Consider this your ultimate guide to mining Ethereum. From what mining is, to how it works, to how to join an Ethereum mining pool, all the way to the requisite Ethereum mining hardware and software you’ll need, we’ve got you covered.
Table of Contents
- What is Mining & How Does It Work
- Ethereum Mining Explained
- How to Mine Ethereum
- Ethereum Mining and the Future
- Ethereum Mining Pool
- How to Store Ethereum Offline
- Additional Ethereum Mining Resources
First, before getting into how to mine Ethereum, we strongly suggest you read up on what Ethereum is, and how this public and open-source decentralized computing platform and blockchain is enabling smart contract and the deployment of decentralized applications (DApps). Head on over to our comprehensive Ethereum guide which tackles:
- What smart contracts and DApps are,
- The core differences between Ethereum and Bitcoin,
- Ethereum’s advantages and disadvantages,
- Common use cases,
- How to buy ETH and more.
Brushing up on Ethereum’s history, integral components, most commonly used terms and concepts, and how it functions in today’s blockchain ecosystem will help you better understand the below ideas and language used. Keep in mind that this CoolWallet guide is purely educational and should be used as a starting point for users looking to start mining Ethereum and other cryptocurrencies.
Looking at mine Bitcoin instead? No problem, check out our all-encompassing guide on everything Bitcoin and how to mine it here.
Now, let’s get into what mining is and how to mine Ethereum (ETH).
1. What is Mining & How Does It Work?
Q: How do I explain Bitcoin to my grandpa?
— Josh Wolfe (@wolfejosh) August 17, 2018
While the above response was made in jest (and about Bitcoin), it provides a great example of the general public’s understanding (or lack thereof) of cryptocurrency, Bitcoin, and Ethereum mining.
Think back to the California gold rush of the mid-1800s, where 300,000 miners took to the streams and riverbed to score themselves a healthy portion of the loot. Cryptocurrency mining draws upon the “gold” analogy associated with digital currencies, as both gold and precious metals are a rarity, along with digital currencies and tokens. And, the only way to generate and increase the total volume of cryptocurrencies is through “mining them” through an economic measure and consensus measure – known as Proof-of-Work or PoW.
At its core, Proof-of-Work aims to curb and deter blockchain network abuse and attacks by requiring network actors to perform moderately hard (but realizable) calculations or computations which verify blockchain transactions and information – all for a reward. Proof-of-Work is the equivalent of a Rubik’s contest, where miners are pitted against each other in order to see who solves mathematical equations the fastest.
So, what type of “mathematical” equations and puzzles are miners solving? Quite a few.
For example, Proof-of-Work miners are using computational resources to typically solve hashes, to verify the ultimate legitimacy of transactions (and prevent infamous double-spending) and ensure a distributed trustless consensus – meaning the riddance of a middle or trusted third-party to execute a function. Below are just some of the known Proof-of-Work functions executed by miners:
When a blockchain network is setting and facilitating transactions, it bundles them together in what is called a “block,” which is then mined (aka verified) by miners in order to ensure their legitimacy through the solving of a “mathematical puzzle.” Miners are then subsequently rewarded for broadcasting their successful completion and mining of the block in the form of a blockchain token (think ETH and BTC). Rinse and repeat.
And, as the network grows and garners more users and data, the mathematical equations become harder, ultimately needing more hashing power to solve them.
At present, the Ethereum blockchain follows the longstanding and established Proof-of-Work consensus mechanism, so let’s take a look at how exactly Ethereum mining occurs in the next section.
Still confused about what Proof-of-Work is and how it functions in the facilitation and validation of transactions? Check out our ultimate guide to Bitcoin, where we break down Satoshi’s white paper and original idea behind PoW.
2. What is Ethereum Mining?
At its simplest, Ethereum’s GitHub explains the mining of Ether as:
“Mining Ether = Securing the network = verify computation.”
It’s first important to understand that Ethereum is an entirely different beast than Bitcoin (currently the largest cryptocurrency by market capitalization as of September 2018), and as such, has its own respective token known as Ether, or ETH), and a different hashing algorithm, known as Ethash.
Ethash, a modified version of Dagger-Hashimoto, necessitates the discovery and alteration of a once off or “nonce” input/value to the Proof-of-Work algorithm, which impacts the blockchain hash value for uniquely identifying data. Simply put, miners are using computational resources to essentially “guess” answers to a proffered puzzle until one gets it right and “wins.” On the Ethereum network, miners receive a directly proportional reward to their mining power, also known as hash rate.
When a miner identifies a hash which matches the intended goal, they will then be rewarded in ETH and subsequently broadcast the mined block across the Ethereum network for each node to validate and add to their respective ledger copies.
So, how exactly do miners execute such calculations and transactions?
Either on a CPU or “on the GPU through a combination of the Ethereum daemon and sgminer.” It’s extremely important to understand that mining Ether using a CPU is entirely not worthwhile and 100% not profitable, as even the most basic GPUs are nearly 200x quicker than CPUs for Ethereum and cryptocurrency mining.
