As the adoption and popularity of cryptocurrencies soar, people are looking for different ways to earn from crypto. One method of earning cryptocurrencies, like Ethereum, is by mining them.
In simple terms, mining refers to the process of supplying computational power that is used to solve complex maths-based problems. Mining helps secure, verify and authenticate transactions on Ethereum and other blockchains.
There are a few different ways to mine Ethereum. These include:
- Solo mining
- Pool mining
- Cloud mining
We recommend that beginners use pool mining as it’s not very resource-intensive and can still result in decent profits. Follow the steps listed below to get started with pool mining Ethereum:
- Check and update your graphics processing unit’s drivers
- Set up your Ethereum wallet
- Download an Ethereum miner
- Join a mining pool and get server coordinates
- Configure the miner’s .bat file
- Run the miner to start mining Ethereum
- Calculate your profitability
2021 has been the year of cryptocurrencies. While cryptocurrencies like Bitcoin have been around for a while, popularity and interest in the crypto market have reached frenzied levels in 2021 and likely continue to surge in 2022.
Ethereum, one of the most popular cryptocurrency blockchains, recorded a staggering 1.2 million transactions every day in September 2021. That’s almost double the number of transactions that were being recorded on a daily basis at the same time last year.
This recent influx of new investors into the world of cryptocurrencies has sparked interest in how the underlying technology works and how one can make money online using crypto.
This article explains one of the more popular ways of earning crypto online, i.e. Ethereum (ETH) mining. It also explains what Ethereum is and how the Ethereum blockchain functions.
How to Mine Ethereum
First, it’s important to understand what mining is. We also explore the best ways that new users can get started with mining Ethereum.
Note: Mining Ethereum is going to be a redundant activity soon. This is because Ethereum is fundamentally changing the way its blockchain is secured. It is switching from the Proof of Work (PoW) protocol, which requires mining, to Proof of Stake(PoS), which does not require mining. Both concepts are explained later in the article.
Do keep this in mind if you plan on incurring significant expenditure on purchasing ETH mining equipment.
What is mining?
To understand what Ethereum mining means, it’s essential to get a basic idea of how blockchains work. As the name suggests, a blockchain quite literally comprises blocks that contain information. Each block is “chained” to the previous block in the series.
In other words, the blockchain is basically like an online ledger of transactions between different parties. This record is encrypted through cryptography so that no single party can unilaterally change records of past transactions.
Hashing is used to encrypt different blocks on the chain, which involves providing solutions to complex mathematical problems. Nodes (or computers/processing units) on the blockchain network compete with each other to guess the correct hash sequence. This process of contributing computing power to correctly guess that hash function is known as mining.
Miners who successfully guess the hash function are rewarded with Ether tokens (the cryptocurrency that fuels the Ethereum network) by the mining algorithm. Not only is Ethereum mining a great way to earn money, but it also helps secure the Ethereum network. Naturally, the more powerful your mining equipment, the more complex solutions it can provide in a shorter timeframe.
What are the different ways to mine Ethereum?
There are three major ways to mine Ethereum, each with its own pros and cons. These are:
- Mining on your computer using a mining pool.
- Solo mining Ethereum
- Cloud mining Ethereum
Each method of Ethereum mining differs in terms of the energy and computational power you need to expend, costs, and expected returns. We’ll explain the differences between each mining process. For now, all you need to know is that pool mining Etherum is the best method for beginners.
So now, let’s go over how you can mine Ethereum using a mining pool first before we discuss the others!
How To Mine Ethereum Using a Mining Pool
Before we move on to our step-by-step guide on how to mine Ethereum using a mining pool, it would be useful to briefly understand what pool mining is.
What is Ethereum pool mining?
Solving complex mathematical problems generated by the Ethereum network requires considerable computational power. A single laptop or PC usually doesn’t have enough processing power to consistently and safely solve the hash problem and mine Ethereum on its own. Indeed, Ethereum mining by yourself usually requires a mining rig, which is essentially a powerful computer with a top-level graphics card.
Cryptocurrency miners have formed mining pools to overcome this problem. An Ethereum mining pool consists of several different participants on the Ethereum network who contribute computing power to help solve the hash function.
Participants in the mining pool split the mining rewards if any participant in the pool successfully solves the hash problem. Each participant gets the mining reward in proportion to the computational power supplied by them.
Users with relatively limited computational power should strongly consider pool mining as a viable method to mine Ethereum. Some of the most popular Ethereum mining pools are:
You should pay close attention to the pool fees, pool size, and minimum payouts that the mining pool offers in deciding which one works best for you. Use the step-by-step guide below to start mining Ethereum through a mining pool.
Step 1: Check your Graphics Processing Unit (GPU) and update drivers
You’ll need a GPU with at least 3GB RAM to begin mining. It should be updated with the latest drivers to ensure smooth performance. GPUs from major brands, like Nvidia, come with software solutions that notify you when an update is available. Alternatively, you can just check the developer’s website to see if you’re using the latest version or not.
Step 2: Set up a cryptowallet
An Ethereum wallet will be needed to store the ETH you earn as mining rewards. There are several different kinds of cryptowallets, such as hardware wallets, mobile wallets, and software wallets.
