What Is Ethereum?
Ethereum is the creation of the Russian-Canadian programmer and cryptocurrency researcher Vitalik Buterin. Ethereum was launched in 2015 and is an open-source, decentralized, blockchain-based software platform that enables SmartContracts and Distributed Applications (ĐApps). Read more about this cryptocurrency at our detailed review here.
This means that you can build completely decentralized apps and software on the Ethereum platform without any interference from a third-party. Ethereum also has two cryptocurrencies: Ether and Ethereum Classic.
What is Mining?
The term mining originates from mining precious commodities like gold. Just like gold, mining and find cryptocurrencies is hard. It requires time and effort, but the end result is beneficial for both miners and the cryptocurrency.
Mining involves the miner participating in a given peer distributed cryptocurrency network, which subsequently rewards the miner with crypto tokens in exchange for providing computing power to solve mathematical problems. Mining is an intense job that requires a lot of processing power and time.
Cryptocurrency transactions need to be embedded in data blocks, and each block is linked to several other blocks, which creates a blockchain. Blocks must be analyzed very fast in order to ensure that transactions are running smoothly. This is where miners step in; miners will devote time, processing energy, and computer time to sort through blocks.
Once the mining process hits the right hash, miners submit their solutions to the issuer of the currency for verification who in place offers crypto coins as a reward. Many cryptocurrencies entirely depend on digital mining to exist.
Getting started in mining Ethereum
Ethereum mining is very similar to mining Bitcoin – it is the process of maintaining the Ethereum ledger by solving complicated mathematical problems. However, unlike Bitcoin mining, Ethereum mining can only be done with a Graphical Processing Unit (GPU).
Unlike Bitcoin, where blocks are added on average every 10 minutes, Ethereum blocks are added on every 15 seconds approximately. Ethereum miners have rewarded two ETH as well as gas. Gas refers to the fee, or pricing value, required to successfully conduct a transaction or execute a contract on the Ethereum blockchain platform. Ethereum uses a different hashing algorithm from Bitcoin’s ‘hashcash, also known as Ethash.
Ethash is a memory-hard algorithm that’s designed to resist the development of Ethereum mining ASICs, meaning it’s incompatible with special hashing hardware that was developed for Bitcoin mining specifically. It is most suitable for GPU-mining.
Mining Ethereum is essentially the process of mining Ether, which means securing the network and verifying transactions. Ether serves as the fuel for the smooth running of the Ethereum platform and is an absolute must. Mining Ether is an incentive to motivate developers to create top-notch applications.
Developers who are looking to use smart contracts on the Ethereum blockchain need Ether to proceed, and it is essentially is a less expensive way of running transactions on the network. Ether can also decide to be sold after mining.
It’s important to point out that mining Ether, just like mining Bitcoin, takes up a lot of electricity. Miners can use any personal computer, but as we mentioned previously, they will need Graphics Card (GPU) with at least 2 GB of RAM.
After the hardware comes to the software
After you’ve purchased the appropriate software, you will need to look at installing software. After that, you will need to set up your nodes and connect it to the network and download the entire Ethereum blockchain, which is currently over 20GB in size and just keeps growing. Once that’s done, you will need to install Geth.
Once you’ve installed your software, you will need to set up a private test network that will help you test public contracts and your mining capabilities. Understanding the approximate hash rate of your device will help you calculate your potential profits. There are various profitability calculators that will help you calculate it as well as the electricity costs in your country. The higher is your possible hash rate, the quicker you can mine Ether.
You will need to install a mining software called Ethminer; once the nodes are set and connected to the network, you can begin mining Ether. Ethminer makes your GPU run the has the hashing algorithm essential that secures the network through proof of work.
You are entitled to receive three ETH once you’ve successfully mined a block. Miners also receive payment along with the transaction, which is an incentive for them to do this job. The reward is automatically transferred to their Ethereum wallet. Income is based on the miners’ hash rate and electricity consumption.
If mining out on your own seems too complicated, you can consider joining a mining pool. A mining pool is when a group of miners combine their efforts and computational power in order to improve their chances of solving mathematical problems and earning Ether. Profits are split between all the participants proportionally to the contributed computational power.
The supply of Ether is not infinite, and the overall amount of the crypto token was decided when the cryptocurrency was initially released in 2014. Mining cryptocurrencies is not easy; there are plenty of associated costs that just increase with time. As more miners join the Ethereum mining process, mining difficulty increases. At the same time, Ethereum’s value is continuously increasing, making the complex mining process potentially more valuable.