pool is actually a group of miners who combine their computing power to solve the blocks. Upon a successful completion of the block, the awards are distributed by all the members of the pool!
You might be thinking right now that why do I have to share my coins. Folks! Sharing is caring, and it is all good if you are earning!
Some pools that you might consider are f2pool, ethpool and nonopool.org (it is actually a website!)
Precautions to Follow
Although, crypto mining is an automatic process, there are some precautions that you can take care of to avoid a potential pitfall.
Stated below are some important recommendations to stay safe all the time.
There are a large numbers of scammers who are ripping of ethereum investors and miners. So if are getting offered something that sounds too good to be true then it is a scam. With Etereum there is nothing free and you will be scammed if you go in the path of getting something for free. Do your own research on everything you need to know about how ethereum and only use trusted sites and equipment bought from legit sources.
Spare Some Bucks Every Time
Make sure you convert some ethereum into money all the time. Don’t convert all of it so that you don’t regret it if the price jumps up rapidly.
This is to ensure that you can recover from a scam and theft scheme that most of the mining pools and clients can throw you into. Obviously, the there’s no such thing as auditing on the blockchain!
Watch Out for Scams
Make sure you check the reputation and safety certificates of your prospects before investing all of your mining power into a system.This will ensure that you don’t fall into a scam and face a loss in the future.
Use Ethereum Mining Calculator
Make sure you keep your business profitable using the ethereum mining calculator. Using an ethereum mining calculator will let you know if ethereum mining is profitable to you or not.
The ethereum mining calculator will take the current price of the ethereum in the market and will deduct your expenses from it. Then, it will let you know if the business is still profitable or not.
So, make a good use of these ethereum mining calculators so that you can perform well on your ethereum business.
If power is a solution to the blockchain, then patience is its key. You always have to stay patient throughout the ups and downs.
All of the cryptocurrencies are volatile; which means that they shift their values rapidly! So, make sure you stay patient to get the best fruit, or avoid the worst loss.
THERE’S NOT MUCH TIME!!!
This might be the most important precaution that you will be reading. Very soon, the Ethereum will deviate from the traditional proof-of-work system (same as the Bitcoin’s) to proof-of-stake system.
In easier terms, this means that you will not be able to mine ethereum if you did not possess ethereum very soon!
So, hurry up and make some coins before it is too late!
Successful implementation of the above set your foot in the ethereum mining business. Now, proof-of-stake is coming up pretty soon. Therefore, fill up your wallets with ethereum quickly so that you can stay in the mining market after a change occurs.
Best of luck to you all in your mining business!