Each differs in its ease of use and level of security. We won’t get into the details in the post, but a reliable Ethereum wallet, like Metamask, should suffice for most beginners.
MetaMask is particularly easy to set up and is available as an extension for Chrome, Brave, Firefox, and Edge. It’s also one of the more reliable and popular software wallets available today.
If you’re particularly concerned about the security of your Ethereum mining rewards, then you should think about setting up a hardware Ethereum wallet by getting a device like the Ledger Nano S or Nano X. Though do keep in mind that Ledger suffered a data leak recently which exposed mail addresses and personal information of a million users.
Pro Tip: Use a password manager to set a strong password for your wallet. This will help guard against potential cryptocurrency hacks and scams.
Step 3: Install the Ethereum mining software
You’re going to need mining software, known as an Ethereum miner,= that can communicate with the Ethereum blockchain. For the purposes of this guide, we’re going to be using lolMiner.
Head over to lolMiner’s GitHub repository and download the latest release of the miner, which should be a zip file. lolMiner currently only supports the Windows operating system.
You should always download mining software from the official GitHub repository. This is because some sites disguise viruses, worms, keyloggers, and spyware as mining software to infect your computer. You can check the source code of the file on Github and verify that it doesn’t contain any harmful elements.
Step 4: Join a mining pool and get server coordinates
You can select one of the mining pools we had listed above and head over to its website to get started. We’re using Ethermine for this guide.
On Ethermine’s homepage, you should see a big button with “Start Mining” written on it. Go ahead and click on it.
That should bring you to a page with server coordinates and other information related to different ports. Keep this page open as we’ll be using these details later on to configure the mining software you downloaded.
Step 5: Configure the .BAT files
Locate the zip file you downloaded from lolMiner and unzip it. The unzipped folder should contain a file named “mine_eth.bat”. Right-click on this file and select “Edit”. This should open up a notepad with some code written in it, as you can see in the following image.
We’re only concerned with the text that lies within the clearly defined user-editable part of the document. This part allows you to enter the coordinates of your mining pool and wallet address and configure the miner to use them while mining Ethereum.
Follow the simple steps below to configure your miner:
- Replace “eth.2miners.com” under ‘set “Pool” and ‘set “Pool2” with the address of your mining pool. If you’re using Ethermine, this will be displayed on the webpage we had navigated to earlier. Choose the address of the server that’s closest to your location.
- The numbers after the “:” (usually 2020) indicate the port address. Replace this with the address listed on your mining pool’s website.
- Replace the wallet address under ‘set “Wallet” with your own Ethereum wallet address. It is displayed prominently on the Metamask extension and should be easy to find. Don’t delete the text after the “.” i.e. “lolMinerWorker”.
- Save the changes to the .bat files and exit the notepad.
Your miner is now fully configured to mine Ethereum. So let’s start the mining process without further delay.
Step 6: Run the miner
Double click on the “eth.bat” file. It should bring up a command prompt that displays lines of code that look something like this:
Unfortunately, the GPU we tested this on no longer has enough hashing power to support Ethereum mining. If you have a GPU that’s powerful enough to mine Ethereum, then you should see a line of code that states “Started DAG gen on CPU 0”.
That’ll be followed by lines of code that begin with “New job received”. You can largely ignore these. You’ll know that you’ve successfully started mining when you see the text “GPU 0: Share Accepted”. Once that comes up, you can let the mining application run and it’ll keep the mining process going.
Congratulations, you’re now officially mining Ethereum! But is it even profitable for you? Let’s find out how to calculate your profits in the next step.
Step 7: Calculating Profitability
The command prompt window will occasionally display the average speed of your processor, as in the screenshot below:
Take a note of the speed and head on over to an ETH mining calculator, like whattomine.com, that lets you calculate your profits from mining cryptocurrencies. All you need to do is enter your average speed (in Mh/s) from the command prompt and your electricity and power consumption (in $/kWh) into the relevant fields.
This ETH mining calculator will show you your likely mining rewards and potential profits. You can use these values to determine whether mining Ethereum is a profitable business for you by subtracting the pool fees and hardware costs.
How To Mine Ethereum Solo
Why split the rewards of Ethereum mining with others if you can do it yourself? Well, if you happen to have the required specialized mining hardware lying around, then you can definitely give solo mining a shot.
The mining reward for a single block of Ethereum is usually 2ETH plus transaction fees, which brings the total to between 3.5-4 ETF. With Ethereum currently trading at close to $3000, solving a block could result in significant mining rewards.
But let’s be realistic about the feasibility of solo mining Ethereum. There’s a slim chance that you’ll actually have enough mining power to successfully get a block reward on your own even if you have an Ethereum mining rig with a dozen GPUs.
Indeed, most people who mine Bitcoin and Ethereum and professional miners with a large mining farm that contains hundreds of GPUs.
Moreover, mining Ethereum on your own will lead to a lot of power consumption. As a result, the overall profits you get from mining Ethereum are likely to be minimal unless you live in a nation where electricity is cheap.
