Over the past decades, the world has steadily entered a new and exciting digital era. With it, a whole new horizon of opportunity has opened up and brought change to almost every aspect of our daily lives. Including, and especially, how we spend and receive money.
In the world of digital money, cryptocurrency and blockchain technologies like Ethereum and Bitcoin have been leading the world towards a new system of online transaction. Where our daily monetary transactions no longer require a centralised banking system, and can be done in an open, secure, and trustworthy manner in virtually any online digital environment or setting.
In this ETH guide we’ll delve deeper into the world of Ethereum mining and cryptocurrency.
Ethereum is a decentralized, open source blockchain network and platform that enables the creation of smart contracts and decentralised applications (dapps). In simple terms, a “blockchain” is a digital ledger of transactions, distributed across a network of computers. Each block in the chain contains a record of multiple transactions, and once a block is added to the chain, its information cannot be altered or deleted.
Ethereum was created in 2015 by Vitalik Buterin, a Russian-Canadian programmer and blockchain researcher. Since then, it has grown to become one of the most popular choices of blockchain networks in the world, coming in second only to Bitcoin. Like Bitcoin and other blockchain networks, Ethereum has its own cryptocurrency called Ether (ETH). A “cryptocurrency” is the medium of exchange designed for transactions over a blockchain network.
ETH mining is the process of using computing power to validate transactions on the Ethereum blockchain. This in turn earns ETH miners’ rewards in the form of Ether cryptocurrency.
The process of “mining” involves solving complex mathematical problems within the blockchain. Once the “blocks” are solved, and transactions validate, they are then added to the Ethereum network. The process of mining also helps to maintain the integrity and security of the Ethereum network, utilising systems such as Proof of Work (PoW) to avoid illicit behaviour. PoW allows the miner’s work to be easily verified by the rest of the blockchain community.
The work, and computational power that is required to mine ETH, is generally determined by three factors:
While the process of mining is automatic and a single computation can be performed in mere split seconds, there is however a huge amount of data to sort through, with more being added on an on-going basis. Therefore, careful consideration is needed in terms of planning and managing the above and following factors.
The most common form of mining, PoW miners must find and solve block transactions via computing power. Currently, this boils down to:
Intended as a future replacement for PoW, Proof of Stake (PoS) offers a number of benefits, via the use of ETH tokens. ETH tokens are built on the Ethereum blockchain and are made to adhere to the Ethereum token standard, ERC-20. ETH tokens are also used to represent assets like virtual shares, assets, proof of membership or utility, and can be traded on cryptocurrency exchanges.
With PoS, miners validate, and are paid in ETH, according to the block’s transaction fee rates. Otherwise, PoS aims to offer the following benefits:
Other types of mining include what are commonly called “hybridised consensus mechanisms”. Various crypto companies utilise these mining methods to create faster, cheaper networks in the blockchain and crypto space.
The most common and significant types of decentralised consensus mechanisms are:
Ethereum makes earning a steady crypto salary easy for miners, offering a standard rate of 2 Ether per block mined. An additional commission payment by the transaction issuer is also included as compensation for equipment expenses, called “Gas”.
Furthermore, Ethereum miners have the option of mining “uncle blocks”. Uncle blocks are alternative branches of the blockchain parent history. Though not part of the main blockchain, they are still recognized as valid by the network.
In Ethereum, a block can only have one parent block, but it can have multiple uncle blocks. When two miners find a block at the same time, the network may choose one to be added to the main chain and the other to become an uncle block. Uncle blocks help to increase network security and efficiency by allowing for faster block solving times by spreading out labour allocation.
Miners who find an uncle block are given a portion of the block reward, which incentivizes participation. This mechanism also helps to balance the network by distributing rewards more evenly and can help further reduce chances of malicious or unlawful activity by up to 51 percent.
Our ETH guide aims to make mining simple, and you’ll need the correct equipment if you want to get started:
To mine ETH, you will need to acquire the following hardware:
The following software is typically needed to mine ETH:
When mining ETH, the following factors should also be considered:
By considering these factors, you can make an informed decision about whether mining ETH is a profitable venture for you.
Here are a few useful tips for mining ETH:
Following these tips can increase your chances of success when mining ETH. However, it's important to remember that mining is a competitive and rapidly evolving field, so staying up to date with the latest developments is key.
Mining ETH can be worthwhile for several reasons:
Potential for profit: If the market conditions are favourable and the price of ETH is high, mining can be a profitable venture. Miners receive a reward in ETH for each block they mine, so the more blocks they mine, the more rewards they receive.
Contribution to the network: By participating in the Ethereum network as a miner, you can help to secure the network and ensure its stability. This is because miners play an important role in validating transactions and adding new blocks to the blockchain.
Diversification: Mining ETH can be a good way to diversify your portfolio of cryptocurrencies and reduce the risks associated with price volatility.
Flexibility: Mining ETH can be done from anywhere in the world, as long as you have access to the necessary hardware and internet connection. This allows for a high degree of flexibility and mobility.
Overall, mining ETH is most worthwhile for those who are most eager and interested in participating in the Ethereum network, and who have the necessary technical expertise and resources. The more you get into it, and the more investment in hardware and energy, and the more potential for reward. However, this must be weighed against the costs and risks.
Ethereum, and blockchain in general, has huge potential for becoming the future of online transaction due to its decentralised and programmable nature, which offers several advantages over traditional centralised bank systems:
All the above, along with the increasing adoption of cryptocurrencies and decentralised systems, make Ethereum a promising candidate for the future of online digital transactions.
Whether or not this comes to pass though, will likely depend on the continued development and adoption of the network and technology. Blockchain and crypto can be a rollercoaster ride at times, making it hard to predict future trends and find reliable patterns to make predictions. Despite all odds though, the technology continues to push ahead, gaining more interest and participation along the way.
Things are rapidly changing, and soon time will tell. What is certain though, is that to cope with such a swiftly changing world a robust, secure, and versatile system will be needed for the future. So far, Ethereum and blockchain fits the bill better than most.
Ethereum offers a standard rate of 2 Ether per block mined.
Uncle blocks are alternative branches of the blockchain parent history.
ETH mining relies more on GPU than CPU. However, a CPU of i5 or higher is recommended.
Yes, electricity costs are something every miner must factor into the equation.
