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How to Mine Ethereum
Similar to bitcoin, Ethereum is another public blockchain technology in cryptocurrencies. Like Bitcoin, Ethereum is mined continuously by several miners worldwide to earn rewards in Gas fees, transaction fees, and block rewards. Computers worldwide continually solve cryptographic puzzles that are solvable with the help of high processing graphic cards and verify all transactions to add them to the ether block. Upon completing one block, you get two Ethers as a reward.
Mining Ethereum Vs. Mining Bitcoin
Although Bitcoin revolutionized how we use transactions and pay each other, being the first does not necessarily mean you’re perfect. Bitcoin has various kinks and issues, and Ethereum was created after studying all these kinks and perfecting the network.
For one thing, Ethereum is developed so that it can only be mined using graphic cards and no other external device like the ASIC tools bitcoin miners use nowadays. The use of such devices concentrated the miner community solely towards a select group of individuals with access to high-tech computer components. It could shell out huge amounts of investments. By ensuring only graphic cards could be used to mine Ethereum, its developers ensured that miners had access to the technological hardware quickly and could start mining with even a little investment, to begin with.
And in another sharp contrast to bitcoin, Ethereum is inflationary. That is, there is never an end to how many Ethereum you can mine. And if too many Ethereum are added into circulation, its price may fall heavily. To avoid this, the block reward of Ethereum was reduced from 5 to 3 in 2017 and then again to 2 in 2019. While Bitcoin follows a pattern of halving its block reward every 4 years, the ethereum core developers decide when to reduce and or increase the block reward. Thus, making sure not too much and not too little of Ethereum is in circulation at any given time. This makes it harder to estimate the rate of return on your investment because there is no telling when the core developers might change the block reward to mine Ethereum. Currently, it is set at two Ether since 2019.
Reasons To Mine Ethereum
Ethereum made its debut in 2015, years after bitcoin entered the market. 1 ETH was worth less than $1 at the time. Therefore, the only people who mined Ethereum were software developers and cryptocurrency believers who wanted to be a part of the revolution no one could see at the time. Today, however, Ethereum has crossed well over $2000 and is becoming profitable with every passing day. Thus, more and more people have started investing in this technology and converting their computers into the Ethereum nodes essential to mine.
With Ether set to shift from the traditional proof-of-work method to the more reliable and easily accessible proof-of-stake method, investing in Ethereum seems like the right time to make the most of your investment and keep earning a passive income.
How To Mine Ethereum
All in all, there are precisely three ways you can mine Ethereum. While diversification is essential in investments, I wouldn’t advise you on using more than one way if you’re a home-based miner trying to mine crypto for the first time. If you have certain experience and can properly balance your money, you could try to use the other two ways simultaneously as well.
Solo mining is when you are the 100 % owner of all the investments into the equipment. The mining software is free to download and is easily configurable. All you need is some high-powered GPUs rigged to your custom-made PC, and you are good to go!
Sounds simple, doesn’t it? The reality couldn’t be farther. While it is true that all you need is a couple of high-powered GPUs and a custom PC with a good internet connection, it is often quite difficult to mine Ethereum on your own. Given how highly competitive mining is, this method is not suitable unless you are willing to invest huge sums in hundreds of thousands of dollars and are ready to keep investing thousands more each month to maintain daily expenses.
Such high-level miners set up what is known as Mining Farms. There are warehouses full of equipment and often with their energy supply, such as solar or wind energy.
Even if you can invest such large amounts and are confident you can maintain it for at least over a year until you breakeven on your investment, having zero experience in mining would cause difficulties to you and, in the end, give you nothing but losses. Therefore, you should stay away from solo mining for as long as possible and concentrate on the other ways of mining Ethereum.
This is the easiest of the three mining methods. Cloud mining is the practice of renting the mining equipment of other miners and taking a share of their mining rewards. All you have to do is pay the person or cloud mining company a fixed amount of money, and they will regularly transfer you your mining rewards based on their policy. That is, some companies prefer to transfer your Ethereum after reaching a certain value, such as 2 or 2.5 ETH and so on, while others prefer the practice of paying once a month regardless of how much you have earned.
The only drawback is that you can have no idea if the money you gave will be invested into the mining equipment and not any other means. You cannot guarantee that you will be paid when the time comes. For all you know, it could all just be a scam, and you just wasted your hard-earned savings. That is why you must always make sure that the company is a long-standing and trustworthy company that regularly pays its investors.
Pool mining is the best of both worlds. It lets you have your equipment like solo mining, puts you in touch with other miners, and helps you mine alongside them. In pool mining, a group of solo miners combines their hash rate to improve their chances of solving a block and earning their reward. The profits are split proportionally to your contribution to the hash rate. However, most pools charge 1 – 2 % of the profits as pool fees are used to run and maintain the pool.
How To Mine Ether
To mine ether, you need to follow the following steps.
- Create an Ethereum wallet
- Update your GPU drivers
- Install mining software
- Join a mining pool
- Collect your rewards
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Ethereum is everything bitcoin isn’t. You don’t need high functioning equipment to mine Ethereum but good GPUs. Thus if you buy the right equipment and start mining, this can become a great way to earn passive income and build your network into the Ethereum world. Make sure you use the best GPUs you can afford, and they are updated with the latest drivers to make the most of them.