Ethereum Mining

Ethereum is one of the biggest players in the booming crypto industry. The Ethereum platform is aiming to make the blockchain a revolutionary asset for new kinds of online transactions. The platform needs Ether to function, and Ether is only produced by Ethereum mining. This guide explains the ins and outs of Ether mining.

What is mining?

In general terms, mining is the process of validating blockchain transactions and in turn, creating more cryptocurrency tokens. The way in which tokens are generated ensures that they are scarce (a required characteristic of currency).


Most blockchain cryptocurrencies use a similar approach to mining. A blockchain is a large chain of blocks of data forming a distributed database held by all users. These blocks contain information on all transactions completed since the beginning of the cryptocurrency’s inception; they are records of transactions. Whenever a user makes a transaction, an entry is created and stored in a block. Before a transaction is confirmed, it has to be verified and validated. This is the job of miners. They have to ensure that the transaction is valid before it can be added to the blockchain.

How does Ethereum mining work?

The underlying principle of Ethereum mining is similar to bitcoin mining. The information that is stored in the blocks is saved in hashed form, which is a digital encoding of data. It is a long string of alpha-numeric characters that represent a piece of information. Reverse engineering the information from its hash is not possible, which is why they are utilized.

Miners generate hashes until they get the correct hash. This generation of hashes is automated, with the user only having to run the mining software. After the right hash is found, the result is given to the Ethereum platform. The hash is then checked using the proof-of-work algorithm to verify that the generated hash is correct. Once this is confirmed, the miner is rewarded in Ether for his or her work.

There is almost zero chance of getting a hash without doing the required work because the hashing process requires the input of a nonce, which is a random number that generates some output. The miner only knows the format of the output hash expected of him or her; it is impossible to know which nonce to use with just that information. A lot of guesswork goes into the hashing process until the right hash is found, the computing power needed for this is the “work.”

Why do People Become Miners?

The mining industry is quite large. A significant portion of the sector is composed of Ethereum miners since Ethereum is one of the most popular blockchain technologies. But why do people engage in mining?

The simple answer is money. If you are a miner, your rewards are paid out in Ether. This Ether comes for the transaction fee that is required to make an Ethereum transaction.

How to go about Ethereum Mining

If you are interested in Ethereum mining, then you need to have a few things before you can begin your life as a miner.

  1. A computer with a decent GPU (graphics card) with at least 3GB of RAM
  2. At least 30 GB of free disk space on your system
  3. Some knowledge about using software from the command prompt
  4. An Ethereum client (such as geth)
  5. Ethereum mining software

The proof of work used in Ethereum is designed to be particularly effective when using a GPU to mine. You can use a system without a good graphics card and rely on the CPU to undertake the mining process, but your results will be modest compared to GPU mining.

Before you start mining, you should be aware that your mining setup will use electricity. It’s a good idea to calculate your running costs before you start. If you live in a country where the cost of electricity is high, then your profits might be far slimmer.

Now, to get started with your life as a miner, follow these steps:

  1. Download and install Geth from here. This is the communication hub linking you to the platform and giving you updates.
  2. Open a command line dialog. If you are a Windows user, you can do so by typing in cmd in the start menu.
  3. Type in ‘cd/’ without the quotes to get to C: directory (this is where you will have installed Geth).
  4. To create a Geth account, type in ‘geth account new’ and hit enter.
  5. You will be prompted to enter a password for your account. Take utmost care so that you enter the password you want correctly before pressing Enter. It’s advised you use a strong password and it is important to note it somewhere safe.
  6. Download the Ethereum blockchain and synchronize it with the network. Just enter ‘geth –rpc’ to do so.
  7. You will need a mining software for Ethereum. Ethminer is a good choice.
  8. Open a new command prompt terminal and type in ‘cd/’ followed by the installation directory you used for Ethminer and then hit Enter.
  9. Type ‘ethminer –G’ and press Enter to start the mining process.

Ethereum Proof of Work

The proof of work algorithm used by Ethereum is Ethash. The algorithm is designed in such a way, so it focuses on the miner’s memory switching capacity rather than computation capacity. This prevents centralization of mining power with those who have dedicated hardware like ASICs. Ethash looks at how quickly the hardware can make memory switches rather than how quick it can compute. Since GPUs are head and shoulders above ASICs in this regard, it is unprofitable for anyone to invest in ASICs to mine Ether.

The algorithm also alters the difficulty of mining based on how quickly miners are producing blocks. If miners start creating blocks too fast, Ethash increases the difficulty, while the opposite happens if miners take too long.

Ethereum is one of the most widely used cryptocurrencies. It is versatile and is helping small businesses by providing an efficient transaction system. Since AMD and Nvidia dominate the GPU market, some centralization is to be expected. However, Ethereum plans to introduce a proof-of-stake system rather than proof-of-work. In this new system, mining won’t be necessary.

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