Download an Ethereum Wallet
Just remember, after you mine your first bit of ETH (or your 2000th ETH), you’ll need somewhere for it to be sent. Cue an Ethereum wallet. However, proceed with caution, as some Ethereum wallets in the crypto-sphere warn against their users directing mining payouts to their wallet.
For example, the Jaxx Cryptocurrency Wallet webpage states:
“Jaxx is a lightweight wallet that is not ideal for receiving frequent tiny transactions that mining efforts in general produce. Receiving frequent mining rewards (or even faucet rewards) will create a lot of microtransactions that will need to be queried when you want to spend your balances.”
Furthermore, it reads, “We are recommending that you do not point your mining rewards to your Jaxx Wallet.”
Additionally, Coinbase, one of the largest online cryptocurrency exchange platforms states, “Please note that Coinbase cannot be used to receive ETH mining rewards.”
Finally, while it may seem like your best bet is to have your ETH mining rewards sent to your CoolWallet S or Ledger Nano S address, you should be looking at hardware wallets as more of a long-term savings option and not as your direct deposit address for frequent mining rewards. At CoolWallet, we suggest users direct rewards to an online ETH wallet and later transfer it to a hardware wallet for long-term storage and protection.
Consolidation, consolidation, consolidation. Consolidate your ETH in your online wallet, and when there is a meaningful amount (and not dust), transfer it to your CoolWallet S or Ledger Nano S.
So, which Ethereum wallets should I download to send mining rewards to?
Best Ethereum Wallets for ETH Mining Rewards
Curious about the best Ethereum wallets to have your ETH mining rewards sent to? Below are 3 of the best Ethereum wallets for doing so.
Official Ethereum Wallet (Mist)
The Official Ethereum Wallet is strongly recommended for miners looking to have ETH rewards sent to a wallet address. It enables users to access decentralized applications on the Ethereum blockchain and also allows them to store ERC-20 tokens.
Furthermore, the official Ethereum wallet authorizes users to write, use, and deploy smart contracts on the blockchain. After creating a wallet, you’ll be prompted to create a secure password, which is your sole means of access to the Ethereum Mist Wallet, so make sure to write it down and store your password in a safe place.
Just remember, once you accumulate a significant amount of ETH (an amount you aren’t alright with losing or equivalent to one month’s salary), it’s time to start thinking about transferring it to cold storage and a hardware wallet.
And, for those curious about the evolution of the Official Ethereum Wallet, head on over to Ethereum’s GitHub to check out all previous commits.
For those looking to jump right in with the Official Ethereum Wallet, just keep in mind that you need to wait for the entire Ethereum blockchain and network to sync.
For miners and participants looking to skip having to sync the entire Ethereum blockchain, check out MyEtherWallet and MetaMask
With proven success in the security and Ethereum storage world, MyEtherWallet is a free, open-source interface to the Ethereum blockchain and network, allowing users to access and interact with the Ethereum blockchain through their node.
As MyEtherWallet is one of the most popular wallets for users looking to store their ETH and ETH mining rewards, beware of copycat and phishing websites. Make sure to always double check the domain you are accessing and keep an eye out for the word “secure” and green “https” in the address bar. Bookmarking MyEtherWallet is an effective way to prevent accidentally accessing the wrong website or wallet.
Furthermore, MyEtherWallet enables users to store all their ERC20 tokens as well and is compatible with several hardware wallets, making it the preferred wallet for users seeking security and depth. And, MyEtherWallet is completely free (but for the transaction fees you’ll be charged when sending Ether).
Easily identifiable by its giant fox head logo, MetaMask is a browser plugin, bridge, and wallet, which allows users to run Ethereum DApps right in their browser without having to run the entire Ethereum node.
Creating a MetaMask wallet is incredibly fast and simple, and requires users to copy down a 12-word seed to use in case of wallet loss and recovery.
As MetaMask is also one of the most popular wallets and extensions in the cryptosphere, make sure to bookmark the official MetaMask wallet link, and always verify a secure https connection.
Looking for a thorough explanatory video of MetaMask and how it’s connecting everyday web browsers to the Ethereum blockchain? Check out this video. And, for users looking to download MetaMask and start accessing Ethereum DApps and the blockchain, head on over to their easy-to-navigate website.
And, if you’re looking for a comprehensive guide on the best Ethereum wallets out there, look no further, we’ve got you covered in this all-encompassing blog post where we walk you through the difference between hot and cold wallets, the best Ethereum wallets available, paper and steel wallets, and more!
Now that we’ve taken you through the basics of Ethereum mining, let’s get started on how to actually mine Ethereum.
3. How to Mine Ethereum: Ethereum Mining Rig & Ethereum Mining Software
Ethereum’s block difficulty has significantly increased in just the past year, translating to less ETH received per mining rig and an overall more competitive mining ecosystem.
When accessing Ethereum’s GitHub page, users and potential ETH miners will be greeted with the message:
“Becoming an Ethereum miner is not recommended. Ethereum is going to transition to Proof-of-State, making Ethereum mining obsolescent. Becoming a miner would involve investing in a mining rig (several GPUs), plus maybe other hardware if needed, like a compatible computer), which is probably unlikely to get a return on investment by the time that PoS is implemented.”
