How to Mine Ethereum - Guide for Beginners

Mining is a way to acquire smaller or larger amounts of a cryptocurrency. But mining is also a way to support a coin's ecosystem by helping build a larger, more decentralized network, thus making the information storage on the blockchain more secure.

Mining is a way to acquire smaller or larger amounts of a cryptocurrency. But mining is also a way to support a coin's ecosystem by helping build a larger, more decentralized network, thus making the information storage on the blockchain more secure.

It is possible for newcomers to the world of cryptocurrencies to start mining immediately and receive rewards. Ethereum mining can be rather complicated and is suitable for intermediate to advanced users. For taking up speculative market positions, it is much easier to acquire Ethereum outright, as mining is not free and may come with significant costs, as returns may vary.

Ethereum Mining Profitability

The market price of Ethereum has been rising dramatically since the beginning of 2017. The cryptocurrency has added up to 5000% to its value at the peak, as more newcomers would want to get on board and acquire some holdings of Ethereum.

[caption id="attachment_82" align="alignnone" width="1096"]Ethereum (ETH) $255.78 (9.14%) | CoinMarketCap 2017-08-06 11-49-13 Source:[/caption]

Market price fluctuations directly impact mining profitability as the price of the coins mined is higher than the cost of electricity. There is the impact of Ethereum mining hardware, as powerful enough GPUs are required.

The best way to get an idea of how Ethereum mining could bring profits is to run the numbers through an Ethereum mining calculator.

Coin Profit per day Profitability Ratio
Ethereum $1.29 318% (20 MH/s hashing power)
Bitcoin -$3.72 -100% (20 MH/s hashing power)
Litecoin $0.95 236%(20 MH/s hashing power)
Dash -$0.2 -42%(20 MH/s hashing power)

One can see that depending on market price, solo mining or mining with small hashing power may not be profitable for some cryptocurrencies. The current price of Ethereum makes a small daily profit and is still accessible for owners of standard equipment. Mining for Ethereum sometimes uses large mining farms but is also possible for hobby purposes and small-scale acquisition.

What is Ethereum Mining

Ethereum miners are a key component to the coin's ecosystem. Simply put, without miners, the Ethereum network would not work. Miners compute blocks every 12 seconds, and five new Ethereum come as a reward for each new block.

New blocks arrive with a header of metadata that contains a time stamp and information on the software version. Miners then run the data through a hash function, returning a random-seeming string of numbers and letters. The string must match a target to be considered valid, and this is when a block is solved. The award of five Ethereum goes to the miner who solved the puzzle correctly. The solving of the puzzle is also known as proof of work (PoW) and ensures that Ethereum cannot be created by cheating, but only by correctly solving a mathematical puzzle.

Rising difficulty means more miners are competing to calculate the next block and the puzzles adjust to become more difficult to solve.

[caption id="attachment_93" align="alignnone" width="1147"] Source[/caption]

The way mining works for Ethereum is similar to that of Bitcoin or other cryptocurrencies, though with altered parameters on speed. The difference is the specialized mining algorithm Ethash requires more memory. It is impossible to mine Ethereum using purpose-specific processors or ASICs, which are mostly used to mine Bitcoin. The developer team behind Ethereum did this on purpose, to encourage a more distributed network of GPU mining.

It is possible that mining Ethereum may change completely, as PoW is replaced by "proof of stake". Proof of stake will use the owners of tokens to secure the network. But at the current moment, there is no foreseeable date for a switch to the new algorithm, and besides too much of an investment would be needed to participate in "proof of stake" verification. For now, regular mining is still viable, and the change still seems to be in the conceptual stage.

How to Mine Ethereum

How to join the miners of Ethereum? The first way is Ethereum solo mining. Unfortunately, Ethereum solo mining is a path for the more technically-savvy user who understands programming. For beginners, it is better to answer the question of how to mine Ethereum on Windows, using readily available mining pools or other applications that make the task easier.

Another user-friendly way is to take up Ethereum cloud mining. Cloud mining is a prepaid usage of computing power. Users pay a pre-determined rate for a limited rate of hashing power and then use the power to mine their own Ethereum potential rewards. The advantage of cloud mining operations is the user-friendly interface and clear statistics.

Cloud mining is available for various rates at:

Genesis Mining - one of the first miners to set up contracts for computing power. This miner uses green energy to run its operation. Also available for Bitcoin mining, but recently added Ethereum contracts. Contracts run for two years.

HashFlare - offers smaller contracts for various hashing algorithms, covering Bitcoin, Litecoin, Ethereum and Dash.

Ethereum Mining Software

For those who plan for solo mining under Windows, the newest Windows 10 operating system allows support for a motherboard with up to six GPU cards. An additional piece of software is needed, and MinerGate can offer an intuitive and relatively easy experience.

For builders of mining rigs, there is a dedicated, stripped-down operating system for using on those specialized machines. EthOS Mining OS is dedicated to mining for Ethereum, but also Monero, ZCash, and other cryptocurrencies. This software is for more experienced users, who feel confident enough their own Ethereum mining rig.

Ethereum Mining Hardware

For solo miners or those who wish to join a mining pool through their own efforts, the process may require some hands-on action to build and activate a specialized machine. The mining rig is a computer built to offer a high hashing rate. It uses a dedicated motherboard and a number of GPU cards to achieve the calculation. Building a rig at home could be costly. Currently, there is no clear way to calculate potential profitability after taking into account the price of components, software and electricity, along with personally invested time. The price spike of Ethereum in 2017 made mining more profitable, but there is no guarantee the current state would continue. Mining by specialized hardware is another personal risk related to cryptocurrencies.

While cloud mining could be set up with only a home computer, setting up a solo mining operation or linking a rig to an Ethereum mining pool is a bit more complicated. The most straightforward way is to choose the best-selling components available for Ethereum GPU mining.

Some of the best sellers are available at GPUShack, a specialized store for mining components. The store also offers specialized software to control rigs with a higher number of GPUs.