Ethereum was created by Vitalik Buterin, Charles Hoskinson, Anthony Di Iorio, Mihai Alisie, and Amir Chetrit and was launched in 2015. It was the first programmable blockchain to introduce the concept of decentralized applications (DApps) to the sector of blockchain-based products. The network is public and open-source, and it enables users to make fast payments on the distributed ledger.
The Ethereum network has its own native digital currency called Ether (ETH). The crypto is one of the top trading digital assets on the cryptocurrency market.
What Is Mining?
Decades back, the only mining known to humanity involved a lot of physical work and actual axes. However, with the development of the first cryptocurrency, Bitcoin, a new form of mining was discovered and defined. This mining process doesn’t involve an axe, mining shafts and physical labour. Rather, it requires computational power.
In a nutshell, cryptocurrency mining is the computational process of using complex computer equipment (hardware) to solve mathematical equations. Mining cryptocurrency is not only rewarding for miners who use computational power to generate new blocks and verify transactions on the network but also the thing that keeps the network secure and running.
Miners use complex computer hardware known as mining rigs to solve mathematical equations. In return, miners are rewarded with cryptocurrency for creating new blocks and validating transactions on the network. At the same time, miners also prevent double-spending and keep the network safe and operational.
Ethereum Mining and Miners: How Is ETH Mined?
Proof of work (PoW) is the pulsing vein behind any cryptocurrency project that relies on mining. The same is true for protocols operating on Ethereum that back the process of mining.
The Ethereum network uses PoW for mining, but the PoW protocol used for ETH mining does not have the same specifications as the protocol used for BTC mining. The PoW protocol used by Ethereum is more memory-dependent and is also resistant to ASIC miners. That means that mining ETH is less competitive because ASICs are restricted to ensure democratized mining on the Ethereum network.
The process of mining involves mining equipment, which is specialized hardware such as ASICs, CPUs, or GPUs. GPUs work the best for mining ETH because the Ethash removes competitive ASIC miners from the network. Whichever miner or pool of miners solves the equation first with the use of computational power gets the reward, and a new block is generated.
Miners protect the network, keeping it decentralized, operational, and functional, as well as safe from attacks.
PoW in Ethereum Mining
The PoW used for mining ETH has a difficulty bomb built into its difficulty algorithm. At some point, miners won’t be able to perform mining past the specified block limit, which will lead to an inevitable hard fork. The PoW for ETH mining was also adjusted to take away the initial advantage that ASIC miners had, so ETH is best mined with GPUs.
Miners commence the process by running the block’s header metadata through a hash function. If a miner finds a hash that matches the target, the miner is rewarded. Then, the miner broadcasts the block so that each node can validate and record the verified transaction on the ledger. That way, other miners can’t use the same hash, making the process cheat-proof. That is why the protocol is called Proof of Work.
Due to inefficiencies found in the Pow protocol, the Ethereum team is planning to make a major transition to Proof of Stake (PoS). The PoS that will become a part of Ethereum 2.0 is called the Ethereum Casper protocol. With this PoS protocol, mining ETH should become less competitive because the block creator will be chosen based on the users’ stakes. The choice is made by the algorithm. Adding a malicious block will be practically impossible because the attacker would need to own more than 51% of the network’s currency, ETH.
Ethereum’s Casper represents a combination of PoS and PoW, facilitating increased efficiency and deflating competitiveness in ETH mining. Once Ethereum transitions to the Casper protocol, miners will be “replaced” by stakers. Stakers will get transaction fees in exchange for verifying transactions, just like how miners get mining rewards.
The Script Used in Ethereum Mining
Ethereum is written in Scala, C++, Go, Python, and Rust. The network uses Ethash as its PoW function. The algorithm uses Keccak and is based on modified versions of Dagger and Hashimoto. The script used for Ethereum mining is designed to create resistance to ASIC miners and can be easily verified.
ETH Coins Minted per Block
Whenever a complex mathematical equation is solved, a new block is generated on the network. Each new block creates, or mints, new ETH units. With each generated block, 3 ETH are generated, and rewards are distributed to miners.
Average Block Time
The average block time is set to 15 seconds, making Ethereum faster than the original crypto, Bitcoin, which has a block time of 10 minutes. With Ethereum, one block is generated on the network every 15 seconds while verifying transactions, and 3 ETH are minted in the process.
If miners work generating new blocks and verifying transactions faster, then the difficulty is adjusted by the algorithm so that solutions are found within the average block time of 15 seconds.
Miming rigs are equipment for mining cryptocurrency and are essential for miners. There are many different types of mining rigs. ASIC-type miners or ant miners are known to be the strongest.
ASICs can’t be used for mining Ethereum because the Ethash algorithm prevents ASIC miners from joining the network. However, there are more than a few other types of rigs that can be used for Ethereum mining. GPUs are the most efficient for ETH mining by far.
CPU mining speaks in favour of democratized mining. It’s also a great choice for beginners and “small” miners working in mining pools and joining their computational power to mine ETH and other currencies.
CPU mining is simple and is the most basic form of mining, which is why CPU miners usually have a hard time making any profits from mining. CPUs are also the weakest type of mining equipment, which is why it’s not the most popular mining method. However, it is the least expensive in terms of investing in mining equipment.
GPU mining is considered to be the optimal solution for mining ETH. A GPU, or graphics processing unit, is essential to your computer because it renders visual effects and 3D graphics so that the CPU is not overloaded by demanding graphics. GPUs are also more efficient for mining and are more advanced equipment for mining.
GPU mining has some challenges, but it’s the perfect replacement ASICs in environments where ASIC mining is disabled. The challenges of GPU mining are directly related to the adjusting difficulty because it is more difficult for miners to solve mathematical equations.
FPGA mining, or field-programmable gate array mining, is certainly the best choice when it comes to power and efficiency. FPGAs work by creating multiple gate arrays that form tables for calculating inputs for desired outputs. That is why FPGA is easily used in DNA sequencing and machine learning, which says a lot about its potential and power.
Because the device performs great in parallel processes, mining hashes can almost certainly result in creating new blocks and taking mining rewards. Due to its efficiency and power and the fact that ASICs are disabled for ETH mining, FPGA is one of the top choices for ETH miners.
Cloud Mining or Joining the Pool of Miners
Miners with advanced mining rigs and equipment can mine individually and probably make a substantial profit from mining ETH. However, most miners are turning to group mining, where computational power is shared, and the group of miners works together to solve the equation. Another option is to rent hash power from service providers and companies operating with cloud mining.
For mining pools, a group of miners joins a protocol in which their computational power is shared while working on solving the equation together. Once the group of miners succeeds in resolving the problem and generates a new block, the reward is split according to each miners’ contributed computational power. The more power you share, the greater the gains. Because multiple rigs are working on a single equation, the chances of solving the equation increase.
Miners who operate via cloud mining pay a fee to service providers to rent hardware stored in the providers’ warehouse of rigs. Miners can then use the rented hash power to mine ETH and other crypto. The miners get a share of payments generated through the use of the rented power based on the rented hash power and amount.
The advantage of cloud mining over pool mining is the ability to rent hash power without the need to maintain hardware.