While block difficulty on the network has been drastically increasing over the last year, mining rewards have stayed relatively the same, meaning ETH mining rewards are slowly thinning and there is no guarantee of profit or success in the mining-space in 2018.
Ethereum’s transition to hybrid PoW/PoS (as expanded upon in Section 5) is set to drastically reduce ETH block rewards, with a subsequent and inevitable complete transition to PoS which will do away with mining altogether. That’s right, there will be no mining of ETH once Casper is implemented.
Ethereum Mining Profitability Calculator
Before you purchase (or build) your own Ethereum mining rig, we strongly suggest you head over to one of the various Ethereum mining profitability calculators to input your rig’s hash rate, power consumption, and the cost per kWh. Doing so will give you a fair representation of what you can expect to make (or lose) in a day, month, or year when mining Ethereum.
For example, if your Ethereum mining rig and GPU mines roughly 168 MH/s, then at current ETH price ($229), you are looking at earning roughly USD $2.20 per day or $802 per year. That’s accounting for your annual power cost of nearly USD $150. Keep in mind that this is with only one GPU Ethereum miner and is likely a grossly underestimated number.
Head on over to https://www.cryptocompare.com/mining/calculator/eth to play around with various numbers (hashing power, power consumption, cost per kWh, and pool fee) in order to get a better understanding of the actual costs and profits associated with mining Ethereum.
If you are living in the United States, you’ll likely be paying at least USD .10 per 1000 watts per hour, which could mean upwards of $2.50 per day in power costs. While the following link and map outline the cheapest and most expensive countries to mine Bitcoin, it still may give you a more complete picture of which countries will give you the best chance at setting up and running a successful Ethereum mining operation. You can check out the cheapest and most expensive countries to mine Bitcoin here – with the cheapest being Venezuela, and most expensive being South Korea.
Furthermore, it’s important to identify a mining pool (as addressed in section 6) with low fees, as some are known to take up to 10%.
Also, it’s important to understand that mining rigs are depreciating assets, so not only could you be losing money by mining Ethereum, you potentially might not be able to sell your rig after you’re done with it – leaving you even deeper in the hole. To gauge just how much your Ethereum mining rig may depreciate, head on over to Amazon.com to peruse the various mining rigs for sale and their respective costs.
We strongly suggest anyone considering mining Ethereum to develop a well-thought-out mining and profitability outline and game plan, otherwise, you may be surprised come ETH payout and utility bill time. This is not something you just jump right into.
Finally, just remember to factor in Ethereum’s transition to a hybrid PoW/PoS consensus mechanism, with the overall intention of ultimately doing away with PoW together in the next few years, so ask yourself: “Will I be able to turn enough of a profit to make mining ETH worth it over the next 2-3 years?”
If you’ve run the numbers and have decided it is worth the risk, then this guide is for you!
And remember, this post is not to deter Ethereum miners but to present the facts of the current Ethereum mining climate and profitability. Mining Ethereum or any cryptocurrency does carry risk, and there is a very real chance that you may never see profits from mining ETH, BTC, or altcoins. Make sure to never put more money into a mining rig or cryptocurrency investment than you are prepared to lose, and everything else will be gravy.
Etherscan, an Ethereum blockchain and analytics tool is also another popular calculator for determining Ethereum mining profitability, along with Whattomine.com, which allows you to compare altcoin profitability to both Ethereum and Bitcoin.
Now that you’ve determined you’d like to start mining ETH and have established a formidable attack plan, it’s time to decide which hardware and software you’ll use. Should you build your own? Purchase online? Or pool your resources with a few friends to set up a communal rig?
Ethereum Mining Hardware & Software
The most common route Ethereum miners take is the purchasing of an already assembled Ethereum rig. However, it’s not unheard of to make your own, and in today’s competitive cryptosphere, where mining rigs are selling in the tens of thousands (if not more), it could be a good way to save some money – if you know what you’re doing.
Take this section as an introductory guide to just some of the materials and components you’ll need when assembling your ETH mining rig, and not as creed or doctrine.
Building Your Own Ethereum Mining Rig
Should you decide to build your own, below are just some of the components you’ll need to purchase and assemble before commencing with the mining process. In order to build a comprehensive and high functioning Ethereum mining rig, you’re likely going to spending anywhere from USD $1500 to $4000.
- Frame: You’ll need a mining frame to stack and separate the various (or single) GPU you’ll be using to mine Ether.
- Motherboard: You can easily find a motherboard at your local computer store or by ordering one on eBay or Amazon. Refrain from purchasing a used one if you can.
- Hard Drive: Look for a hard drive with high operating speeds and faster boot times, this is one part of the rig you really shouldn’t sacrifice quality for!
- CPU: As it isn’t the biggest concern for Ethereum mining, you can choose a cheap processor. But, make sure to choose one that has a fan!
- Power supply units (PSUs):
- RAM: A single 4GB RAM-card is likely enough when first getting started.
