What is Ethereum Mining?

Remember, Ethereum uses the Proof-of-Work (PoW) consensus mechanism. For all PoW-based cryptocurrencies, mining is the blood that keeps those mechanisms running.

And for any decentralized network to properly run, it requires its own blood--consensus mechanisms. Similar to Bitcoin’s mining system, Ethereum also uses computers to repeatedly and very quickly guess answers to a puzzle, until one of them wins. For more information, please see Byzantine Generals Problem.

What happens in Ethereum, is miners will run the block’s unique header metadata, which include timestamp and software version, through a hash function, which will return a fixed-length, scrambled string of randomized numbers and letters. The only value that is changed is the ‘nonce value,’ which impacts the resulting hash value.

Types of Mining

There are four types of mining: CPU mining, GPU mining, FPGA mining, and ASIC mining. Let’s explore each.


Ether was designed as a coin that could only be mined with consumer graphics processing units, or GPUs. By trade, the industry recognizes GPUs as the most sensible choice due to its flexibility and relatively good performance compared to price.


FPGA, or field-programmable gate array is a specialized device which allows for some form of configurability while still being more efficient than GPUs at certain computations. However, FPGA are considered expensive and to be very complex devices that require advanced technical knowledge to be used effectively, rendering them inferior to GPUs.


ASICs, or application-specific integrated circuit machines are specialized devices which are hardwired to do only one task, which allows them to achieve much higher efficiency than generic computational hardware.

ASICS, on the other hand, provide a measurable performance boost over graphics cards, but still have some downsides. ASICS can only mine Ether and a few other coins if they are based on the same hashing algorithm. In contrast, GPUs can mine many other coins, and can be resold to gamers or used to build a gaming PC. They are definitely hard to find, especially if you go directly to manufacturers.

How to Mine

No matter which method of mining you choose, you will need an Ethereum wallet before getting started. There are four (4) ways an individual can mine Ether (ETH):

  1. Joining an ETH mining pool
  2. Cloud mining
  3. Solo mining
  4. Creating your own Ethereum mining pool

DISCLAIMER: This is for educational purposes only and should not be taken as investment advice.

An image of a mining pool on Nanopool | Stormgain

A mining pool is a server that breaks down a mathematical equation into smaller equations and distributes it among connected computers, called “miners”. In mining pools, participants are incentivized to solve the equation together, as they all share into the reward which is eventually distributed to them.

In the space, there are a high number of ETH miners, making it extremely competitive for an individual to solve any particular equation. The more complex a task is, the higher the reward for a block is.

Mining pools make it very difficult for any individual miner to solve the equation by themselves, as it requires a significant amount of computing power, which of course is expensive. When joining a pool, it is important to take note of the following information:

  1. Pool hashrate
  2. Pool reputation
  3. Commission rate
  4. Minimum payout amount and frequency

Therefore, by combining the computing power of several individual miners, mining efficiency is increased, allowing for individuals to all profit, together.

Cloud Mining

Cloud mining requires a participant to lease mining equipment, rather than owning it outright. A leasing company (lessor) owns the equipment and maintains it in exchange for the participant (lessee) paying for the time the equipment works.

For all the coins mined during the lease time, they are transferred to the lessee’s wallet (not the lessor’s), which also provides a number of advantages:

  1. You don’t need to buy, install, or maintain equipment
  2. There is no risk of damaging the equipment

However, there are some downsides:

  1. Participating in cloud mining presents the risk of Ethereum’s price decreasing, would make any given lease contract a loss.
  2. There is a high risk of fraud, as it takes time to find a reliable leasing company.

Solo Mining

If you think you have what it takes to go out on your own and mine, do so with extreme caution. In the current landscape, it is extremely expensive and inefficient to do this on your own, as it requires significant amounts of computing power. It is for this reason mining pools were created, so as to provide a mechanism for individuals to benefit who otherwise would be unable to do so individually.

For information on how to mine ETH on Windows or MAC, please click here.

Building Your Own Mining Rig

When setting up your Ethereum Mining Rig, you will need the following pieces of hardware:


The base of the mining rig is known as the motherboard. The amount of GPUs that an individual can use is directly related to the number of GPU slots that the motherboard has. The more GPUs that can be attached to the motherboard, the more the hash rate hashes.


The GPU determines how powerful the rig will be. The type of GPU an individual purchases depends on how much they are willing to spend.

Hard Drive

Once the mining rig is put together, you will need something to store your OS (Windows or Mac) and mining software. It is best to invest in a standard SSD (solid state drive).


For informational computation and fast calculation, you’ll want RAM or Random Access Memory. Typically, a 4GB RAM should be sufficient.

Power Supply Unit (PSU)

Depending on how many GPUs you’re using, will determine the size of the power supply unit (PSU) you purchase. The PSU takes into account all the power consumption of your GPUs and other components to make sure the capacity of the PSU is larger than the sum of all the GPUs.

Take for example, two (2) 220-watts GPUs and other components which consume 250 watts, then the PSU must have more than 690 watts (2x 220 watts + 250 watts).

Software Mining

Of course you will need an OS before installing the software.

ethOS is a 64-bit linux app specifically designed for Ethereum Mining, which mines Ethereum out-of-the-box, allowing an individual to control all their rigs from a single location.

Ethereum 2.0 and How This Affects Miners

On December 1, 2020, Ethereum 2.0 will go live, upgrading the current PoW model to a Proof-of-Stake (PoS) model. For reference, PoS requires network participants to tie their cryptocurrency to the network as collateral.

For the Ethereum 2.0’s launch to be successful, it needs 16,384 validators to stake a minimum of 32 ether, which is the equivalent to $12,800 at current market rates. On November 6, Ethereum’s founder, Vitalik Buterin sent 100 transactions for 32 ether each (totaling 3,200 Ether). This amount is worth around $1.4 million at press time.

Start buying and trading cryptocurrency
Sign up and start opportunities with the future of currency
Sign Up Now