Ether Mining Guide: How to Mine ETH Cryptocurrency

Ethereum (ETH) is an open-source public blockchain protocol that features the use of smart contracts. This allows other decentralization applications or Dapps to be built on top of the Ethereum blockchain. Ether is the block reward or cryptocurrency that is generated by verifying transactions and creating new blocks to ultimately maintaining the Ethereum blockchain. Ethereum was proposed and founded by Vitalik Buterin in 2013. There are also many other co-founders including Dr. Gavin Woods, Joseph Lubin, Charles Hoskinson, and Anthony Diiorio.

The Ethereum Virtual Machine (EVM), which is decentralized and Turing-complete, utilizes an international network of public nodes to execute scripts. The Ethereum blockchain also uses “gas” as an internal transaction pricing mechanism, which is included as part of every transaction on the Ethereum network. The “gas” is considered transaction fuel, and incentivizes miners to include the transaction in a block.

Ether is the 2nd largest cryptocurrency by market capitalization (USD$ 69+ billion). It is one of the few cryptocurrencies that still uses a Proof-of-Work consensus mechanism that is ASIC-resistant (until recently according to rumours) and can still be mined using regular GPU computational power.

If you are considering mining ETH in the short term (there may be a couple of years left), you want to first think about whether you are going to solo mine, pool mine, or cloud mine. Pool mining has associated costs like pool fees but you could see quicker rewards and reduced reward variance in comparison to solo mining. At this point, the most profitable and efficient way to mine ETH would be to pool mine or cloud mine. Let’s break down the elements of mining Ether so you get a complete understanding of the underlying technology and how the process works.

Ethereum Mining & Consensus Mechanism

Ethereum currently uses the Ethash Proof-of-Work consensus mechanism based on the original Keccak hash algorithm, which was standardized as SHA-3. Ethash 1.0 was designed to be ASIC - resistant with its memory-hardness, making it difficult to implement special ASIC chips. There are some traces of slightly modified versions of the earlier Dagger-Hashimoto hashes present as well that help reduce computational overhead. Ethash uses a 1GB dataset known as Ethash Directed Acyclic Graph (DAG) and also has a 16MB pseudorandom cache for light clients, which are regenerated every 30,000 blocks. This is called an epoch. Ethereum miners use cryptographic nonces along with pieces of the DAG to create mix-hashes using receipt and transaction data to generate a hash that is set below a dynamic target difficulty.

There have been many proposals to move Ethereum to a Proof-of-Stake (PoS) consensus mechanism, as outlined in the original Yellow paper. The most recent proposal, EIP 1011, was submitted on April 20, 2018, outlining the transition to a hybrid consensus mechanism that utilizes both PoW and PoS. This implementation is called Ethereum Casper. It is critical to understand the implications of this, as it will drastically change how Ether is mined once it is implemented. Also be aware that in the long term, Ethereum is looking to change the consensus mechanism to be fully Proof-of-Stake based. This means Ethereum will no longer be mineable once the full transition to PoS is complete.

In the meantime, let’s take a look at some of the top miners on the market.

Ethereum Mining Hardware

ETH was originally mined using consumer grade CPUs and GPUs and was ASIC-resistant. Since its inception much has changed. It is no longer profitable to mine using CPUs, GPUs are the primary way to profitably mine Ether and is one of the the most profitable cryptocurrencies to mine due to its price potential. The increase in ETH mining has led to the unavailability of many GPUs for gaming or graphics and has caused a significant price increase in the cost of GPUs on the market, globally.

Ethash DAG is stored in the VRAM of the GPU, so you need to have enough storage to load the DAG. You will also require a graphics card that has at least 3GB of VRAM in order to mine Ethereum, which will rise to 4GB of VRAM later this year. Anything less is insufficient and you WILL NOT be able to mine ETH. There are also a few minimum system hardware specifications that will need to be met. Here are some recommendations:

• For rigs of less than 6 GPUs, 4GB RAM is required. For more than that, look at getting a 8GB RAM stick;
• A motherboard with enough PCIe inputs is critical. You will need these inputs in order to build a multiple GPU rig;
• A Powered riser cable for each card;
• An open-air rig for multiple GPUs;
• A reliable power supply with capacity based on the GPUs chosen to mine;
• A reliable internet connection.

