TL;DR: Mining Ethereum over Bitcoin offers a lot of potential for independent miners, and can be accomplished with readily available and multipurpose hardware. This post will dive into all of the necessary steps for getting started with mining Ethereum in 2018.
- What is Ethereum?
- Generating a wallet
- Selecting mining software
- Joining a mining pool
- Optimizing payout
The year is 2018, and you’ve probably heard of mining Bitcoin before. The absurdly competitive industry of "generating" new cryptocurrency by use of increasingly specialized, and profoundly expensive, hardware that is designed for one singular purpose. Bitcoin mining rigs will cost you an arm and a leg, but seemingly become obsolete the second you’ve purchased them. Many of us often simply imagine giant warehouses the size of literal coal mines. Facilities where millionaires store their loud, power-hungry, and constantly working drones which produce more heat than the surface of the sun. A community which makes it impossible for average members to ever make a profit, and a competitive space where the lights are never turned off.
Frankly, Bitcoin mining is no longer feasible for normal folks like you or me as it was never designed to stand the growth it has experienced. The optimal hardware to mine Bitcoin now is called ASIC (Application-Specific Integrated Circuit) and is specially designed for solving Bitcoin’s computational puzzles. Using your own (or off the shelf) CPU or GPU will simply result in much higher cost from electricity and excess hardware. The potential reward will never be worth the investment. Consequently, average miners are leaving Bitcoin behind.
What is Ethereum?
Ethereum is a blockchain-based platform which enables developers to build and deploy decentralized applications on top of the network. The advantage of Ethereum over Bitcoin is that it can support many different types of decentralized applications and general purposes. Applications are not just limited to basic financial transactions but become applicable to any particular industry.
Ethereum also has the second largest market cap after Bitcoin and has gained massive growth in the last year. The market cap for Ethereum (ETH) has reached over $100 billion and has a circulating supply 82.7% greater than Bitcoin.
Ethereum price from January 2017 to January 2018.
So what about mining on Ethereum?
Ethereum mining is similar to Bitcoin mining, in that miners will also have to solve complex cryptographic puzzles to receive their reward. Except, Ethereum's Proof of Work algorithm requires not just computational power, but memory allocation as well. This reduces the competitive advantage of ASIC mining rigs over common GPU rigs. The result is a mining ecosystem which is resistant to the emergence of specialized hardware that favors bigger players and investments. So how do you get started with mining Ethereum?
Step 1: Generating an Ethereum Wallet
To store your Ether, you’ll need a digital wallet like any other crypto-currency. There are a lot of great wallets being maintained by the Ethereum community, which naturally has attracted a lot of talented developers given its mission. Among the most popular are the following:
Depending on the wallet you’ve decided to use, the initial installation process will differ slightly. Some wallets will give you a series of words known as a mnemonic phrase, and others will give you a mixture of letters and numbers known as a private key. These can be used to restore your wallet should it ever be lost. Make sure to keep this data somewhere safe, and preferably stored offline.
After being given your recovery key/phrase, you’ll be given a public address for your Ethereum wallet as well. This address is common knowledge and can be shared openly with others. This address is where people will send you Ethereum, and can be thought of like a username or email address. Copy it down as well, because you’ll need this address to receive your mining proceeds later on.
Step 2: Selecting your mining software
There are several excellent options for mining Ethereum on your machine. Among the most popular options are EthMiner, Claymore, and EthOS.
EthMiner is an Ethereum focused GPU mining worker with standalone executables for Linux, macOS, and Windows. Ethminer is a very simple command line program which requires a base knowledge of operating a terminal and takes very little time to set up. If you're just interested in mining Ethereum and want to start slow, EthMiner is a great option.
Claymore is one of the most popular, if not the most popular, software options for quickly and easily getting your mining rig up and running. It offers extensive control features, runs very smoothly, and even allows for on-the-fly tweaking of certain parameters without needing to restart your machine. Claymore also has standalone executables for Linux, macOS, and Windows. If you're comfortable with getting your hands dirty, Claymore is worth testing out. This miner is free-to-use; however, there is currently a developer fee of 1% for Ethereum-only mining and 2% for dual mining.
