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One of the unique features of cryptocurrencies is that you can mine them by solving complex mathematical problems and puzzles. Just like Bitcoin, you can also mine on the Ethereum network, create fresh Ether tokens, and get rewarded with Ether in return for the PoW (Proof of Work) task.
Here’s all about how Ether mining takes place.
Blockchains use the mining process to validate and confirm new transactions on that network. This process is associated with the proof-of-work (PoW) consensus. It helps to remove the vulnerability of double spending and related attacks. By successfully mining a block, the miner validates it on the blockchain, and the block gets added to the network.
Based on the difficulty of mining and the competition, Ethereum mining can be a capital-intensive process. To start mining on Ethereum, follow the steps given below:
Step 1: Create an Ethereum-based crypto wallet
To mine Ethereum, you will need a crypto wallet that can hold the rewards once you mine them. There are various options to choose from, some of the popular ones being:
Step 2: Select your mining hardware
You will need a very powerful computer system for mining Ether. Due to intense competition, a high-powered system is a must. A basic low-powered system will not mine fast enough to harvest a profit. However, there are several things to keep in mind before buying hardware for crypto mining. The factors are:
Crypto mining equipment requires heavy initial investments. The speed and power of your system will determine how profitably you mine Ether. Opting for a GPU mining rig will give you a better result than a CPU-based one.
You can also opt for an application-specific integrated circuit (ASIC) miner. They are custom built to mine Ethereum. Their high performance ensures that you can profitably mine the cryptocurrency. One example of such a system is the Bitmain Antminer E9. It is considered the world’s most powerful Ethereum miner.
As mining rigs work round the clock, you must invest in a cooling system. You can include it in the initial cost you will need to set up your mining rig. A powerful and efficient cooling system helps your rig perform optimally throughout the day.
Some miners even shift their operations to cooler locations to reduce overhead costs.
Another important thing to remember is your area’s electricity cost. As your mining rig will operate 24/7, it will be beneficial for you to set up your operations in an area with low power costs.
A high-speed internet connection is another requirement. The higher the speed, the lower the latency and the more efficient your operation will be.
Due to high electricity consumption and its impact on the environment, governments of various countries are reviewing their stand on the legality of crypto mining. Make sure to check with your local authorities before starting mining operations.
Step 3: Choose your mining strategy
You can choose a mining strategy that best suits your needs based on your budget and investment strategy. The three approaches that you can follow are:
For the time being, cloud mining can be a good choice if you do not have the resources to set up a mining rig. Firms rent out their mining power and do the whole process for you. After the block is mined, you get the rewards. The company takes a fee for the services rendered.
The entire process takes place online when you invest in a cloud mining service. So, before you opt for one, research the platform’s background and credibility. ECOS and StormGain are two reputable service providers in this respect.
Pool mining involves teaming up with other miners and clubbing together all of your resources. The rewards in a pool are divided based on the hash power provided. While choosing a pool, keep in mind the pool size, fee, and minimum payout.
If you are determined to do the whole operation yourself, then solo mining is the best option. All the mining rewards go to your pocket, but you have to bear all the expenses alone.
Step 4: Install mining software
After you set up your rig, installing the necessary mining software is essential. You can choose from the following:
These are some of the best-performing Ethereum mining software. However, you can always opt for the software of your choice.
Step 5: Collect your rewards
After a block is mined, the rewards are transferred to your synced crypto wallet. If you are mining in a pool, ask the pool leader about the method of receiving rewards. Most pools will give you rewards in periodic instalments based on the mining success of the group.
There are some crucial factors to remember before you embark on your mining journey. They are:
Mining may be daunting at first, but once you choose your options correctly and get the hang of it, it can be quite a profitable venture. You can use your mining knowledge and experience on a different blockchain and mint a different cryptocurrency in future too.