How to mine Ethereum (ETH): step-by-step Beginner’s Guide

Ethereum was initiated to address the limitations of Bitcoin. At least, that’s what its creator Vitalik Buterin was thinking at a time. In due time, Bill Noble, chief technical analyst at Token Metrics, said that it embodies two purposes – money and a value carrier. Additionally, it’s a highway to decentralizing finances. 

Unlike Bitcoin, this ‘invention’ comes as a software blockchain-enabled platform. Users do their thing on the platform with a native token. Ethereum is used by developers but others also invest in the cryptocurrency to get benefits. Another way to make money is mining Ethereum. It’s a big thing, and those who master the drill might get great earnings. Without further ado, let’s get started with the subject!

What is Ethereum (ETH)?

Let’s get to know the very essence of Ethereum. It was created by Vitalik Buterin seven years ago following the following in the footsteps of Bitcoin. He figured out that Bitcoin seemed like a pocket calculator –  you do math with it, do it pretty and that’s it. So, the guy gave to the world Ethereum, a blockchain network with a native cryptocurrency – Ether (ETH), promising to go beyond what Bitcoin offered. 

Of course, you can purchase and trade it as an investment, just like Bitcoin. Additionally, it’s a software platform allowing to release new apps. Usually, they are crypto-oriented or made to streamline processes dealing with selling, buying, or using cryptos. Just like the apps we use in our everyday life, these ones might represent lending programs or payment websites. 

To make mining Ethereum even more understandable, take a look at your smartphone. Devices have built-in apps or downloaded ones. They have a more universal usage, while Ethereum ones are more focused on cryptos. With the lending app example, software engineers might create the app that people involved in the crypto business could use for loans or borrowings.

The concept that powers it is smart contracts. These are programs running independently on the Ethereum blockchain. Smart contracts fulfill functions that traditionally some third-party would take responsibility for. 

To illustrate, networks are used by people to perform direct transactions. At present, peer-to-peer lending is getting traction on Ethereum. A relevant app crafted on the Ethereum network helps individuals get financial support without a third party. 

In this context, smart contracts work as algorithms that execute a specific role when particular conditions are met. In the scenario of peer-to-peer loans, the contracts are enabled as an outcome when the collateral is located in the right wallet or account. The advantages coming with such an approach (as opposed to an old-school lender) are speed of fulfillment, lower commissions, no human errors or conflict of interests.

As we’re getting closer to how to mine Ethereum, there’s a need to outline other crucial points here. Behind the network, there’s the powerful idea of decentralized finance since anyone who has the Internet can access products and services placed on Ethereum. Through smart contracts, software engineers “concoct” decentralized applications, each having different purposes. 

They might contain financial features like cryptocurrency exchanges, decentralized lending websites, and data aggregators like Matcha. The latter investigates many cryptocurrency exchanges for the most optimal rates. Additionally, you might stumble upon dapps for something like acquiring or selling digital artwork, gaming, and technological solutions for developers.

What’s more, the network’s nature of open source enables the creation of absolutely new cryptos like Chainlink and XRP. They are called tokens. You might have heard about others that position themselves as cryptocurrencies. These are USD Coin (USDC), Uniswap (UNI), or Tether (USDT). They are powered by Ethereum and serve to ‘embody’ ownership of unique items, as stated on the network’s official website.

Ethereum (ETH) Mining Overview

How to mine Ethereum? The question is flat out broad since many aspects are involved. To remind, crypto miming is like sitting in a math class in Junior High School and solving problems. Here, students are miners, and this time, they suggest a so-called “proof-of-work” for the network, which validates Ether (ETH) transactions. At present, Ethereum works by a proof-of-work (PoW) consensus principle and any time soon will ‘migrate’ to a proof-of-stake (PoS) mechanism.

Additionally, miners are in charge of crafting novel Ether tokens, which comes as an outcome of this process. They get rewards in Ether for executing effectively a PoW task. The system introduces the term “hash function”, which represents an “encrypted” piece of data technically coming from some arbitrary input. What makes hashes and standard encryption different is that the process is a one-way one. 

The only helpful method to figure out what input was used to release a given hash is to examine all existing input combinations and check which one is convenient. Another factor that complicates the process is that little modifications in primary data will bring about absolutely different outcomes. 

Proof-of-work begins when a list of needed hashes is defined according to the “difficulty’ parameter. Miners have to identify a combination of parameters, along with the preceding block’s hash, to produce a hash that meets the conditions dictated by difficulty. This assignment is pretty onerous in terms of energy, but it can be smoothly managed by making difficulty higher or lower.

