To put it simply, cryptocurrency mining is a process of solving complex mathematical problems. Miners are essentially the cornerstone of many cryptocurrency networks as they spend their time and computing power to solve those math problems, providing a so-called “proof-of-work” for the network, which verifies Ether (ETH) transactions. Besides that, miners are responsible for creating new Ether tokens through this process, as they receive rewards in Ether for successfully completing a PoW task.
PoW relies on fundamental properties of the hash function, an “encrypted” piece of data that is procedurally derived from some arbitrary input. Proof-of-work starts by designating a list of desired hashes based on the “difficulty” parameter.
Why should you mine Ethereum?
Mining turns the act of securing a network into a complex but usually quite profitable business, so the primary motivation for mining is making money. Miners receive a certain reward for each block, plus any transaction fees paid by users.
An unconventional use for home mining is a form of cheaper heating. Mining devices turn electricity into cryptocurrency and heat — even if the cryptocurrency is worth less than the cost of energy, the heat on its own could be useful for people living in colder climates.
Will the proof-of-stake transition kill Ether mining?
A common concern for any prospective Ethereum miner is the Ethereum 2.0 roadmap, which introduced plans to transition to proof-of-stake, a consensus algorithm that would deprecate miners where all existing Ethereum miners have limited time available to earn a return on their investment. But thankfully, PoW mining is likely to be still functional until about 2023.
Is mining Ethereum profitable?
Whether any type of mining is profitable depends entirely on the cost of electricity in any given area. As a rule, anything below $0.12 per kilowatt consumed in an hour is likely to be profitable, though prices below $0.06 are recommended to make mining a truly viable economic enterprise.
Professional miners can gain an edge by moving their operations into regions with the cheapest electricity or by taking advantage of the generally lower rates reserved for industries. These are some of the primary reasons why mining has turned into a serious and capital-intensive industry.
The key to successful mining is maximizing the hash rate while minimizing electricity and hardware costs. Therefore, in addition to location, the choice of mining hardware is crucial for mining.
How to find the best mining hardware?
Choosing the right hardware should primarily be dictated by three factors: its maximum possible hash rate, its energy consumption and its 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.
How to set up an Ethereum mining farm: Guidelines and risks
Mining requires careful planning and attention to avoid unfortunate outcomes. All computers are a potential fire hazard, and this risk is magnified in mining due to the constant usage and high energy outputs involved.
Choosing high-quality power supply units with ample power rating margin is highly recommended to protect from power surges and other electrical issues.
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.
The most straightforward way to mine Ethereum is by joining one of many mining pools like SparkPool, Nanopool, F2Pool and many others. These 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. There are other details involved with setting up a successful mining farm, many of which are jealously guarded as trade secrets. This guide is not meant to be entirely comprehensive, but if you are serious about mining, you should now have a strong knowledge base to conduct further research.