Note: If you don’t have a modern graphics card with the appropriate amount of RAM, you should use EthMiner. Claymore only works with higher-end cards like the RX 470, 480 or 580 with at least 2GB of RAM (and some others), as well as the top-of-the-line cards made with Nvidia hardware.
EthOS is a pre-configured Linux distribution that is specially customized for mining Ethereum in a highly optimized fashion. It's rather convenient for new miners that want to make an outstanding setup of their mining rig in short amount of time. EthOS is not a free Linux distribution, but the advantage of ethOS is that it's hassle-free. There's no installation of drivers, compiling code, creating scripts, and so forth. After you have booted ethOS on your SSD or USB memory drive you're good to go. Once you turn on the rig, EthOS starts running and detects all of your hardware. There's a minor amount of configuration, but the process is very seamless at $39 for a digital download.
Step 3: Joining a mining pool
While optional, cryptocurrency mining payout can be a very unpredictable income for solo miners. If you mine independently, you'll always be competing with giant teams of powerful miners. For this reason, it's much more profitable to join a mining pool where proceeds are split among users. You can think of a Mining Pool as a co-op. To simplify, being a part of this pool allows you to receive a consistent payout for the work that you provide. They usually offer a simple sign-up process which allows you to specify your payout address, track your progress, and tweak some settings. There are several large pools to select from in Ethereum, so here are a few to start:
This is a popular mining pool which rewards its contributors through a PPLNS Reward system. This system has a 1% fee + 5 Finney per payout (0.001) fee.
This is a relatively new pool where you can mine Bitcoin, Ethereum, Ethereum Classic, Litecoin and other CrytoNote-based currencies at the same time. CryptoCurrencies such as Monero, Bytecoin, DigitalNote, Dashcoin, Infinium, and more are also supported. MinerGate is the first pool which provides such a service for merged mining, often called "dual mining" without a decrease of hash-rate for major coins. The pool even utilizes a friendly GUI application and can be a great option when trying to diversify your investments.
This mining pool is a predictable-solo mining pool for Ethereum. That means that 100% of the block reward will be credited to the miner that contributed the most work on the pool for a specific block. The reward is paid out automatically after ten confirmation on the Ethereum blockchain and provides an interesting approach to pooling.
Other Mining Pools
There are thousands of different mining pools for Ethereum, all of which offer unique advantages and disadvantages. It would take an eternity to compare each of them comprehensively, but https://investoon.com/mining_pools/eth provides a great service for breaking down some of the core differences and traits between popular communities.
Step 4: Increasing your Payout
Congratulations! At this point in the mining process, you should have generated your Ethereum wallet, configured a device to mine Ether with one of the provided software solutions, and joined a mining pool that fits your specific requirements. So what's next?
Dual mining cryptocurrencies
"Dual mining" is a popular trend in the cryptocurrency space presently. With dual mining, you can combine the mining process of multiple cryptocurrencies such as Zcash, Sia, Monero, and more without having to sacrifice significant processing efficiency. This is a great option for diversifying your portfolio and is easy to establish with tools such as Claymore and EthOS. Different cryptocurrencies will pair better, but profits largely depend on betting on cryptocurrencies you believe will appreciate more.
Investing in better hardware
One logical conclusion to increase your payout is to improve the hardware made available to your mining rig. There are two basic approaches miners can take when it comes to investing in new hardware, and there's no single correct answer. As a miner, you can choose to buy a preconfigured set of hardware, or you can choose to build your own custom arrangement. The profitability of each option largely depends upon your experience building computers, the time you're able to allocate, and the base knowledge you possess about optimizing hardware performance. Miningstore.co hopes to provide the right resources for everyone, and offers several pre-configured machines in addition to custom rig cases and bulk GPU orders.
Preparation for Proof of Stake
Casper is a proposal for slowly consolidating Proof of Stake into Ethereum. Proof of Stake will eventually replace mining (Proof of Work) altogether, but not before working side-by-side with existing systems to ultimately enhance the potential profitability of today's growing mining community. Understanding Casper can help you maximize your long-term investments, and get the most out of your mining rigs.