Miners own a specific ‘hash rate’ that determines the number of combinations to be tried at a time. The more they are involved in the process, the more difficult it is for outside entities to replicate the network. So, this is how miners secure the network.

Best Ethereum Mining software

From the very beginning, Ether was supposed to be mined with GPUs. What makes it different from Bitcoin is that it can be successfully mined with ASICs. Both are geared towards completing one task, which makes them more efficient than more universal computational hardware.  (Just in case you want to know how to mine Ethereum on PC).

Three aspects define your choice of mining software: how much they cost, what’s the max hash rate software could have, and, finally, how much energy will be required. 

Speaking of the price, sometimes it’s not paid attention to properly, but it can be a game-changer in certain situations. Hardware wears down, and it’s important to make sure that the investment in it will pay off before it happens. However, the matter is often exaggerated because graphic processing units (GPU) are enough resilient. Many of them last up to five years. 

It’s not even about wear and tear, it’s rather about hardware becoming obsolete. So, how to mine Ethereum with GPU? More progressive GPUs or ASICs outperform and outshine existing miners, particularly those with higher electricity expenditures. That way, the payback time – the one needed for the miner to get an investment paid off – becomes a significant factor for financial analysis in mining. 

Here’s a list of parameters you should pay attention to when picking the right hardware. 

First and foremost, calculate the payback period. The lower the value is, the better the outcome is. When comparing gears, take into consideration that there’s a difference in their hash rate, which affects daily profits respectively.  

Another factor to mention is fees accrued. They are quite unpredictable, depending on the day. Ordinarily, they constitute 10%–50% of the total daily earnings. In due time, they’ve been somewhere below 10%. Additionally, as miners fight for block rewards, reducing operational costs below the worldwide average is crucial to making business sustainable. 

Finally, it’s important to consider the remaining hardware needed to assemble a miner. Usually, it is an established cost and relatively affordable, as GPU mining rigs exploit from 6 to 14 GPUs. ASICS are widely self-sufficient, yet they need the acquisition of third party power supply units. 

Taking into consideration the factors mentioned above, we can outline a few differences in various hardware options. For example, AMD RX 580 manufactured three years ago is the optimal value-money ratio at $0.05/kWh. But compared to others, it is a weak option because of low energy efficiency.  

To name a few energy-efficient and attractive options for those with significant electricity costs, these are the A10 Pro ASIC or the Nvidia RTX 3080. Other ASICs might not be a fit because of hardships with purchasing or a short remaining lifespan. 

There’s another type of hardware that might come to mind – FPGAs. For example, the SQRL FK 33 is quite energy-efficient but its unit price is unattractive. However, it is recommended to verify the sample prices from reputable sources. 

Also, if you want to know how to mine Ethereum with Nvidia, you can purchase Nvidia GTX 1060. But bear in mind that buying used GPUs like the AMD RX Vega 64 or the Nvidia GTX 1060 might help save expenditures but in the meantime, there’s the risk of gear failure.

How long to mine 1 Ethereum (ETH)?

Considering the present-day Ethereum difficulty level (February 9), the mining hash rate, and bonuses for a block it might take 99.9 days to mine 1 Ethereum. This makes an Ethereum mining hash rate of 750.00 MH/s eating 1,350.00 watts of power at $0.10/kWh. The block reward is 2 ETH.

It’s essential to mention that the amount of days counted does not comprise difficulty boosts and drops as well as block reward ones (halving).

The Ethereum mining calculator is a godsend for miners. You can assess beforehand how long to mine 1 Ethereum. It calculates potential profits by altering the mining hash rate values or by picking one of the relevant devices from the list provided. Ordinarily, the Ethereum mining information is renewed constantly with present-day block mining data. It serves as the default inputs for the calculator, including the default hash rate and wattage details. All of that adds to better decision-making. 

Today, mining Ethereum is worthwhile, according to the mining hardware hash rate of 750.00 MH/s, existing pool or maintenance fees, and electricity costs. Yet, the situation can change quickly. The blockchain is expanding, and the Ethereum difficulty changes up or down leaning on the overall computer power presently mining blocks and releasing hashes. This means it’s recommended to verify mining profitability from time to time. 

How much does it cost to mine Ethereum (ETH)?

The cost depends on the approach a miner picks. One can go solo, join a mining pool, or practice cloud mining. Participating in the pool is probably the most optimal way to kick off. It’s about partnering up with other individuals. They make an agreement that if anyone from them manages to ‘crack’ the cryptographic puzzles, bonuses will be distributed among all the involved according to the hash power provided. Actually, the pool’s volume, calculated in hash power, defines the number of blocks a squad identifies on average and the awaited payoffs coming with it. 

