So, you’re interested in mining? Before you start digging for Ethereum, it’s important that you know what mining is and how to get started. If you’re new to mining you may not know exactly what it is, don’t worry we’ve got you covered. This article will explain mining and how you can mine Ethereum in a step by step guide.
In case you’re new here to the digital asset ecosystem, Ethereum is a blockchain that powers the digital asset Ether. It was launched in 2015 by creator Vitalik Buterin, and you can read all about him in our post here. Ether is the second-largest digital asset after Bitcoin.
It’s important to know that in 2022 Ethereum is moving from proof-of-work to proof-of-stake. This means mining Ethereum will likely become obsolete in time as they push for users to begin staking. However, this change has not been implemented just yet so there is still time for you to make a profit from mining Ethereum. It will work in your favour to build a large ETH position now as when the POS begins you should be able to earn interest on your holdings.
First off: what is a mining pool?
A mining pool is a group of digital asset miners who come together, combining their computational resources to enhance their hashing output over a network to better their chances of finding a block to successfully mine for digital assets. Pools can vary in size depending on how many miners there are and the difficulty of the mining.
Mining via pools can be more successful than solo mining; the more miners there are, the more resources you have, thus increasing your chances of success. If your pool is successful the rewards are divided between the individual miners who contributed. These shares work by how much processing power or work each individual has contributed to mining the token. Sometimes, miners must show proof of their mining efforts to receive their rewards.
Not all digital assets are mined in the same way, this article covers Ethereum pools only. However, some common protocols are applicable across many of the popular mining pools.
Types of mining pools
Proportional mining pools. All of the miners that contribute to this type of pool’s processing power receive shares until the pool finds a block. After this, miners receive rewards that reflect the number of shares they hold.
Pay-per-share pools. In this pool each miner receives shares for their contributions, similar to proportional pools. However, with these pools, miners can receive instant payouts regardless of when the block is found. Miners in this pool can exchange shares for proportional payouts whenever they want.
Peer-to-peer mining pools. These mining groups aim to prevent pools from becoming centralised. They do this by integrating a separate blockchain, related to the pool itself, which is designed to prevent the operators of the pool from cheating and taking an unfair cut of the mining rewards. What’s more, the separate blockchain prevents the pool from failing because of a single central issue.
How do Ethereum mining pools work?
Ethereum mining pools are typically categorised by three components: pool size, fees and payouts. Larger pools offer smaller payouts but are much more likely to find blocks. Each pool comes with its own management fees as well as different payout amounts and times.
Generally, Ethereum pools spawn blocks relatively quickly compared with other digital asset pools. On average a new block is added every 15 seconds, thus rewarding miners with consistent payouts and rewards for their mining efforts. Ethereum mining pools provide steady payments, unlike solo mining. Working collectively with others you can frequently earn a modest portion of the entire pool’s Ethereum rewards.
Ethereum mining pools can be accessed globally, with the most popular pools are located in Asia, Europe and the US. Each offers different rewards, pool sizes, fees and payout structures. You must choose a pool that is most suited for you and your requirements. There are quite a few pools to choose from to begin your mining experience.
Examples of Ethereum mining pools
Ethereum mining pools distribute rewards through various methods depending on the pool you choose to mine. The fees the pool requires you to pay are usually used to pay and reward the pool provider for the maintenance and upkeep of the pool. Ethereum pool fees are between 1–3%. The majority of the popular pools offer a 1% fee as an incentive to drive miners to particular pools. Rewards structures can differ based on the miner’s contribution, miners should be more mindful of how each pool shares rewards and payments.
Ethermine is the largest Ethereum mining pool, it has more than 300,000 miners and employs approximately 22% of the network’s hash rate. The pool charges a single fee of 1% for all received ETH rewards. You can access the pool via both mobile and desktop thus creating accessibility for first-time miners.
Sparkpool was the most popular Ethereum mining pool for its hash rate of 25%, but the pool has now been shut down due to regulations in China. 2Miners and Nanopool are other popular pools, with both pools having high amounts of miners as well as leading hash rates.
Benefits and drawbacks of a joining mining pool
Mining individually isn’t always profitable due to the amount of high power and resources needed, but your chances of success are increased if you join a mining pool. Due to the increased popularity of digital assets in recent years, miners need increasingly expensive hardware as well as an abundance of electricity to keep up with mining demands. Joining a mining pool reduces these strains as the hardware and electricity is spread between all the systems rather than lumped on the individual — in essence, the more the miners, the less strain on each individual’s system.
What’s more, participating in a mining pool means miners are usually bound to certain terms set by the pool itself, meaning that they could dictate how the mining process is approached. Due to the potential rewards being shared to all participants the profit is lower, however, but most pools reward each individual for the work they’ve contributed to keep things fair.
Steps to mining Ethereum
If you are still interested in getting into Ethereum mining, follow these broad steps to begin:
Step 1: set up your system
Step 2: connect your Ethereum wallets
Step 3: locate and join an Ethereum pool that suits your needs
Step 4: get started mining Ethereum and earning rewards
Once you’ve completed these steps you’re ready to begin your mining journey and make your dent in the digital asset space. If you want to find out if you can profit from mining Ethereum, you can use this handy Ethereum mining and profit calculator. It will provide you with the information on how long it will take to mine 1 Ethereum depending on the hardware you’re using. If you’re using the most up-to-date top-notch hardware it could take anywhere between 30–60 days to mine 1 Ethereum. If you’re using less powerful hardware it can take 60–90 days. It’s also important to take into account the pool you’re using, ideally the more users in the mining pool, the quicker it should take to mine new tokens.
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