For a comparison table of the most efficient and best GPUs on the market in 2018, check out this CoinTelegraph article.
And, if you’re really serious about building your own Ethereum mining rig, this article explaining how to build a universal mining rig for Ethash algorithm coins is a great place to start.
Purchasing an Ethereum Mining Rig
Purchasing an already assembled and functioning Ethereum mining rig is the most common of options for getting started, as not everyone has a handy background in assembling computers.
Check out cryptocompare.com if you’re curious about what an Ethereum mining rig costs, along with the “payback period” for you to break even. For example, this 168MH/s Ethereum mining rig is going for a cool Usd $2,252, and boasts a nearly 24,000 day payback period, meaning users who purchase such rig will be earning roughly $3 per month in Ethereum or $35 per year.
Note that while mining rigs with a high hash rate may solve mathematical equations and calculations faster than lower hash-rate rigs, they typically come at a pretty penny and generally use more electricity, ultimately decreasing your bottom line and profits.
Ethereum Mining Software
Once you’ve selected your requisite Ethereum mining hardware, you’re going to need to install software.
For starters, Ethereum miners will need to install a client in order to connect to the Ethereum network. Using the directions for your appropriate OS, you can download Geth here. Post-download, your own personal node will be able to interact with other nodes on the Ethereum network and will act as the interface for your personal deployment of smart contracts. Just know that the entire Ethereum blockchain size has exceeded 1TB.
But wait, that’s not all. If you’re looking to do more than just interact with nodes on the Ethereum network and actually want to mine “cold, hard, ETH,” we recommend downloading Ethminer. Ethminer will effectively authorize your GPU to run the hashing algorithm which is integral for securing the ETH network through PoW. And, for users with more than one ETH mining rig, you can install Awesomeminer.
Finally, don’t forget to test your connection, by establishing a private test network. Doing so is an extremely helpful tool for testing public contracts and testing your overall mining capacity. In an individual private test network, there are no other users, so your GPU is solely responsible for locating and validating blocks.
How Do I Sell My Ethereum For Fiat?
After you’ve accumulated a healthy stack of ETH, you’ll either want to HODL it, trade it, or convert it into fiat (USD, GBP, SGD). Should you decide to sell your ETH for fiat, it can sometimes be difficult locating a proper medium and exchange to sell it on. After all, mining ETH could be your job and the payouts from which you could be reliant on for paying your rent or purchasing groceries.
Let’s take a look at three of the best places to sell your ETH for fiat.
Offering fiat currencies in over 32 countries and cryptocurrency storage in nearly 190 countries worldwide, Coinbase is a go-to online exchange and platform for converting your Ethereum into fiat.
Founded in 2012, Coinbase grew to over one million users by 2014, making it one of the largest and frequented online exchanges and purchasing platforms. At present, they boast over 13 million users and revenue in excess of US $1 billion, so there’s no need to worry about having an order filled.
Coinbase is one of the simplest exchanges and platforms to sell your Ethereum, as they support both mobile and web interfaces for doing so, and a straightforward withdrawal option, where you only need enter your bank account information. Note that when selling your ETH on Coinbase to a U.S. bank account or the USD Coinbase wallet, you’ll be looking at fees right around 1.5% or nearly 4% in PayPal withdrawals.
If you’re looking to sell your ETH on a reputable exchange, look no further than the Kraken exchange. Known for being the world’s largest Bitcoin exchange in terms of Euro liquidity and volume, Kraken has been highly regarded in the cryptocurrency exchange space due to their transparent team and numerous fiat pairs.
Signing up for Kraken is quick and easy, however in order to deposit and trade between currencies you’ll need at least Tier 1 verification, which will require your name, DOB, residence, and telephone number. Once set up with Kraken, it’s as simple as looking for the “Funding” tab, where you can choose ETH (Ether) to generate an address and send your mined Ether too, followed by converting it to USD, CAD, GBP, JPY, and EUR.
Note that for domestic US withdrawals, Kraken requires users pass Tier 3 verification, which requires a proof of a government-issued ID, utility bill, social security number (for US users only), and an ID confirmation photo. Finally, Kraken calculates a user’s withdrawal fees based on their maker/taker status and thirty-day trading volume, resulting in fees ranging anywhere from 0% to just over .25%.
Besides authorizing users and investors to purchase ETH and BTC with their debit and credit card, CEX.io also allows users to withdraw their ETH in fiat. Unlike Coinbase, which does restrict a handful of countries from accessing and using it, CEX.io is available in 99% of all countries worldwide and nearly 24 U.S. states, meaning, there’s a good chance your location and country is covered.
Depending on your account type and location, users can withdraw their fiat by:
- Direct withdrawal to Mastercard/Visa (yes, you’re debit card),
- Swift bank transfer (EUR),
- SEPA transfer (EUR), or
- Crypto capital transfer (USD/EUR).
What’s absolute “killer” (CEX.io’s words) is their launch of instant withdrawals to payment cards in fiat, ultimately easing mass adoption and purchasing power. In most instances, fiat withdrawals are processed instantaneously, with fees ranging anywhere from 1% (crypto capital) up to 2% or EUR $3.80 cap for Visa.
