What Is Mining?
Mining is to the blockchain what prospecting is to gold. It is the process of extracting cryptocurrency from the network. Miners, the people who do the mining, devote time, computer space, and energy to solve complex problems and find transactions on the network that have not been previously recorded.
These transactions are put into large bundles called blocks which are in turn bundle together into a blockchain. The blockchain prevents people from assigning the same cryptocurrency to two or more recipients (a-la writing a bad check).
For their effort, miners are rewarded with some of the cryptocurrency based on a pre-agreed schedule.
How to Mine Ethereum
Ever since Ethereum broke through the charts in 2017, many people are interested in finding out the benefits of mining Ethereum and how to mine Ethereum. It’s pretty simple once you set up an Ethereum mining rig. In fact, before knowing how Ethereum mining works, one has to know what an Ethereum mining rig actually is. You can see our step-by-step guide on how to build Ethereum mining rig below.
Once the rig is set up, Ethereum mining requires script writing and some knowledge of the command prompt. However, as there are different ways of mining Ethereum, people have many doubts and ask questions like “Can I mine Ethereum with CPU?” and “Can I mine Ethereum with GPU?” and “What is Ethereum staking?”
3 Ways of Mining Ethereum
Though cryptocurrency mining is common to digital coins, different coins subscribe to different methods of mining. The three common types used in the Ethereum mining process are CPU mining, GPU mining, and Staking.
Some coins such as Aeon are CPU-intensive coins, which means no graphics processing unit (GPU) or application-specific integrated circuit (ASIC) can be used to mine them. The goal of CPU mining is to ensure mining is accessible to everybody who has a computer with a central processing unit (CPU).
Graphics cards or GPUs are more effective at mining than CPUs. Most coins can be mined on a GPU, which does massive calculations in the blink of an eye. While an “Intel i7” processor (a top-end CPU) can compute at about 300 hashes/second, a GPU like the “AMD Radeon R9 290X” or “GeForce GTX 1080” will hash at about 600-900 kilo-hashes/second.
The Ethereum Mining CPU or GPU debate is quite common, but one must not forget the third form of mining.
In this form of mining, the miner holds coins and gets a steady stream of new coins based on the age of the coins and percent of the total coins in circulation that the miner holds. While this allows for fast transactions, the downside is that if you only hold a small amount of the coin, the earning would be low or even nothing. (Source: “3 Types Of Cryptocurrency Mining,” Steemit, July, 2017.)
Ethereum Mining: GPU vs CPU
This is literally a no-brainer as the numbers below will show. GPUs have more ALUs (arithmetic logic units) than CPUs so they can do bulky mathematical labor in a greater quantity than CPUs.
For example, running “Ethminer” on my CPU gives me a hash rate of 0.248 mega-hashes per second whereas each of my AMD R9 390X GPUs gives me a hash rate of about 31.58 MH/s. If you do the math, each GPU gives me 127 times the hash rate of my CPU.
How Does Ethereum Mining Work?
Though Ethereum mining is simple, it involves different steps. We’ve listed them below (the steps are for “Windows” computers).
- Download “Geth.” This will link you to the Ethereum platform while coordinating your setup. Unzip the Geth file and transfer it to your hard disk drive, preferably the C: drive.
- Open up the Start Menu and search for “CMD.” This is the Command Prompt you need to execute the installed application.
- Locate Geth. Type “cd/” into the command prompt terminal and press Enter. “C:\>” should be highlighted now, which means you are currently in the C: drive, where you put the Geth file earlier.
- Now you need to create a new account. Type in “geth account new”—the command prompt should display “C:\>geth account new”—and press Enter.
- The command terminal will now ask you to create a new password. Type in a password, press Enter, and voila! Your new account is ready.
- Now it’s time to link up Geth with the network. Type in “geth –rpc” in the terminal and then press Enter. This will start the download of Ethereum’s blockchain and that synchronizing with the global network. This can take a while.
- Install a mining software, like Ethminer, to help your GPU run the hash algorithm required on the platform.
- Open a new command terminal and repeat Step 3.
- Type in “cd prog” in the new terminal window—it should say “C:\>cd prog”—and press the Tab key. It should now say “C:/> cd “Program Files”.” Now push the Enter key to show “C:\Program Files>.” To go into the Ethereum mining software folder, type “cd cpp” then press Tab, then press Enter. Press tab once again. The terminal should now display “C:\Program Files\cpp-Ethereum>.”
