What is Ethereum Mining?

What is Ethereum Mining?

What is Mining?

Ethereum is an open source platform which allows users to build the next generation of  decentralized applications. It’s an abstract idea that the governing authority in a company or financial institutions can be eliminated, by building trust due to the high visibility of the workings rather than having to trust companies blindly.

The essence of the project is using the blockchain technology which works in a peer to peer fashion, thus eliminating the need for a middleman or the authority.

Most applications today are centralized and you need to trust the authority which is in charge for the privacy or safety of your information. In a blockchain based service, your private information, funds and content all belong to you and therefore they’re as secure as they can be.

What is Mining?

In order to understand mining, you need to understand the process of how cryptocurrecy works. The ‘mining’ of a coin – literally bringing a coin to life – is a process through which people can earn Bitcoins.

The process is two-faced, solve an extremely difficult puzzle and solve the block of transactions. The puzzle is solved using different softwares that use the power of your graphics card to estimate solutions. So you’d generally harness your laptop’s graphic card’s power to solve this puzzle. That would be half of the mining process. If you do solve it, you need to then solve the block of transactions.

Once one of the hundreds of people who race to mine Bitcoins have completed the puzzle, a coin is brought to life and given to the solver.

The idea behind mining bitcoin is that the puzzle solution helps to verify a group of transactions. If there’s an attractive reward to mining Ethereum, there will be more and more people interested in mining. Thus, the puzzle becomes harder and the network becomes much more secure.

How can you mine Ethereum?

In the early days, you could download a software and use your computer’s powers to mine these coins. However, with the increasing number of people interested in mining, the mining process gets faster and the puzzle becomes much more difficult. That’s why people today buy different graphics cards or chips that are specifically designed for Ethereum mining.

If you want to mine Ethereum, here’s some things that you’re gonna need.


  1. An online wallet
  2. Free mining software such as cgminer and stratum
  3. Access to a mining pool
  4. Access to a coin exchange
  5. Reliable full-time internet connection
  6. A cool hardware setup location
  7. Desktop or laptop used only for mining
  8. Graphics card or ASIC chip
  9. Appropriate cooling technology for the setup.
  10. Patience


Here’s why you need all these things. Firstly, you need an online wallet to store the coins that you mine. You can’t really just save them somewhere, because you need a wallet to receive or send coins. Thus, in order to receive your earnings, you need an online wallet. You will also need mining software, which is usually open source, so it doesn’t cost you anything.

You will need access to a mining pool. A mining pool is like a team of miners. This team of miners has much higher chances of solving the puzzle, since their computing power is added. Therefore, it’s recommended to get an access to a mining pool since there’s higher chances of you making some money. In a mining pool, all the earnings are distributed based on the help that you gave in solving the puzzle.

You will also need a reliable full-time internet connection. Some miners recommend securing a connection of at least 2 mb/s. That’s because you need fast speeds to make sure you’re the first one who solves the puzzle.

What’s the best way to do Ethereum Mining?

The best way to mine Ethereum, according to me, is quite relative. The technology used and techniques used change from day to day in order to increase efficiency. There’s great discussions on reddit about Ethereum mining and I suggest you read up right here. If you’re serious about buying some equipment and getting your own personal setup running, that’s your Bible. Also, consider actually being active on discussions on reddit. There’s a reason why it’s called the front page of the internet.

According to the reddit page, the best GPU to buy for you to mine Ethereum are:




Nvidia 980 Nvidia 1060 Nvidia 1070
RX 470 4GB RX 470 8GB RX 570 8GB
RX 480 4GB RX 480 8GB

RX 580 8GB

The repercussions of Ethereum mining.

Unfortunately, the Ethereum mining culture sometimes does more bad than good. Due to the pursuit of better and faster technology, miners bought graphics cards that were more and more effective. Suddenly, there was a surge in people buying graphics cards and the price of an individual graphic card increased. So, people who’d like to build their computer will have to pay a higher price to buy them since most of them are bought by miners.

Now, there’s a serious shortage of GPUs in South Africa as well as most of the world. You can’t buy a graphics card for the same price on eBay anymore. The best performing graphics cards go for $300 over their retail price. Since it’s an attractive market, the prices are kept high by merchants who know their market.

According to Motherboard, Ethereum miners use as much electricity in a day as the Republic of Cyprus. Currently, building a rig and running it is quite expensive. As electricity gets more and more expensive, there’s bound to be less miners on the Ethereum network.

Cloud Mining

Cloud Mining is one of the solutions to the graphic card crisis that is happening at this very moment. It’s like you’d rent some computing power at a facility which would in turn do the processes for you. Then, you’d receive your earnings based on the computing power that you are renting as of this time. It’s an elegant solution for people who wouldn’t want to invest over $3000 in hardware for Ethereum mining.

These companies take care of the hardware, they maintain and update them regularly. They also make sure that their mining power is the most efficient and effective. So, they’re also making sure that your computing power is put to good use.

Fortunately for people who’d want to use cloud mining, they can pretty much just not care about anything going on in the Ethereum world. The company would take care of any changes that need to be done on the software side to maximise earnings. These kinds of analysis takes expertise and companies charge users for these services.

Go build your first rig!

It’s quite challenging to build a new rig but trust us, it’s worth the effort. Depending on your investment and the quality of hardware, you might be able to squeeze in $1-$10 per day. That’s after you cover up your investment in the hardware. It’s a great side income and you don’t have to put in as much work. Now that you’re equipped with the essential information, go build your first rig!

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About Article Author

Michael Serrano
Michael Serrano

Michael is an engineer and a bitcoin evangelist. He has been involved in cryptocurrencies since 2013. His biggest wish? 1 billion users of bitcoin, ether and litecoin by 2020. In the last 10 years he has worked for various early-stage start-up as a back-end developer.

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