Above are three of the easiest and most convenient options for ETH miners looking to unload and sell their ETH for fiat. Furthermore, all three are viable platforms for converting one’s ETH into other cryptocurrencies, such as BTC or BCH. Just make sure you’ve enabled two-factor authentication for logging onto both platforms, as centralized exchange and platform hacks can happen at the drop of the dime, so it’s essential you add a secondary security layer.
4. Ethereum Mining & The Future: Transition to Proof-of-Stake
Inspired by the acronym “GHOST,” or “Greedy Heaviest Observed Sub-Tree,” Ethereum’s Casper is a transition protocol, set to transform Ethereum from PoW to PoS completely over the next few years.
As mentioned throughout this post, Proof-of-Work (PoW) exhausts large amounts of energy and resources, ultimately forcing miners to square off against one another. After all, as PoW is a consensus mechanism – with the goal of verifying and ensuring valid information to the blockchain ledger – it requires service requesters in order to perform and run smoothly. Specifically, the most common issues and downfalls of PoW include:
- Inefficient power and energy consumption,
- Potentially predatory ecosystem (where those with funds to purchase more powerful mining rigs are the ones to prosper), and
- Some degree of centralization, where large mining pools can “team up” to occupy 51% of the network.
Such extreme exhaustion of resources and energy ultimately leads to exorbitant and wasteful energy costs, something Ethereum founder Vitalik Buterin and the ETH community are looking to curb. On March 30th, 2018, Buterin released his first version and implementation guide for Casper, Ethereum’s new hybrid PoW/PoS consensus mechanism.
The guide notes, “…all of the proof of work mechanics will continue to exist, but the additional proof of stake mechanics will be added…” Casper is set to roll out a cross pollination of sorts, where both PoW and PoS work hand in hand towards a more efficient and effective blockchain platform.
What is Proof-of-Stake?
For those unsure of what Proof-of-Stake is, it simply refers to a consensus algorithm which depends on a validator’s economic stake in the network.
While Bitcoin and the present amalgamation of Ethereum reward users and participants for solving “cryptographic puzzles” for transaction validation and verification, PoS rewards users who “propose” and vote on future blocks by “staking” their base currency (in Ethereum’s case, this would be ETH).
For an excellent example of Proof-of-Stake and how it differs from Proof-of-Work, check out this educational video by YouTube channel “Simply Explained.”
So, what’s the purpose of Ethereum’s Casper?
To finalize “checkpoints,” also known as key blocks, which effectively prevents the blockchain from ever being rolled back, even in cases where 99% of Ethereum miners support a chain not contained within that block. Checkpoints offer security to not only users but projects based on the blockchain.
For example, established checkpoints (preventing users from rolling back the block) are especially important in the financial world, where ownership of assets and other financial tools can’t simply be rolled back and redistributed.
So, how exactly do users participate in the PoS consensus process?
Block validators will be required to “lock up” a certain number of ETH as their stake, after which they will start validating blocks on the blockchain, and will ultimately place a bet on the block’s validity. Should the block be attached, then validators will receive a reward proportionate to the bets placed on the block. In order to finalize such blocks, 2/3rds of validators will “place bets” on their finalization, ultimately reducing any major incentive to attack or collude on the network, as they are risking their own ETH deposits.
Ethereum has issued a comment on the minimum and the maximum number of ETH validators can stake; 1,500 ETH and 60,000 ETH. While these numbers aren’t set in stone, they should give you a good idea of the ballpark holdings for Ethereum network validators.
Attesting to Casper’s efficacy towards preventing malicious attacks, Ethereum Foundation researcher, Vlad Zamfir, stated, “it’s as though your ASIC farm burned down if you participated in a 51% attack.”
Casper is revolutionary in terms of PoS, as it has implemented a mechanism to deter and punish malicious actors by slashing or eliminating their stake (ETH) put forth all together. Furthermore, with Ethereum’s sheer size and need for block validation, Casper has accounted or lazy and inattentive validators, by reducing their stake (or eliminating it completely) should they go offline (intentionally or not).
So, what are the major takeaways of why Ethereum needs Casper?
Core Reasons For Ethereum Casper
If you haven’t figured it out by now, some of the core advantages of implementing a hybrid PoW/PoS consensus mechanism include:
- A shift towards a truer, decentralized blockchain – Unfortunately, the majority of hash rates on the blockchain are concentrated within core mining pools, creating an unfair and uncompetitive mining environment. PoS provides a fair shot to anyone seeking to stake their tokens in order to validate.
- Energy efficiency – With Bitcoin and Ethereum mining costs alone in the billions, PoS is set to tame this power eating consensus mechanism, which will subsequently have a direct impact on our very own environment.
- Deterrents to malicious attacks and 51% attacks – As users and validators are investing a stake (ETH), they can’t pool together such stakes to make it more valuable, deterring large-scale attacks and protecting the network from a 51% attack.
