A comprehensive beginner’s guide to Ethereum mining.
As the biggest smart contract platform in the world, Ethereum is a major player in the crypto world. Its native token, ether (ETH), is the second-largest cryptocurrency in terms of market cap and is used to pay for services and transaction fees on the Ethereum network.
However, as well as buying ETH on an exchange, did you know that you can also mine Ethereum to earn ETH? Read on to find out how.
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What can I use to mine Ethereum?
What is Ethereum mining?
Proof of work
Like bitcoin, transactions on the Ethereum network need to be verified using a process known as proof of work. This verification is performed by miners who use computational power to solve complex mathematical equations and ensure the validity of each transaction. As a reward for their efforts, miners receive ETH.
There are a few options available if you want to start mining Ethereum:
- Mining from home (not recommended)
- Joining a mining pool
- Using a cloud mining service
Mining from home
Unlike bitcoin, which these days require highly specialized and expensive ASIC mining hardware, Ethereum can still be mined with graphics processing units (GPUs). However, it’s not as simple as just plugging in your PC and instantly earning ETH rewards.
When you mine Ethereum, you’re competing against a huge network of people, mining pools and companies, many of which are backed by substantial resources. In order to be able to make a profit mining alone, you’d need a huge amount of computing power at your disposal – we’re talking a whole lot more than one solitary graphics card.
Finding the financial resources to establish such a mining operation is beyond many, but even if you could afford it, you would then have to deal with a host of other problems, such as:
- Equipment could overheat and break down.
- You’ll need to install adequate ventilation and fans to cool your computer equipment.
- The noise generated by your cooling system could anger your neighbors.
- The electricity costs needed to power such an array of computing equipment are substantial.
- You simply may not have sufficient space to house the necessary mining units.
As a result, going out on your own as an Ethereum miner is not a viable option for most people.
Joining a mining pool
The easiest way to overcome many of the pitfalls of mining from home is to join a mining pool. These collectives allow miners to “pool” their resources to work together and to share the ETH rewards when a block is mined by a pool member.
You’ll need to compare and even try out a range of mining pools before deciding which one is right for you as no two mining pools are the same. You’ll need to consider issues like:
- Fees. How much do you need to pay to join a mining pool, and how often is the fee charged?
- Minimum payouts. How much ETH will you need to mine before it can be transferred to your wallet? How long will you have to contribute to a pool before you can earn any ETH?
- Size of the pool. The larger the pool, the greater your chances of getting a reward. However, at the same time, the more people there are in a pool, the smaller your share of a reward will actually be.
- History and reputation. Is the mining pool well-established and reputable?
Using a cloud mining service
The third option if you want to mine Ethereum is to sign up with a cloud mining company. These services essentially allow you to lease sophisticated mining equipment from them for a set period of time. Genesis Mining and HashFlare are two of the best-known providers of this type of service, but there are also plenty of other companies available.
Cloud mining allows you to access the latest hardware without having to invest in expensive mining equipment yourself, and you don’t need to worry about ensuring that the hardware is running effectively.
However, the trade-offs are that you don’t have any control over the mining rig, and you’ll also need to be vigilant to avoid any cloud mining scams. Make sure you compare your options and thoroughly research any provider before signing up to a cloud mining plan.
How to start mining Ethereum
Now that you’ve considered each of the Ethereum mining options listed above, read on for step-by-step instructions on how to mine Ethereum using your preferred method.
Method 1: How to mine Ethereum from home
- Create an Ethereum wallet. Make sure you create a safe and secure crypto wallet for storing your ETH holdings.
- Choose a graphics card. To set your computer up to mine Ethereum, you’ll need to compare and choose a range of GPUs to find a suitable one. You might also want to consider setting up your own mining rig consisting of several GPU units to increase your mining power.
- Install the software. After installing the drivers for your graphics card(s), you’ll then need to install mining software. If you’re comfortable using the command line, you can install Geth, and you can also consider a wide range of other software options (such as MinerGate and Ethminer).
- Start mining. You can now follow the prompts in your chosen mining client to start mining ETH. However, as we mentioned above, unless you’ve got significant resources, mining alone will not be a profitable venture.
Method 2: How to mine Ethereum through a mining pool
- Create an Ethereum wallet and choose a graphics card. Follow steps 1 and 2 as outlined in the Method 1 instructions above.
- Join a mining pool. Compare the fees and features of a range of Ethereum mining pools to decide which one is right for you.
- Install the software. You’ll need mining software to connect your mining hardware to a pool. There are several options available, so make sure to compare your options before making your final decision.
- Start mining. Set up a private wallet for storing your ETH safely and securely. It’s also a good idea to regularly recalculate your mining costs to determine whether your mining venture is still cost-effective.
Method 3: How to mine Ethereum using a cloud mining service
- Create an Ethereum wallet. Compare a range of ETH wallets where you can store your tokens. Choose one that allows you to retain control of your private key.
- Pick a mining service. Compare cloud mining companies to find one that’s right for you. For example, consider their reputation, the contracts they offer, the hardware they use and how much you’ll need to pay.
- Choose a mining contract. Cloud mining services typically offer a range of different packages designed to suit varying customer needs. Check these out to find out the length of each contract, total cost, and whether there is any flexibility to allow you to customize your own package.
- Select a mining pool. Once you’ve chosen your plan, you’ll usually need to choose a mining pool. Consider the fees, minimum payout, pool size and more when making your decision.
- Start mining. You can now start cloud mining Ethereum. Check your account regularly so that you can watch your balance grow, and transfer ETH to a secure wallet as needed.
Disclosure: At the time of this writing, the author holds IOTA and XLM.
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