Ethereum Mining: How complex is it?
Mining consists in promoting the security of the public blockchain by providing a contribution in the form of computing power. In exchange for this contribution, new units of crypto assets are generated, which reward the «miners» in proportion to their computing power. In our example with Ethereum, miners thus receive Ethers as a reward.
Mining on Ethereum is an activity open to everyone without restrictions, in principle, since all you need is a computer with an Internet connection.
However, Ethereum mining uses only the power of video cards, usually designed for video games. If you really want to mine Ethereum and get results, you will have to dedicate your computer(s) to this. In particular, it is necessary to equip each computer with several video cards, which in some cases can be up to 18.
Therefore, you should learn about the field of video card production. For example, it is generally recognized that AMD with its RADEON line of cards offers higher performance than its competitor NVIDIA with its GEFORCE line. But this market is constantly evolving.
More motivated people also invest in a GNU/Linux operating system, such as a specialized EthOS or SMOS, to achieve optimal performance. But you can make the most of the capabilities of an ordinary computer when it is not used for its basic functions, using software installed on Windows or macOS.
Pools are specialized computing services that organize and optimize the computing power of several players in order to maximize the chances of getting a block. When this happens, the pool redistributes the reward received according to the contribution of each participant. A system of mutual assistance that has proven its worth.
It is necessary to join the mining pool in order to share computing power with other players who have the necessary equipment.
As an individual, joining a mining pool has become necessary to receive rewards from mining. The total computing power of the current Ethereum network is such that the probability of winning Mega Millions five times in a row is higher than creating an Ethereum block alone using human-sized hardware.
The inconsistency of a system open to everyone without restrictions lies in the fact that this is a rare case of «pure and perfect competition», an activity that benefits only those players with «comparative advantages» who will find themselves in a privileged position.
These advantages can be economies of scale when the activity is carried out on an industrial scale, a large order of equipment that will allow you to get discounts from suppliers, professional activities that will avoid certain taxes, and in some cases, for example, in Quebec or China, especially low electricity prices as a result of agreements or special conditions.
The simplest solution is sometimes the best
For several years in a row, if we compare the amount invested in mining equipment and the same amount used for the direct acquisition of crypto assets, the purchase of crypto assets will always be the most profitable.
Since the computing power allocated to the network is constantly growing, and the hardware is becoming obsolete faster and faster, it is simply impossible for an individual player to mine as much Ether as you can just buy for the same invested capital.
By the way, a major update of Ethereum 2.0, expected in September 2022, will change the validation process of the Ethereum blockchain. The network will move from «proof of work», i.e. mining, to «proof of stake», which is completely different and no longer includes mining.
Therefore, before you start mining Ethereum, you need to evaluate a lot of issues, especially if this activity stops in the near future. However, for side activities that use equipment already purchased for other uses, for example, a computer designed for games, it is necessary to take into account only the cost of electricity, and mining can be considered as an additional activity, which in this case will bring limited income.
It is often forgotten that the cost of electricity for a device designed for computing power and running continuously is not zero. This equipment is rapidly becoming obsolete, and the initial investment is an investment that could be used differently.
How Ethereum is Mined
Ethereum mining is not very complicated, but it is necessary to have solid knowledge in the field of computer science.
You need to follow a certain protocol. Before starting work, you need to open a wallet for cryptocurrencies. Then follow these steps to easily start mining Ethereum:
- Visit the Ethermine website. The «Start Mining» button is displayed directly on the main page. Just click on it to start the process. Indeed, you do not need to create an account, Ether mining can be carried out anonymously.
- Select the server. Several servers are offered, corresponding to different parts of the world: Asia, Europe, North America and South America.
- Choose the Ethereum mining software. There are several of them on the site. The choice should be made according to the hardware of your computer. Download it, install it, then configure it. This is the most difficult stage. A dashboard full of graphs, numbers and various parameters can really scare beginners. It is very important to familiarize yourself with the dashboard. It contains all the information you need to track your earnings. If it is configured incorrectly, there is a risk of loss of profitability.
- Transfer the collected ETH. Specify the amount of mining from which ETH should be automatically transferred to your wallet.
Who can mine Ethereum?
In theory, anyone can mine Ethereum. In practice, it is recommended to have good computer skills. However, a beginner can master the basics and get to work quickly.
You also need good equipment: a powerful graphics card, a computer running Linux or Windows and a good air conditioner to cool the computer and the room. Cryptocurrency mining involves a lot of computational operations. At the same time, a significant amount of electricity is consumed and heat is generated in the room. Without proper air conditioning, video cards can overheat. They may not work as well or even break down quickly.
How long does it take to mine Ethereum?
The required time depends on several criteria, including the available equipment. It may take up to 100 days to mine one Ethereum. However, this time can be significantly reduced. On average, it is estimated that it takes 7.5 days for 1 Ethereum. High-tech equipment combined with the use of a mining platform with a high hashrate can allow mining 1 Ethereum per day. However, this requires real financial investments in the most modern equipment, not to mention electricity bills.
Is mining Ethereum a profitable occupation?
This is easy to calculate. There are several elements that need to be taken into account:
- Investments in equipment necessary for mining.
- The video card used: the more powerful it is, the faster you will be able to mine Ethereum. It is also necessary to take into account its service life and the frequency with which it will need to be replaced.
- Energy consumption: mining requires high energy costs.
In many countries of the world, the price of electricity is quite high. This directly affects the profitability of production and can even make mining unprofitable. However, there is a solution to mine Ethereum: join forces with other people to reduce costs and maximize production.
Mining Ethereum alone, in a pool or in the cloud
There are several solutions for mining: alone, in a pool and in the cloud
In single mode, the miner works alone. He extracts blocks from the blockchain to which it belongs. Since his opportunities are low, he has less chance of getting rewarded. However, the reward is higher because he does not share it. If he has the most advanced equipment, he may even get a high reward. However, this mining method is especially suitable for well-trained experts.
A mining pool is when several miners join together. Usually these are people with less powerful equipment. This allows them to combine their efforts to compete with mining companies. Rewards are more regular and their size is higher, but there are also some disadvantages: pool mining can often be interrupted due to breakdowns at pool suppliers.
The last option for Ethereum miners is cloud mining. These are online mining resources. They sell or lease hashing power to miners. This allows you to save on the cost and inconvenience associated with the necessary equipment. This method of mining Ethereum is also available to beginners. But cloud mining leads to a loss of autonomy. The miner depends on the provider, he cannot resell his equipment or send hashing to the pool of his choice.
Moreover, if the provider closes or disappears, miner loses everything. And this happens all the time, since the market is full of fraud.