- Scalability – PoS is set to overhaul Ethereum’s scalability issues (look no further than the troubles associated with CryptoKitties late last year) through sharding, which is the horizontal partitioning of the blockchain or separation of parts into smaller, quicker, and easier to manage parts, known as “shards.”
As of writing, Ethereum boasts a nearly 26 billion dollar market cap (according to CoinMarketCap), meaning the implementation of Casper across the network is not going to happen over night. And, look to see a gradual transition towards moving to a hybrid PoW/PoS consensus mechanism (as noted by Buterin)
5. Joining an Ethereum Mining Pool
Considering joining an Ethereum mining pool? Look no further, we’re taking you through what mining pools are, the different reward schemes offered, and how to mine both Ethereum and altcoins.
In the Wild Wild West arena of cryptocurrency mining, mining pools are simply the “pooling” of mining resources by miners, who distribute and share processing and computational power of the network, ultimately splitting any rewards in a proportional manner.
Mining pools require all miners to perform PoW and arose out of the difficulties associated with ineffective and slow block generation and mining times. So, miners decided to begin pooling their computational resources to generate blocks more swiftly, ensuring a consistent and steady reward stream, rather than a sporadic and one-off reward.
Several reward schemes and approaches associated with mining pools include:
- Pay-per-Share: PPS offers miners instantaneous and guaranteed payouts according to one’s contribution to the percentage or probability the mining pool identifies and mines a block. Under pay-per-share, miners receive rewards from the mining pool’s existing balance, meaning they can withdraw it immediately, ultimately cutting down on potential payment variance (as risk if shifted to the mining pool’s operator).
- Proportional: As its name implies, proportional payouts and rewards and distributed according to the amount of one’s own shares. However, unlike PPS, proportional payouts are only calculated at the end of a round.
- Pay-per-last-N-shares (PPLNS): Similar to ‘Proportional’ rewards, pay-per-last-n-shares is calculated based on the number of last shares (instead of total shares of the last round), meaning it typically favors loyal mining pool members.
- Geometric & Double Geometric: The Geometric Method grants miners the same reward no matter what, ultimately guarding against miners who participate at the beginning of a mining round (where reward expectations are high compared to efforts and pool contributions). Combining both the ‘Geometric Method’ and PPLNS, the Double Geometric Method is entirely score based, meaning that miners will receive rewards based on a given score which grows exponentially.
Now that we’ve gone through what a mining pool is and several reward mechanisms associated with mining pools, let’s turn to what Ethereum mining pools are and a list of some of the most popular.
What are Ethereum Mining Pools?
Ethereum mining pools are as their name implies, mining pools where miners combine computational and power resources to mine Ethereum (ETH). Joining an Ethereum mining pool is a great way to ensure quicker and more consistent payouts for solving an Ether block while cutting down on the overall volatility of the mining process.
Additionally, some of the less glamorous costs associated with mining alone include:
- High electricity costs,
- Lack of space,
- Lack of ventilation,
- Loud noise, and
- Heating issues.
When selecting an Ethereum mining pool, it’s important to weigh several factors before choosing one, such as whether it’s fees are offset enough through returns, such fees are not exorbitant or too high, and the server location (after all, the closer your Ethereum mining rig to the server, the more efficient your mining).
In this Vice article, the author (and Ethereum enthusiast) undertakes to build his own Ethereum rig and later joins a mining pool. He notes, “Although I am only contributing 120 MH/s to the pool I joined, this will result in about 25 Ether per year for my rig. Based on the mining difficulty and price of Ether at the time of writing, this should be nearly $8,00 per year after electricity costs.”
Let’s take a look at three of the best Ethereum mining pools in the blockchain space today.
Best Ethereum Mining Pools
While there are plenty of Ethereum mining pools in the cryptosphere, we recommend first joining a pool with cheap fees and robust user base. When choosing an Ethereum mining pool to join, keep three core things in mind; the pool’s functionality, size, and trustworthiness.
Choosing a pool that boasts all three will save your headache and hassle in the future, and enable you to better identify payout time and load.
Noted for being the third largest Ethereum mining pool in the space, Nanopool supports a community of over 40,000 Ethereum miners and offers participants a low fee of just 1%.
Nanopool’s UI is simple and easy to use, and supports 7 cryptocurrencies, namely:
- Ethereum Classic,
- Electroneum, and
Nanopool does not concentrate on ETH miners from just one part of the world, and miners are distributed around all corners of the globe, as servers are provided in Europe, Asia, Eastern and Western United States, Japan, and Australia.
If you’re looking to join Nanopool, just make sure your rig meets the strict requirements set forth by the pool, as it requires:
- 4+GB RAM,
- Ethereum account, and
- GPU miner with at least 4GB (with the recommended being AMD GPU driver 15.12).
When it comes to the people’s choice for Ethereum mining pools, Ethermine is at the top of the list, and possesses a hash rate at over 25%, meaning it’s the largest Ether mining pool out there. Not to mention it is being used by over 60,000 miners.