Nevertheless, not everyone in the pool has the same position. So, when regarding the participation in such, one should think of three factors: how big it is, what’s the payout’s minimum and the pool’s fee. So, how much does it cost to mine Ethereum? 

The commission means the share for administering the pool. If it’s more than 3%, it’s better to survey other pools. Minimum remuneration constitutes the smallest sum a participant can get from the pool. To illustrate, the minimal settlement is 1 Ether, it might take months to get such an amount as a payoff. 

Another approach is cloud mining. It’s not necessary to possess or run your own mining hardware – one can rent it and someone else does the job for you. In the meantime, you get rewards. In this case, one should trust the other side. So, it’s crucial to do your homework and check whether the investment made is used for the mining equipment and so on. What’s more, it’s better to team up with a reputable, trustworthy cloud mining platform. 

How to mine Ethereum (ETH) solo?

It’s a thankless task, to be honest. Technically, the odds of figuring out the block are equal to the percentage of the network’s overall hash rate. With Ethereum, the current measure constitutes over 1 PH/s, or 1 billion MH/s. Provided you have a farm of 100 RTX 3080 GPUs, even if everyone is doing 95MH/s, it makes up only 0.0009% of the whole thing. 

Simply put, on average Ethereum miners can discover 6500 blocks per day, making a 6% probability of spotting a block. During a month, the odds make up 86%. If taking RTX 3080, the chances of chasing after a sole block in a year are 20%, after three years – about 50%. 

If you’re willing to know how to mine Ethereum solo and get benefits, consider the cost of a sole block. We’re going to outline the information as for the time of writing. So, a stable block reward now constitutes 2 ETH, with transaction commission being up to 2 ETH and some insignificant uncle rewards (+- 3.5 ETH). A worth of near $2,800 per ETH doesn’t make a lot of value. By the way, it works only when a block is solved. Joining a pool is considered the safest approach nowadays.

Ok, what if you’re still obsessed with going solo? First and foremost, you need to have an Ethereum wallet and download the Ethereum blockchain. Your wallet should be synced up, you can specify your own mining setups on your local node. This is pretty much the same as tailoring miners for a pool, but this time you’re having your own one. 

Even if you possess premium GPUs, probably you will not mine any Ethereum prior to proof of work mining is over. On paper, the benefit from solo mining includes the entire block reward and fees without paying something to the pool. But in the meantime, chances are small to get the block itself without a powerful farm. 

Future of Ethereum Mining

What the future unfolds the Ethereum mining? The team is ‘baking’ a “difficulty bomb” that promises to freeze mining. Currently, Ethereum works by a proof of work model but the transition to a proof of stake one is coming. According to a new model, users will approve transactions considering the amount of coins they possess instead of using energy-devouring mining rigs. A new approach relates to Eth2.

Apparently, Eth2 will be super meaningful as this will revamp the network’s infrastructure and make mining outdated. So, developers are about to issue the “difficulty bomb” to push the transition as it will make the old approach flat-out more complicated. At present, postponing the bomb simply gives time to prepare the shift. 

When launched, Eth2 will turn Ethereum into a more adaptable, safe and sustainable ecosystem. It will reduce the environmental impact by 99%. As for the mining, it won’t be capable of bringing revenue. Finally, this turning point will definitely affect the worth of the token. But, we’ll see!

FAQ

When will Ethereum (ETH) mining end?

According to the news given by Tim Beiko, the coordinator for Ethereum’s protocol developers, the team is preparing a transition of models. This will make Ethereum mining useless. This is expected in summer 2022. 

Is it still profitable to mine Ethereum (ETH)?

As of time of the writing, you can pick three approaches, each having its advantages and disadvantages in terms of profits. Please, take a look at the relevant chapters in this article to conclude if you can get revenue from Ethereum mining.

Is Ethereum (ETH) easy to mine?

Ease of mining depends on:

• gear you picked, its power, hash rate
• time you’re ready to spend on mining
• fees and investments involved
• approach you selected: solo, mining pool, cloud mining

Please consider the aspects described above to figure out if mining works for you. 

Disclaimer: Please keep in mind that the content of this article is not financial or investing advice. The information provided is the author’s opinion only and should not be considered as direct recommendations for trading or investment. Any article reader or website visitor should consider multiple viewpoints and become familiar with all local regulations before cryptocurrency investment. We do not make any warranties about reliability and accuracy of this information.