- Start mining. Type in “ethminer -G” and press enter. Your mining will start as soon as your Directed Acyclic Graph (DAG) is built. DAG is a large file stored in the RAM of your GPU for the purpose of making it ASIC-resistant. Make sure there is sufficient space on your hard drive for all this.
Basic Things to Consider Before Building an Ethereum Mining Rig
Just as you would consider all aspects of running a business before setting up, there are a few things to consider before building an Ethereum mining rig.
Ethereum Mining Rig Costs: These are the costs of the computer parts you will need to build the rig. The parts should cost anywhere between $900.00 to $2,800, depending on the quality of parts and where you source them from.
Overhead Costs: If you already have an Internet connection and a basement/garage you can use for mining, the only overhead cost is going to be your Ethereum mining electricity cost.
Ethereum Mining ROI: To make sure your efforts translate into profits at some point, be smart about your initial investments. No point starting off with an expensive computer that does more than is absolutely necessary. Start with a basic rig that has the capacity to upgrade as the business grows. Remember, in mining, time is money. So the faster you get back your return on investment (ROI), the better. After that, it is just the electricity cost and profits.
Technical Knowledge: You need to have a bit of knowledge on how to use a computer. You’ll also need to know how to calculate the hash rate of your mining rig, vis-à-vis your electricity costs, and the cost of the mining rig itself.
Risk: As with any investment, mining rigs do come with a risk. But if you set up your mining rig professionally and have the right expectations, you can manage the risk and come out on top.
Parts Required for an Ethereum Mining Rig
There really isn’t a whole lot as far as Ethereum mining rig parts go. You need parts to build the rig framework and the computer parts that you will attach to this frame. All told, the parts include:
- Aluminum angles (five cut to 14 inches and eight cut to 24 inches)
- Wooden blocks
- Power drill.
- Self-driving screws
- Power supply unit (PSU)
- Power cables
- Random access memory (RAM)
- CPU or GPU
- Heatsink fan
- Powered risers (risers allow you to suspend the GPUs above the motherboard. This will help dissipate heat and allow air to flow through the rig.)
Now for the software. You can run your rig on Windows, “Linux,” or “ethOS.” You’ll need to download graphics drivers and Geth. That’s it. You’re all set to mine. (Source: “BUILD AN ETHEREUM MINING RIG,” Cryptos R Us, October 22, 2017.)
Once the basic setup is done and you start mining ether, you need to get a wallet (preferably offline) to store the mined ether. Now that you know what it takes to build a rig, let us go through a step-by-step guide to build an Ethereum mining rig from scratch.
Step-by-Step Guide on How to Build an Ethereum Mining Rig
Building a rig is fun if you know how to handle a power drill and a screwdriver.
Step 1: Build the frame for the case with the aluminum angles. The box will be 24 inches wide, 14 inches deep, and 14 inches high. To the base of the frame, attach three 14 inch wooden blocks, front to back.
Step 2: Rest the motherboard on these three blocks and screw it into the blocks.
Step 3: Attach the CPU to the motherboard. Once the CPU is in place, lock it in with the CPU cover.
Step 4: Place the heatsink fan directly over the CPU.
Step 5: Pop the stick of RAM into place on the motherboard.
Step 6: Add the power supply unit to the motherboard. Align the pins on the PSU to the holes in the motherboard.
Step 7: Connect the powered risers to the power source and to the GPUs. Using twist ties, hang the GPUs on the frame, away from the motherboard.
That’s it. Your mining rig is ready to be connected to the Internet. (Source: Ibid.)
Should You Consider Mining Ethereum Now?
While you probably won’t get filthy rich by running a mining rig, you can make a decent amount of cash. It all depends on how many GPUs you attached to your rig. The more GPUs, the more money you make. As the rig operates on its own without any interference, it’s almost like getting cash for doing nothing.
And if you are smart enough, you can offset some of the electricity costs by using the heat generated by the mining process to warm up a room or two during winter.
Given that the price of Ethereum is on an upswing, now is a great time to consider mining some ether. But don’t do a half-hearted attempt with a cheap, bottom-of-the-barrel rig. Invest in some decent GPUs and be patient. The ROI will happen pretty soon.
Source: Price Confidential