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How to mine Ethereum? Top tips for beginners - Binaryx
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How To Mine Ethereum? Top Tips For Beginners

ETH is one of the popular cryptocurrencies. Ethereum mining is represented as a system for verifying operations and forming blocks by special computing devices when the coin is issued. Ethereum mining in 2020 is available in different ways: ASIC, video cards, solo, or in a pool. Which of these options is more profitable and reliable? Let’s look at the best way to mine ethereum and what nuances to pay attention to for new miners.

Why should you mine Ether?

Mining turns the act of securing a network into a complex but usually quite profitable business, so the primary motivation for mining ethereum is making money. Miners receive a specific reward for each block, plus any transaction fees paid by users. Costs generally make a small contribution to overall revenue. However, the decentralized finance boom in 2020 helped change that equation for Ethereum.

There are other reasons why someone would want to mine Ether. An altruistic community member could decide to mine at a loss to secure the network, as every additional hash counts. Mining can also be useful to acquire Ether without having to invest in the asset directly. 

An unconventional use for home mining is a form of cheaper heating. Mining devices turn electricity into cryptocurrency and heat. Even if the crypto is worth less than the cost of power, the heat on its own could be useful for people living in colder climates.

Will the proof-of-stake transition kill Ether mining?

As for now, Ethereum mining is based on the Proof-of-Work protocol. However, a transition to the Proof-of-Stake algorithm is expected soon. It will require changes at different levels: from technical specifications for equipment to differences in earning cryptocurrency features. It should be considered that the principle of ensuring the security of the entire system will also change.

Proof-of-Work forms the competitive adversarial nature of miners’ search for solutions. They struggle with each other at the speed of solving complex mathematical problems. The first Ethereum miner to solve the puzzle associated with a specific block receives a reward in the form of cryptocurrency. At the same time, he does not need a deposit amount for mining, but only sufficiently robust equipment.

Proof-of-Stake radically changes the principle of making money. The mechanism involves the formation of a specific pool of validators. Anyone can join this pool, and the block reward will disappear completely. Participants in the block validation process will only be rewarded on transaction fees. In PoS, the creator of a new block is selected by the system in advance. The choice is based on the miner’s share in the total amount of cryptocurrency. Thus, the validator’s income directly depends on the amount of Ether in his account. There is a separate term for mining in the PoS system called “forging.”

Now, let’s talk about safety. PoW attacks are high-priced for hackers, as there is a high threshold for economic and technological entry. Hacking is becoming financially unwise. A hacker will spend more on attacking the system than he will earn in the end. On the other hand, PoS needs additional protection. It’s where the Casper protocol comes into play.

To become a validator, you need to make a minimum deposit, which will ensure the forger’s reliability. Casper’s algorithm can define the conditions under which an unreliable validator loses its stake. It is enough for the validator to violate a specific set of Casper’s new protocol rules to determine the violator.

Vitalik Buterin explains that the number of validators will not be limited, but the possibility of economic regulation will remain. It will be carried out by lowering the fee’s size if the number of forgers increases significantly and increasing it if there is a lack of validators.

Is mining Ether profitable?

And now, let’s discuss the question, “is it worth it to mine Ethereum.” As mentioned above, a vital parameter affecting the profitability of mining any cryptocurrency is electricity costs. Suppose we consider a mining rig of 10 RX580 8GB with an average hash rate of 300 Mh/s, then according to the WhatToMine website. In that case, the monthly income will be about $350.

Here, of course, we are talking about mining in the Ethereum pool. Based on the average price of such a GPU of $245, you’ll need $2450 for ten pieces of it. At the same time, it will be possible to earn about $4200 in a year. As a result, we get that mining Ether on a rig of 10 RX580 8GB will pay off in 7 months. After that, it will start making a profit. 

Today’s main issue is the date of the transition from the Proof-Of-Work to Proof-Of-Stake algorithm, which was announced by Vitalik Buterin at the beginning of 2019. However, this does not concern those who mine on video cards, rather than users with ASICs. After all, if there will be a long-awaited transition to PoS, the GPU owners will start mining another digital currency.

What’s better for Ether mining, a GPU, FPGA, or ASIC?

Ether was designed as a coin that could only be mined with consumer graphics processing units, or GPUs. It puts it in contrast with Bitcoin, which can only be mined effectively with specialized devices commonly referred to as application-specific integrated circuit machines, or ASICs. These devices are hardwired only to do one task, which allows them to achieve much higher efficiency than more generic computational hardware.

Making a mining algorithm that is “ASIC-resistant” is theoretically impossible and very hard in practice. ASICs designed for Ethereum’s mining algorithm, Ethash, were eventually released in 2018. However, these miners offer a relatively modest improvement over GPUs in terms of hashing efficiency. By contrast, ASICs for Bitcoin are substantially more efficient than GPUs due to their specific mining algorithm.

