I’ve done a fair bit of research on crypto over the past year or so, trying to figure out what it’s all about. Details of all that may come in another set of blog posts, but I’m still trying to wrap my head around it all. One of my most recent projects, however, is looking into mining Ethereum.
Believe me, I completely understand that crypto has an extremely high barrier to entry because of knowledge gaps and accessibility issues. I’ve experienced this firsthand. I’m going to attempt to bridge some of those gaps here for anyone who happens to find themselves on our blog. If I tried to do too much in one post though, no one would read it.
Starting out, I’m just going to cover the very basics needed to start mining Ethereum. It may seems like a weird starting place. Sorry for that. But it’s where I am in this grand journey right now. That and it was the first topic that solidly lent itself to a blog post in talking with friends about it.
So come along for our first crypto ride! Learn with me about Ethereum mining.
What is mining?
The simple explanation of mining is that it’s letting your computer do some computational heavy lifting and validating crypto transactions. In exchange for you spending your resources, you are rewarded with a small amount of newly minted crypto.
A huge caveat here – Ethereum in particular is working towards a transition probably within a few years that will change how Ethereum works. The short of this is that you shouldn’t go nuts and buy a bunch of hardware for the sole purpose of mining.
What do I need to mine?
Here’s the list up front. We’ll go through and explain each:
- Hardware
- Electricity
- Ethereum wallet
- Mining pool
- Mining software
Hardware
This is your up front cost. For how we’re presenting this now, this is going to be a computer with a decent graphics card (GPU). Your processor can be complete garbage, and that’s fine for mining. Mining only uses your GPU, which is incredibly efficient at the calculations needed.
If you already have a decently new graphics card in your computer (let’s say Nvidia GTX 10xx series or newer, or AMD Radeon RX 4xx or newer), then you have the hardware covered. The newer the better, however. Newer cards will be more efficient, being able to do more calculations per unit of required…[cue next section]
Electricity
Running your GPU at full tilt 24/7 takes energy, and lots of it. It will depend on your specific GPU model, but this could be anywhere from 50W to 300W+.
Electricity costs are in kiloWatt hours (kWh). A kWh is the energy used with a power draw of 1000 watts for 1 hour. Said another way, a kWh is watts times hours divided by 1000. If you have a 100W load running 24 hours a day, you’re using 2.4kWh per day.
On average across the US, electricity costs are about $0.13 per kWh. Check your utility bill for your exact rates, making sure to add up all the lines that vary by kWh used. Combining this with your power usage, a 100W draw will cost you $0.312 per day (2.4kWh x $0.13/kWh). Your costs will obviously be different.
To make it simple, I’ll just say that it’s probably worth it if you live in the US and you have one of the cards I mentioned above. The best cards seem to be AMD, and Vega or newer. Those should be worth it. I make no promises. I have a GTX 1080, and I’m currently profiting about $0.60/day on average with an Ethereum price at $645 (price as of time of reference, Dec 26 2020 3:12AM UTC).
Ethereum Wallet
In crypto, a wallet is where you store your currency, just like an IRL wallet. There are a whole host of services that give you a wallet address. I personally have most of mine through Coinbase because they make it easy. Well…easier.
Think of it like a PayPal or Venmo account. If your friend wants to send you some money, you would give them some piece of info so that they can look you up on the service. This might be an email or phone number for PayPal, or your Venmo @username. Same gig for crypto. You have a unique address that you can give someone, and they can use that info to send you money. The system gets it to the right place.
For mining, this address is where your earnings will be sent.
Mining Pool
The problem with mining is that it would take an extremely long time to complete the calculations needed to get a chunk of crypto if you’re just using your computer. In the meantime, you’re not getting paid at all. You only get paid if that extremely large computational problem is solved and accepted.
To solve this, miners created pools for spreading out the risk. With enough miners in a pool, you can predictably get paid. In exchange, the pool takes a small percentage of your mining profits (commonly 1%).
Basically…you need to be in a big pool. You’ll never get paid otherwise.
Mining Software
This works similarly to any host of distributed computation programs. You download a software client that connects to a service. That service sends out jobs for your computer to do, and your computer sends results back when those jobs are done.
Combined with the above Mining Pool, you need to tell the software what service to connect to. This differs with every pool, and instructions may or may not be clear depending on your software and your pool.
Now that you have a better grasp of what all these things are, go back to or go ahead and read the post about actually setting things up to mine.