How To Mine Ethereum: A Guide For A Complete Newcomer


June 25, 2018

How To Mine Ethereum

Blockchain’s transformative technology is compared to that of World Wide Web. Yet, despite the demand and rapid growth of cryptocurrencies and blockchain, many consumers were left missing out, as they were struggling to find affordable ways to enter the market and earn their digital cash.

So you have a certain amount of cash that you set aside for investing in a hot new thing called cryptocurrencies and after doing a research you decided to stick with Ethereum which you believe, and rightfully so, has a more technologically advanced mechanism that powers it and therefore better prospects for a wider adoption and a price growth.


Don’t be obsessed by the fact that Bitcoin price is more expensive than Ethereum does. It does not mean that Bitcoin is more valuable than Ethereum. The main difference is that Ethereum is a sophisticated technical update to the blockchain technology that keeps being developed while Bitcoin despite its limitations became a household name and is something that is firmly associated with cryptocurrencies. This reputation of Bitcoin is one of the reasons that stimulates its rapid increase in its price and demand.

Ethereum is the second most popular cryptocurrency that was introduced four years after Bitcoin. The main difference between the two digital coins is that Bitcoin focuses more on the financial operations and Ethereum on the technology that makes these operations smarter, better, faster and safer. Technically speaking, Ethereum is a token that improves the functionality of the blockchain. It is working on the basis of so-called “smart contracts” that set up rules and conditions of peer-to-peer (P2P) crypto transactions. Those contracts are somehow similar to those ordinary legal papers that define the conditions of cooperation between the parties with the main difference of being encrypted by the programming algorithms and scripts that can be defined and executed by the cryptographers.

The smart contracts technology was the basis of the Bitcoin transactions as well, however they were predefined by the system and all of the miners had to stick to it. What Ethereum did was that it gave the miners the possibility of programming those contracts in a way that would incorporate new argumentations or conditionality within the transactions. For instance, crypto miners could set a contract rule that a new transaction would proceed once a certain number of users verified or agreed to it.

This innovation also makes decentralized application (dApp) system possible, meaning that the miners can build their own programs/apps on the platform.

Ethereum (ETH), like Bitcoin (BTC), has a stable market value and capitalization and is being traded and exchanged on the common cryptocurrency platforms. Coins can be purchased on crypto exchanges, used for payments and crypto transactions. However, the ETH price stands for the value of the token, whereas the price of BTC represents the value of the digital coin. The main difference between token and coin is that token represents the value of a certain assets or utility (in this case Ethereum), whereas coin is the actual digital currency.


Mining is the essence of distributed apps network which ensures that all applications running on the blockchain reach the consensus and the transaction is written permanently on the global ledger. Ethereum tokens, or Ethers, are created by solving complex math problems. This is done by a powerful machine that is built to solve these math problems. When a batch of problems is solved it becomes known as a block. Blocks are verified by other users and once they are verified, they get added to what is called the block chain. This chain continues to grow to build a master ledger that will never end.

Ether mining is a very competitive process of validating transaction records in Ethereum public network of transactions. During the mining process transactions are being “sealed” by a hash and then included in the public ledger, known as a blockchain.

When a block of transactions is created, miners take the information in the block and apply a mathematical formula to it, turning it into a shorter sequence called hash. This sequence is stored at the end of the blockchain. Each hash is unique which allows it to serve as a seal on the block of transactions.

During the mining process miners must compete with each other to create the hashes and “seal” blocks. Every time someone successfully produces a hash, they get a reward of a certain amount of Ether, the blockchain is updated, and the network is notified. Different cryptocurrencies use different types of algorithms in order for the blocks to be released.

The rewards of mining are both the transaction fees correspondent to the transactions as they are assembled in the block in addition to the newly released Ether. The fee is a reward for the miner to include the transaction in their block. In the future, the fees will become a more important part of mining income.