Given these complications, we would not recommend that beginner Ethereum miners set up their own mining rigs.
How To Mine Ethereum Using the Cloud
Cloud mining refers to the process of renting out computing capacity or mining rigs on the cloud and using them for mining operations. By using the cloud to mine, users don’t need to specifically configure their hardware for GPU mining or install any mining software on their devices.
Instead, users have to pay a fixed monthly or annual fee to rent computing power in the cloud. This can be a risky strategy in the crypto market. The cryptocurrency’s price can decline rapidly while the rate for the mining equipment is fixed. In such a scenario, your outlay is likely to be more than any mining profits.
There are both free and paid Ethereum cloud mining services. Some of the best free cloud mining services are Swiss Gold Global and Nice-Miner. The best-paid Ethereum cloud mining service is Genesis. It offers state-of-the-art mining rigs at reasonable rates.
Mining Ethereum without significant hardware costs might seem appealing. However, cloud mining is based entirely on trust. Users must be sure that the cloud mining service they are choosing will use the money to mine Ethereum and not divert it to other uses.
We’ve covered all the different ways you can realistically mine Ethereum in this article.
But, do you even know what Ethereum actually is? We recommend that readers who are new to cryptocurrencies go through these sections!
What Is Ethereum?
Ethereum is the second most popular cryptocurrency blockchain in the world. It also has the second-largest market capitalization, of around $420 billion.
Its popularity and market cap reflect the importance of Ethereum to the world of cryptocurrencies. It is a decentralized general-purpose blockchain that supports smart contracts. Now, that’s a loaded sentence with a lot to understand. So let’s unpack what it really means.
“Decentralized” means that there is no one central authority or institution in charge of managing the Ethereum blockchain. Instead, different users who act as nodes on the Ethereum network continuously verify and manage the blockchain. As a result, it’s virtually impossible for anyone entity to manipulate the Ethereum blockchain to its advantage.
Ethereum can be used for multiple different purposes, making it a general-purpose blockchain. It can support applications that have real-world use cases. For example, the Ethereum blockchain is used to sell digital art non-fungible tokens (NFTs). It can enable several other transactions, such as finance, sports betting, and fan interactions, without the need for a trusted intermediary.
Hence, you can think of Ethereum as the base layer on which several decentralized crypto applications (or Dapps) can be created and run.
How Are Ethereum and Bitcoin different?
Ethereum and Bitcoin are the two most popular decentralized blockchains. However, both serve fairly different purposes.
Bitcoin is a specialized blockchain. Its only use case is that of a currency. The Bitcoin blockchain does not support any decentralized applications. Hence, the real-world use cases of Bitcoin are fairly limited in comparison to Ethereum.
However, Bitcoin’s market cap is now over a trillion dollars and it is still the most valuable crypto asset globally. This makes Bitcoin a relatively stable and safe asset in comparison to Ethereum and other altcoins.
Another point of difference is the consensus protocol used by the blockchains to validate transactions on the network. Both blockchains currently use PoW, which requires nodes to expend power and solve hash problems to validate the block.
However, Ethereum will be moving to a PoS consensus protocol. This protocol relies on validators on the Ethereum Network to verify transactions. Validators are chosen randomly by the algorithm to verify different blocks and are awarded transaction fees. It’s called PoS because entering the validator pool for a cryptocurrency requires you to put up or “stake” some of your currency.
PoS does not involve solving any hash functions and uses far less energy, which is why it’s seen as a more sustainable alternative to PoW.
Should I Mine Ethereum or Bitcoin?
A unique feature of PoW blockchains is that the mathematical problems that need to be solved keep getting harder with time. This means that Ethereum and Bitcoin miners will need to constantly upgrade their hardware to ensure that mining remains profitable.
Bitcoin has been around since 2008 and is, hence, one of the most difficult cryptocurrencies to mine. Most Bitcoin miners use specialized hardware, like Application-Specific Integrated Circuit (ASIC) miners. It’s probably not the best cryptocurrency for beginners to mine.
Ethereum, on the other hand, is less difficult to mine and can be done on a fairly powerful laptop (though returns will be scarce). However, as we’ve already mentioned, the Ethereum blockchain is migrating to a PoS consensus protocol, which will make mining redundant. That being said, you can see below that Ethereum’s mining difficulty has shot up sharply in the past year.
But, if you want to try mining with what you have at home, then Ethereum is definitely a better option. If you’re looking to get into mining in the long term, then you may need to invest a decent amount of money in getting specialized hardware to mine Bitcoin or Ethereum.
More and more people are looking for ways to mine Ethereum and earn profits. In this article, we’ve broken down the easiest way to start mining Ethereum for beginners, which is via a mining pool. It’s also the most sensible way as it doesn’t require much investment in hardware. Given the impending switch to a PoS protocol, investing significant amounts in an Ethereum mining rig isn’t the best option.
For information on cryptocurrencies, and especially Bitcoin, check out the following articles:
- How to Buy and Sell Bitcoin Safely in 2022
- The Best Bitcoin Alternatives
- Bitcoin and Cryptocurrency Scams to Watch Out for in 2021
- How to Access Binance for US Customers in 2022