As of 2016, Ethermine was the cheapest ETH pool and is known for charging a single fee for all received ETH rewards. It is also supported on both mobile and desktop versions, making for one of the most convenient pools in the space.
Several distinctive features of Ethermine include:
- Anonymous ETH mining,
- Different servers across various continents,
- Extremely accurate calculation of hashrate,
- Payment for all found blocks,
- Customizable payment threshold, and (as mentioned above)
- Access by third-party applications such as iOS and Android.
At the moment, Ethermine only supports Ethereum (ETH), Ethereum Classic (ETC), and Zcash (ZEC).
Hailed as one of the most reputable ETH mining pools out there, Dwarfpool accounts for nearly 5% of the hashrate and only charges a 1% fee, making it an attractive option for miners looking for a proven track record and low fees. Dwarfpool bills itself as a quality pool you can trust and emphasizes four core values:
- Anonymity, and
One point worth noting when using Dwarfpool is that in order to withdraw, your balance must exceed 1.01 ETH, so make sure to weigh such importance when determining the right ETH mining pool for you. However, should you need a payout, take solace in the fact that Dwarfpool processes payouts several times a day.
2Miners is the youngest pool in the list but probably the most ambitious. This anonymous mining pool was established at the end of 2017. 2Miners provides unique design and it is as user-friendly as the mining pool could be:
- Quick start option with ready-to-go mining software
- Telegram monitoring bot
- Telegram new block notification bot
- Email monitoring service
- Detailed statistics
- 24/7 support
2Miners has got both PPLNS and SOLO pools. PPLNS fee is 1% and SOLO fee is 1.5%. Being the multicoin pool 2Miners supports more than 20 coins including such popular cryptocurrencies as Ethereum Classic, ZCash, Bitcoin Gold and other.
Maybe you’re interested in mining altcoins instead of one of the major cryptocurrencies dominating CoinMarketCap and the cryptosphere, let’s take a look at how to mine altcoins below.
What is Multipool Mining?
For the ambitious renegades of today’s blockchain ecosystem looking to mine altcoins, you’re in luck. Multipools are mining pools which alternate between the mining of various altcoins, depending on the profitability of the coin.
For example, should a multipool’s algorithm determine X altcoin to be the most profitable in the current market (via block time and exchange price), then the pool will switch over from Z coin and start mining X.
But, does this mean I will have to download or acquire numerous altcoin and cryptocurrency wallets?
Not exactly. As multipool mining could theoretically be switching between altcoins quite frequently, a good portion of multipools will automatically convert and exchange whichever altcoin is mined at the time into a more mainstream and widely accepted coin (such as Bitcoin or Ethereum).
Such method stands to enable participants to receive more coins in a mainstream currency than they would receive from simply mining that currency by itself. Additionally, the multipool automatic conversion may drive demand for the mainstream coin, which may have a stabilizing effect on the market.
Curious about some of the coins multipool offers? Check out one of the most popular merged mining pools at https://www.multipool.us/.
With Ethereum’s transition to a hybrid PoW/PoS consensus mechanism, the question of whether PoS will pose a similar centralization risk to mining pools as that of PoW has been thrown around.
Proof-of-Stake as a Centralization Deterrent
Theoretically, no. However, until the system is up and running for a significant period of time, we won’t truly know the answer.
While it’s generally accepted that both Ethereum and Bitcoin require only (roughly) three mining pools to execute a 51% attack on the network, PoS accounts for such “pooling” of resources and energy through a much stricter and higher trust requirement and can ultimately destroy a participant’s stake or deposits if need be. Simply put, the “slashing” or destruction of a participant’s stake or deposits incentivizes validators to refrain from conspiring and correlating large-scale attacks.
Finally, PoS offers a less harmful recovery option for networks plagued by a 51% attack, as the network does not need to change to a new and different mining algorithm.
Also, while it may seem like common sense, you may not join a Bitcoin mining pool to receive payouts in Ether, as they are completely different.
6. How to Store Your Ethereum Offline
Enabling users to keep cold storage at their fingertips, the CoolWallet S is the ultimate hardware wallet for securing your Ethereum, ERC20 tokens, Bitcoin, and other cryptocurrencies.
Now that you’ve successfully mined your first bit of Ethereum, or other cryptocurrencies such as Bitcoin, it’s time to figure out how to best store and protect it. Or, maybe you’ve been investing in Ethereum for quite some time now and have accumulated a healthy stack of ETH that needs safeguarding.
Either way, let’s take a look at how to store your Ethereum offline.
The first rule of storing ETH and other cryptocurrencies, once you’ve accumulated more than one month’s salary in crypto, it’s time to start considering moving it offline to a hardware wallet. Or, if you’ve collected an amount that you aren’t alright losing, then it’s time to pick up your first Ethereum wallet.
Think of Ethereum and cryptocurrency hardware wallets as your own personal safe (or underground bunker), where your private keys are stored offline and out of the control of a centralized entity – one that’s highly prone to malicious hacks and other online attacks.
Just as you wouldn’t keep thousands of dollars of fiat (USD, SGD, GBP) in your wallet and openly flaunt it, you shouldn’t be keeping large sums of crypto online and at the hands of a centralized entity. It’s time to turn to the blockchain and cold storage.
