What is Ether Mining?
Ethereum mining refers to the process of minting new ether (ETH) and verifying transactions. There is no central authority in Ethereum and miners form a decentralised network (similar to Bitcoin) to secure the ledger from fraud. Since Ethereum also runs decentralised applications (Dapps), miners also come to consensus on the state of these Dapps.
As a Proof of Work system, the mining process in Ethereum involves dedicating resources to solving puzzles. Specifically, miners will hash the block header’s unique metadata and try to find a hash value that is lower than the current target, which is like a puzzle they must try to solve by guessing the hash value until it meets the condition that is it lower than the current target.
If a miner finds a block with a hash value lower than the current target first, they receive the block reward and broadcast their block across the network so that nodes can validate it and add to their own copy of the Ethereum blockchain.
The difficulty of mining is adjusted periodically to ensure that a block is produced every 12 seconds on average. Because of the faster block time, it is more likely that two separate miners will both produce a valid block simultaneously, known in Ethereum as uncle blocks.
To ensure that only one block is added to the blockchain and everyone knows which one has been rejected, Ethereum uses uncle rewards to recompense miners who have submitted uncle blocks. These uncle blocks have a smaller share of proof of work and were very close to being submitted to the blockchain, where the rewards are a fraction of what a miner would receive for a valid block that is added to the blockchain.
The mining algorithm is known as Ethash, which was developed to have a property known as memory hardness to discourage specialised mining machines from being developed for Ethereum. ASICs (Application Specific Integrated Circuits) are specialised mining machines that have come to dominate the Bitcoin network, contributing to a higher hash rate but increasing the barriers to entry.
Ethereum was successful in resisting ASICs but these machines emerged in June 2018. Nevertheless, ASIC mining might not last long as Ethereum is due to shift to Proof of Stake during late 2019/early 2020 (which will replace mining with staking).
How Can I Mine Ethereum?
Mining ether is mostly the realm of professionals and you would need a lot of resources and expertise to make it profitable.
Firstly, you need the hardware to set up the Ethereum miners including a reliable power supply, fast internet connection and a rig if you are using multiple GPUs or ASICs. Your computer should also have at least 4GB of system RAM. For more than six GPUs, 8GB of system RAM is recommended.
You’ll also need mining software to control the miners and the latest drivers, depending on which GPUs you use to mine. The most widely used mining software for Ethereum is Claymore’s miner, as well as Ethminer and PhoenixMiner.
GPUs/ASICs for Ether Mining
To start mining Ethereum, you will need to choose the hardware you want to mine with, either GPUs or ASICs.
AMD and NVIDIA are the two main manufacturers of GPUs, with AMD’s options are generally cheaper and better value for money. More experienced miners may opt for NVIDIA products. There are several GPUs you can use to mine Ethereum including:
Radeon R9 295X2: this GPU has one of the highest hashrates for Ethereum (46 MH/s) but comes with a high power consumption of 500W. You can buy this GPU second hand for about $330.
Radeon VII: this GPU has a very high hashrate (around 90 MH/s) and a power consumption of 319W. The Radeon VII costs around $700.
NVIDIA GeForce GTX 1080i: this GPU is able to achieve around 35 MH/s and has a power consumption of 160W. However, the hashrate is not much higher than a GTX 1070 and is about half the price of a GTX 1080i.
NVIDIA Titan V: the 12 GB model can reach hashrate of 68.5 MH/s and has a power consumption of around 200W. This GPU is not cheap though, and will set you back about $3,000.
The ASICs you can use to mine Ethereum include:
Bitmain E3: the Bitmain E3 model has a reported maximum hashrate of 180 MH/s and a power consumption of 800W. Released in July 2018, the E3 was the first ASIC miner for Ethereum. The E3 costs around $1,600.
A10 Ethmaster: created by Innosilicon, this ASIC has a maximum hashrate of 475 MH/s and a power consumption of 850W. With a price around $5,500, it is much more expensive than Bitmain’s E3.
Many Ethereum mining enthusiasts have pointed out that GPU rigs can get comparable hashrates to ASICs and with lower power consumption.
Joining a Mining Pool
Once you’ve got your mining equipment set up, you can join a mining pool (which will give you a higher chance of obtaining a payout) or solo mine.
A mining pool combines the hashrate of all the members and pools it together so that the participants have a greater chance of finding a block and therefore a better chance of receiving the block reward. Each member of the mining pool receives a share of the block rewards based on the amount of work they contributed.
Solo mining is not expected to be as profitable, as you are only harnessing your own hash power to find a valid block.