The problem is, the competition in the mining process is so high, the puzzles has evolved to become increasingly complex and prevent the blockchain to generate too much Ether that may lose its price and disrupt the balance in the system. Miners have to spend more and more calculations power to successfully solve the mathematical problems known as “proof of work”. The one with more power and the access cheaper electricity wins. Here’s why this happens.


Having seen so many ‘would be’ miners try their luck in this business and end up losing a lot of money and walking away from it, it is crucial to pass along as much information as possible to those who see mining as a potential full or part time career.

In the early days of cryptocurrency mining, the whole process was processed on CPUs from normal desktop computers, but with time graphics processing units (GPUs), are more effective at mining. As Ethereum gained popularity lately, GPUs became dominant. However, with such equipment the cost of energy consumed is far greater than the revenue generated.

While Bitcoin mining has evolved to customized machines and designated ASIC chips adapted especially for mining of this coin, the ASIC machine for Ethereum mining has not been yet released. Besides, many blockchains running on Ethereum platform restrict users to mine on ASIC machines because they are too powerful and create an uneven playing field for miners. And if miners are not compensated for their efforts they would not be motivated to maintain the integrity of the network, and the attractiveness of Ethereum blockchain for miners may decrease. So some blockchains took the pre-emptive measure and adjusted their algorithms in such way that makes their blockchain “ASIC-resistant”.

GPU mining units are commonly used for Ethereum mining. To speed up reaching the point where you see a positive ROI from your mining, you can build a mining farm consisting of several GPU units and appropriate hardware that supports their work. To find out the best configuration of your units you can use Ethereum mining calculators commonly found online.


After you have chosen and set up your mining rig, you must choose, download and install the correct mining software program. It will link your rig to the Ethereum network making it a true network node, and will also reap and store your reward. If you are familiar with programming you can download a client called Geth which uses a programming language called “Go” but there are also many similar packages available. The benefit of Geth is that it runs on all popular types of devices and operational system, so all you have to do is to download the right version, install it and set up according to instructions. More advanced users will welcome the smart contract functionality of this client as well as the ability to process transactions right from the command line.

Once you have installed the proper software, you are ready to start mining in the test mode. But to get real rewards you must install another piece of software called Ethminer which makes you a true participant in the Ethereum network. This is an official requirement from the system. You should also configure a digital wallet to collect your coins.


Unless you have invested in dozens of GPUs you are not going to make any sizeable revenue from mining alone. Pools allow you to join computing forces with other participants so that you solve the puzzles faster and collect profit which is divided according to the contribution to the pool by each individual participant. Some of the pool members can have a single but a powerful GPU and some may join in with several machines of average hashing rate. The pool program takes all that into consideration so that the reward is split fairly.

Before you join a pool by signing up on their website you need to check these main factors:

  • Pool size: how many members are participating. Large pools are safe choice because even though there are many people aiming for reward, the chances to solve the puzzle are higher and you will get a guaranteed payout on a regular basis.
  • Payment schedule: how often are you getting paid and what’s the payment threshold. If the pool makes you wait till you earn a minimum payout of a whole ETH token then your payouts will be less frequent and you may get a lower reward because of the rate fluctuations.
  • Fees and commissions: pools deduct a small portion of your earnings for their data centre servicing and administrative expenses. Some pools lure new members with a promise of zero fees but you should wary of these because chances to get scammed at such pools are high. The reasonable fee is 1 percent.

A pool option is considered to be the most reliable option since you still own your equipment and the chances of getting rewards, even in such a tough competitive world of Ethereum mining, are still very reasonable. The risks are also minimized compared to cloud mining services


The thing you need to know with cryptocurrency mining is that beyond the initial cost of the hardware, power and hardware longevity are ongoing concerns. The lower your power costs, the easier it is to make mining a profitable endeavour. Conversely, if you live in an area with relatively expensive power costs, mining can seem like a terrible idea. The most important point is to calculate all of the mining-related extra costs (the price of the rig, the local electricity costs and the number of coins mined per day) to be able to return the initial investment within a shorter period of time.