A small investment in security now could pay dividends by protecting against malicious hacks and theft in the future.
The CoolWallet S: Crypto at Your Fingertips
For users and investors looking to “hold their ETH” and other cryptocurrencies at the tips of their fingers, the CoolWallet S is your ultimate hardware wallet for cold storage and security. The CoolWallet S pairs with both your Android and iPhone, supporting a seamless and quick setup, minus all the clunky USB cables and hassles associated with other cryptocurrency hardware wallets.
The CoolWallet S not only emphasizes security but anonymity too, enabling users to anonymously set up and secure their investment in mere minutes. Furthermore, it’s the first Ethereum and cryptocurrency hardware wallet to partner with decentralized reputation and trust protocol, MetaCert Protocol, ensuring users don’t fall prey to malicious phishing scams. And, for users worried about its durability and ability to weather the elements, take solace in knowing that your wallet is:
- Heat and cold resistant,
- Impact resistant,
- Waterproof, and
Rain, sleet, or malicious hack, the CoolWallet S is your ultimate wallet for end-to-end Ethereum and cryptocurrency storage and security.
If you’d like to read up further on how the CoolWallet S is changing the cryptocurrency cold storage game and bringing value to an otherwise attack-prone industry, head on over to our FAQ or check out our comprehensive blog.
7. Additional Ethereum Mining Resources
While the Ethereum GitHub warns future ETH miners that getting started mining ETH is not recommended, it still can be a viable way to increase your Ethereum and cryptocurrency portfolio, all while contributing to the blockchain ecosystem.
Ethereum and cryptocurrency mining is the epitome of the blockchain, as it gives power to the very people who make up its core and ensure they have a direct hand in validating and verifying potentially world-changing information.
The blockchain is in the midst of overhauling and disrupting our traditional institutions and mechanisms which have failed to modernize appropriately, so it’s incredibly important there is support from all fronts – from advisor roles to functioning and transparent exchange, all the way to honest and motivated miners.
To help assist in your overhaul of today’s ineffective and outdated institutions, below are several more resources which further enrich your Ethereum and cryptocurrency mining experience.
- The CoolWallet Guide to Ethereum: If you’re looking for a comprehensive breakdown of Ethereum, it’s history, core values, and how it’s shaping our present day blockchain ecosystem, look no further. We have you covered.
- Ethereum White Paper: At the heart of Ethereum is its white paper, establishing a formal outline and definition of the Ethereum protocol and network (as penned by Ethereum founder Vitalik Buterin).
- Ethereum Yellow Paper: Supporting Ethereum’s white paper is the yellow paper by co-founder Gavin Wood. Wood’s yellow paper breaks down the Ethereum protocol in a more technical manner.
- Official Ethereum Website: For everything Ethereum, including the original and primary Ethereum wallet to have your ETH mining rewards sent to.
- EtherMining Reddit: Got any questions about mining Ethereum? Reach out to the Reddit community for feedback, tips, and mining tricks.
- Ethereum Reddit: For those looking for broader and more general information about the Ethereum protocol, head on over to their subreddit.
- GitHub: Providing all technical documentation and guides for Ethereum and the future of Casper, check out Ethereum’s GitHub to discover what Ethereum developers have been working on.
- Etherscan: Looking to check to see if your ETH mining rewards were actually sent to your wallet address? Etherescan is an Ethereum blockchain explorer and analytics tool enabling users to search for Ethereum addresses, transactions, tokens, and prices.
- CoinMarketCap: The popular tracking website and tool for users looking to check Ethereum and other cryptocurrency prices.
- Ethereum Twitter: Want to keep up with all the latest Ethereum updates? Ethereum’s official Twitter posts on social gatherings, recent commits, and other important milestones in the Ethereum protocol’s development.
Although Ethereum is transitioning to a hybrid PoW/PoS consensus mechanism and potentially altogether, mining Ethereum can still be a viable source for building your crypto portfolio and it may be a slow transition towards PoS. Furthermore, on September 5th, 2018, Bitmain – one of the leading Bitcoin mining manufacturers – announced an intention of Ethereum support and integration over the next few months, meaning that Ethereum mining infrastructure is about to receive one vigorous boost.
According to the project director at Bitmain, Zhuang Zhong:
“This year, we have been getting a lot of requests for Ethereum support, so we had to add it. Our goal is to provide the best reward margins as we work on product development. In the next 12 months, we intend on being responsible for 12% of the Ethereum hashrate.”
And, with a potential ICO which could extend into the tens of billions, Bitmain support could very well be the catalyst for a more profitable and efficient Ethereum mining ecosystem. So, don’t rule out mining Ethereum just yet, as blockchain has proved time in and time out, that it’s not over til it’s over.
Happy HODL’ing, and remember, once you’ve accumulated more than one month’s salary in Ethereum (or any other cryptocurrency) and aren’t alright with losing it or having it hacked, consider purchasing a hardware wallet to ensure your ETH and future investments are protected and secure.