Another type of specialized device is the FPGA, which stands for field-programmable gate array. These are a middle ground between ASICs and GPUs, allowing some form of configurability while still being more efficient than GPUs at particular types of computations.

It is feasible to mine Ether with all of these devices, but not all are practical or sensible. FPGAs, for example, are inferior to GPUs in most circumstances. They are expensive and very complicated devices that require advanced technical knowledge to be used effectively. The reward is arguably not worthwhile, as their mining performance remains very close to leading GPUs.

Ether ASICs provide a measurable performance boost over graphics cards but carry many drawbacks in practical usage. The most crucial concern is that ASICs can only mine Ether and a few other coins based on the same hashing algorithm. GPUs can mine different currencies and can be resold to gamers or used to build a gaming PC if push comes to shove. Additionally, as few shops sell them, ASICs are more hardened to the source, while buying directly from manufacturers may require high order quantities and long waiting times.

So, for the hobbyist home miner, GPUs remain the most sensible choice due to their flexibility and relatively good performance compared to price.

How to find the best mining hardware?

Choosing the right hardware should primarily be dictated by three factors: its maximum possible hash rate, energy consumption, and purchase price. 

The purchase price is sometimes ignored, but it can make or break a mining operation, as hardware does not last forever. Component “weardown” is a factor, as eventually, all devices will fail. However, this issue is often overblown because GPUs are quite resilient devices, with many reports of them continuing mining for over five years.

The most significant risk affecting miners is hardware becoming obsolete. More advanced GPUs or ASICs can push out existing miners almost entirely, especially those with higher electricity costs. Due to this, the “payback period” — how long it takes for the miner to pay itself back — becomes a critical metric for financial analysis in mining.

How to set up an Ether mining farm: Guidelines and risks

Mining requires careful planning and attention to avoid unfortunate outcomes. All computers are a potential fire hazard. This risk is magnified in mining due to the constant usage and high energy outputs involved.

It’s crucial for in-home mining settings not to overload the domestic electric grid with an excessive power draw. The grid as a whole and each single-socket are only rated for absolute maximum power, and mining devices can easily surpass those thresholds. The wiring could fail and overheat, posing an immediate fire hazard. Consult experts to evaluate the safety of your setup.

Choosing high-quality power supply units with ample power rating margin is highly recommended to protect from power surges and other electrical issues.

For GPU and FPGA mining rigs, there are several essential hardware requirements for mining ETH effectively. Investing in specialized motherboards, such as the Asrock X370 Pro BTC+ or the Gigabyte GA-B250-FinTech, can be worthwhile, as they are optimized for creating new coins. Each motherboard may support up to 14 GPUs, which is usually impossible on standard motherboards.

The motherboard should be paired with a sufficient amount of RAM, 8 or 16 gigabytes, and at least 256GB of drive storage. The latter part is essential as Ether mining requires a lot of runtime memory, at least 4GB per GPU. This requirement can be offloaded to the much cheaper permanent storage with no performance loss through an operating system trick called pagefile caching. The GPU’s RAM must also be at least 6GB to account for the growing DAG, a vital mechanism of the Ethash algorithm.

The DAG, which stands for directed acyclic graph, is a large dataset used to compute the hashes for mining Ether. Mining hardware must have enough memory capacity to store it. The dataset grows at a rate of approximately 1GB every two years for Ether. However, other coins may have different growth rates. Four-gigabyte devices will have been completely unusable by the end of 2020, while 6GB-GPU will likely decrease by 2024. Ethereum mining calculator can help evaluate the exact schedule.

The central processing unit can be as cheap as necessary, as it has no relevance to GPU mining. Multiple-GPU setups are likely to require risers, an adapter to allow GPUs to be connected to the motherboard. The mining rig case should be open and wide enough to allow air circulation.

In terms of the operating system, Windows and Linux are both valid options. However, Linux may require more command-line interactions to set up. It’s crucial to optimize the GPUs in terms of clock speed, power usage, and memory timings to achieve the figures outlined earlier. Still, a full roundup is outside of the scope of this guide.

The most straightforward way to mine for Ethereum is by joining one of many mining pools like SparkPool, Nanopool, F2Pool, and many others. They allow miners to have a constant stream of income instead of a random chance of finding a whole block once in a while. Popular mining software includes Ethminer, Claymore, and Phoenix. It may be worth testing each one to see, which is faster for your specific configuration.

Finally, the devices should be regularly maintained, cleaned, and dusted to keep the hardware in good standing. Other details involve setting up a successful mining farm, many of which are jealously guarded as trade secrets. This guide is not meant to be entirely comprehensive. Still, if you are serious about mining, you should now have a strong knowledge base to conduct further research.

Conclusion

So we finished the review of mine Ethereum features. Finally, we would like to say that you should calculate all possible options and risks before buying mining equipment. The crypto market situation changes almost every day. No one can predict the profitability of the purchase of equipment exactly. However, at the moment, Ether mining can still be profitable.