We are going to discuss about what is Ethereum Mining, how does ethereum mining work? Is it still profitable to mine ethereum? And what you need to do to start Ethereum Mining?
Ethereum Mining in a nutshell
Ethereum Mining is the function of maintaining the system by solving cryptographical problems. Despite of Bitcoin Mining that can be done through Central Processing Unit (CPU), Ethereum Mining is being done by Graphical Processing Unit (GPU) only. But generally, Ethereum works very similar to Bitcoin. It is decentralized system that is updated by every people connected to the system. Another similarity is that they both updated their chain after a new block updated.
However, they seem to be much alike, there are numerous differences between Ethereum and Bitcoin. For instance, in Ethereum blockchain, new block generates every 15 seconds but in bitcoin system new blocks added every 10 minutes. Ethereum miners receive 2 Ether plus all transaction fees as a reward for each block. Ethereum Mining algorithm is Ethash which is differenct than bitcoin’s algorithm. You can’t mine Ether with ASICs because they are developed for Bitcoin mining.
Important factor of Ethereum Mining
As more miners join the Ethereum network, Ethereum blockchain automatically adjust the computational difficulty of solving block in order to maintain 15 seconds. You see that Difficulty closely tracks hashrate network. You can learn more about Difficulty here.
Is it still profitable to mine ethereum?
There are some good reasons in Ethereum mining.
- Ethereum is being traded easily for bitcoins. Most of the wallets have the option to trade it in their features.
- Ether can be sold in USD on several exchanges such as Coinbase.
- Traders love Ethereum because of its high volatility, you can maximize your profits.
- Ethereum will be switch to a Proof of Stake, then you can make money by your ETH position.
- If you believe in the Ethereum concept, you can support and gain voice in the Ethereum network through mining.
If you have a clear understanding of Ethereum mining and concept of its difficulty, you should consider some economic calculations. While mining Ethereum earns money it also cost money and you have to make a right decision. There are number of calculator you can find on google for example: Ethereum mining profitability calculator.
Difficulty Factor and Block reward and ETH/USD rate
These fields are updated automatically. You can enter you own values manually to simulate scenarios.
Hashrate, Power (Watts): Use this table to find the parameters per your GPU’s make and model. Make sure the hash rate measurement is identical between the table and the calculator.
Pool Fees % (optional): Enter your mining fees if you’re mining via a mining pool (usually run around 1% plus a 1 ETH payout fee.
Hardware cost (USD): Put here (in USD) how much you are about to pay for your GPU.
Power Cost (USD/kWh): Enter your electricity price.
The profitability output will appear below the calculator as you enter the values:
The important part is that difficulty and price are changing by seconds, so your profit is for the moment you are calculating.
Warning: Ethereum is scheduled to a proof of stake so the mining device will no longer be useable then you should move on to another coin.
Hardware for Ethereum mining
Experimentation with various GPU selections in the calculator will reveal a card with the best price to performance to power consumption combination (expressed as MH/s per Currency Unit). Keep in mind that AMD cards outperform NVidia for cryptocurrency mining purposes. The card should have at least 3 gigs of RAM or it won’t be able to properly mine Ethereum. This is due to the growing DAG file (directed acyclic graph) used in the Ethereum Proof of Work hashing process.