That being said, it needs to be mentioned here that there have been recent rumors of Bitmain and a few other firms like Samsung (KS:005930), creating new ASIC (Application Specific Integrated Circuit) miners to be released in Q2 2018. This is definitely something to be on the lookout for if you intend to mine ETH profitability and competitively. If ASIC miners are released, it could drastically reduce GPU mining efficiency if the hashpower is significantly higher than existing GPUs. This may result in the obsolescence of profitable GPU mining.

Below is a table outlining a few GPUs that can currently be utilized to profitably mine ETH:

Ethereum Cloud Mining

If you don’t want the hassle and costs associated with buying hardware to mine but still want the exposure, you can look into cloud mining. Essentially, cloud mining involved using shared process power from a remote data centre. This alleviates having to manage and maintain hardware setups but comes with associates risks. The most popular form of cloud mining is called Hashpower Leasing. You essentially lease your desired amount of hashpower from a remote cloud mining firm, typically on a 1 or 2 year lease, in exchange for fiat currency. This gives you the the right to the ETH block reward proportional to your purchased hashpower. Cloud mining is also applicable to many other mineable coins, not just ETH. Below are some advantages and disadvantages of cloud mining.

Ethereum Mining Software

The software used to mine Ethereum is just as important as the hardware. Different software has been created for different hardware. You want to get the most out of your hardware, so utilizing the correct mining software and optimizing your GPU or CPU is essential to reap the most profits.

You will need temperature monitoring and overclocking software to optimally tweak your GPU performance, reduce temperature, and reduce overall energy usage. Many miners use MSI Afterburner for overclocking and GPU-Z for temperature control, so you may want to take a deeper look at those.

As far as mining software goes, the most reliable and widely used is Claymore’s mining software. It is the most robust and best all around miner which is easy to set up and has extra functionality. You can also mine two coins at once with this software to increase your income. Ethminer is also another popular option as well. Setting up the software should be pretty straightforward and involve downloading and extracting .zip files.

You will also need to ensure you have a ETH wallet setup in order to receive your block rewards and hold your ETH balance. If you don’t plan on holding large amounts of coins, a web or desktop wallet is more than suitable, you can create a wallet here. Remember to NEVER share your private key and it’s best to download and use a keystore/JSON file which is password protected or use MetaMask. If you do intend to hold large amounts of coin, the best and most secure way to hold your coins is in a hardware wallet, so a Ledger Nano S or Trezor will be your best option.

Ethereum Mining Difficulty & Profitability

The network hashrate has grown exponentially since inception, which is justified as ETH is the second largest cryptocurrency by market cap and has huge price potential. With the emergence of the Ethereum Enterprise Alliance and many other large corporations working on Ethereum blockchain based industry solutions, Ethereum will become a major player in the cryptocurrency space and will help lead mass global adoption across many industries. Ethereum has experienced significant exponential growth since early 2017. The increase in price has lead to higher demand for ETH mining and has increased the difficulty level over time.

You can take a look at more charts here

Below is a chart outlining the potential profits using cryptocompare. This link will allow you to enter different inputs and see the associated profit potential so you can gauge your overall cost and profits. This is for illustrative purposes and results can vary depending on your inputs and the market price of Ether. It is also based on an ETH price of USD$ 229.81.

With the potential introduction of ASIC miners and the increased price potential from the PoW to PoS consensus mechanism, ETH is definitely worth mining if you can get hold of an ASIC miner. In the meantime, GPU mining is still profitable. ETH is one of the best cryptocurrencies to mine solely based on future price potential.

If you have any questions about Ethereum mining hardware or software, please feel free to comment below and let us know.