What Is The Best Way to Mine Ethereum?
Mining Ethereum has become a popular form of income for some crypto enthusiasts and entrepreneurs. It allows people to help support the Ethereum Network whilst also earning rewards in its native currency: Ether.
There are now a variety of ways you can mine Ethereum, so we have created this easy-to-follow guide to lay out all the possible ways you can mine and which we think are the best.
What Is Ethereum?
Unlike Bitcoin, Ethereum has a talisman that is responsible for the original conception of the Ethereum network and is largely the leader of the whole project to this day - his significance to the project and cult status in the crypto community cannot be understated.
Originally born in Russia, Vitalik was the child of computer scientist Dmitry Buterin. His family soon moved to Canada to look for a better life and it didn’t take long for Vitalik to excel in mathematics, programming, economics, and cryptography.
By 17 he was thrust into the cryptocurrency having been told about Bitcoin by his father and then founded Bitcoin Magazine in 2011 has been writing for another publication, Bitcoin Weekly, shortly before that. Vitalik was paid 5 Bitcoin for every article (a value today of almost $200,000).
By 2013, aged 19, Vitalik Buterin was traveling around the globe sharing ideas with Bitcoin enthusiasts. He proposed changes to the Bitcoin Network that would allow the complete evolution of blockchain technology, but as often is with the Bitcoin community, it was met with hesitation. It's important to understand one of Bitcoin's core features is its rigidity. This then led to the creation of the Ethereum network as we know it today.
Having originally published a white paper proposing Ethereum in 2013 Vitalik began working full-time on what would be a network very different from Bitcoin’s. In 2014 the original five founders of Ethereum launched the network, they were: Vitalik Buterin, Charles Hoskinson (founder of Cardano), Gavin Wood (founder of Polkadot), Anthony Di Iorio, and Joseph Lubin.
The drama that surrounds the eventual split of the co-founders is something widely fixated over by the Ethereum community. Essentially, Vitalik wished the project to develop as non-profit but other members of the team, notably Charles Hoskinson, disagreed with this and left to form what are today some of the biggest projects in the space.
Ethereum subsequently launched as a smart contract-based network that would go on to completely open the blockchain and cryptocurrency space up for innovation and cause the subsequent explosion we see today.
What Is The Ethereum Network?
The Ethereum Network is a decentralized blockchain network that:
Has smart contracts as its foundations
Stores all transaction and smart contract history on its blockchain
Confirms transactions and issues new tokens into the supply through mining
Uses the Proof-of-Work consensus mechanism
Runs using the native currency: Ether
The blockchain consensus mechanism for Bitcoin and Ethereum. Requires miners to solve complex mathematical problems with extensive levels of computing power to verify transactions on the network and in turn earns miners rewards.
Very energy consuming
Requires specialist hardware
Mining is ongoing and indefinite in order to solve problems and verify blocks
What Is Mining?
There are two core concepts to understand about the nature and functions of mining that both hold incredible value to the wider system.
These two facets are:
The process of new Ethereum entering the overall supply via rewards for work.
When users send transactions to one another they are entered into an unconfirmed transactions pool to be sorted and verified by the network’s miners. This verification process is called mining and essentially consists of computers solving complex mathematical equations. You need a lot of computer power to complete these problems so miners are required to have special hardware to do so.
The process in which transactions become confirmed.
Essentially, once a problem is solved it means a block has been created. A block represents a collection of verified and confirmed transactions that give the network security of trade.
Once a miner successfully creates a block they are rewarded with Ether and the overall market supply is slightly increased.
Different Ways To Mine Ethereum
Your first decision to make is whether you wish to mine alone or as part of a group. Solo mining means you do it alone and therefore take 100% of the profits (if you are using your own equipment).
Mining is an extremely resource-consuming process, so any problems with hardware will need to be dealt with by you. And needless to say, the competition for mining blocks is very high and therefore harder to compete just as one individual.
Pool mining refers to pooling together the mining resources of more than one person or group. Pool mining dramatically increases your competitiveness and likelihood of finding a block to mine. More resources, more opportunity.
This works by essentially combining the hashing output of devices thereby increasing the Giga hashes of mining power.
Application-Specific Integrated Circuits mining refers to using extremely specialized hardware with high computational and processing power designed for cryptocurrency mining. This is, without doubt, one of the most efficient ways for someone to mine. In fact, many suggest ASIC miners have an unfair mining advantage, over those using CPU and GPU mining for example, which negatively affects the overall network.
CPU mining refers to simply using a laptop or computer with some specific software programs. This doesn’t have anywhere near the force of ASIC or GPU mining and really isn't a viable option to miners nowadays. This was much more effective in the early days of the network when mining competition and resource costs were much lower.
GPU mining is one of the more popular ways to mine Ethereum as it is somewhere in between ASIC mining and CPU mining. For a GPU setup miners design, a small-medium size rig consisting of a motherboard, a processor, a rig frame and as many graphics cards as that miner can buy.
GPU mining is relatively competitive and also reasonably priced to build and maintain.
Cloud mining is an interesting way to mine Ethereum as it allows miners to rent the equipment they need to perform mining activities. This clearly has its upsides as it's a competitive way to mine, it's not very costly and also you are not responsible for maintaining the equipment.
However, one of the biggest issues with cloud mining is that you pay an upfront price for the renter's services, therefore if the price of Ether goes down (the token you are mining) then you are more than likely to lose money.
What Is The Best Way to Mine Ethereum?
The answer to this question really depends on what you want to do and how many resources you have to do so.
Beginners may find it best to have a go at designing their own rig and trying out GPU mining. This can be done on your own or then grouped together with others with pool mining. Cloud mining is also an option but beginners must be aware of how to read charts and keep up to date with Ether market trends.
To Mine The Most Ethereum
ASIC mining is undoubtedly going to yield the best returns. Equally, if this is then pool mined with other ASIC miners there can be some huge amounts of work undertaken.
The Easiest Way to Mine Ethereum
Cloud mining is probably the easiest form of mining because it does not require you to buy, own or maintain any technical hardware.
The Worst Way to Mine Ethereum
CPU mining is now more or less obsolete with the competition and resource costs of Ethereum mining today.
The best way to mine Ethereum really depends on the resources you have at your disposal and what you wish to accomplish. Mining is currently very resource-intensive because of the Proof-of-Work consensus mechanism that Ethereum operates with.
It is worth keeping an eye on the overall development of the Ethereum Network also because everyone is waiting for the rollout of Ethereum 2.0 which is expected to completely change the mining landscape. If this happens the consensus mechanism will change to Proof-of-Stake and mining will then be undertaken with large amounts of Ether, rather than computing power.
Nevertheless, the current best way to mine Ethereum has probably pooled mining with ASIC hardware. This will give you the best returns and make you the most competitive.