If you’re new to mining Ethereum, this guide covers all the important facts in a simple, low-jargon way. Let’s start with some short answers to common questions about Ethereum mining:
Q: Why should I mine Ethereum tokens (aka ether or ETH)? doesn’t mining Ether take up a lot of electricity?
A: If done properly, more money is earned by selling mined ETH than is spent on electricity. In other words, it’s profitable! You can check out the profitability with our Ethereum mining calculator.
Q: Can I mine with my CPU (Personal computer’s processor) instead of an expensive graphics card (GPU)?
A: GPUs are so much faster that CPU-mining is no longer profitable or worthwhile. Even entry-level GPUs are about 200 times faster than CPUs for mining purposes.
Q: What’s the best GPU to use for getting the most ETH for the least electricity?
A: AMD cards tend to edge out similarly-priced NVidia cards in terms of efficiency. We cover the best cards to get under the heading “GPU Hardware” further down in this post.
Q: Why point your GPU towards a mining pool as opposed to solo-mining?
A: Unless you throw a fortune into mining hardware, your odds of generating ETH on your own are low. Pool-mining allow you to earn ETH in a regular and predictable way.
Q: How do I get started with mining Ethereum?
A: If you’ve got a suitable GPU, it’s a quick and painless matter of installing the Ethereum wallet and mining app then entering a few settings into your chosen pool’s website. Further details are available in the Getting Started with Mining section.
Here are some good reasons to mine Ethereum:
- Mining can be a great way to subsidize the purchase of a new, high end GPU (or two or three…).
- As Ethereum is easily traded for bitcoins (BTC), it’s a cheap way to slowly build up a hodling position in Bitcoin. Many influential people are very bullish on Bitcoin’s prospects for 2016 and later.
- BTC can be easily sold for cash so, indirectly, mining ETH can be a good way to fill up your bank account or earn cash. ETH can also be sold directly on several major exchanges, such as Bitfinex, BTC-e, Kraken, Gemini and Coinbase.
- Mining can be a cheap entry ticket to the Ethereum markets, loved by traders for their high volatility. If you’re a good and / or lucky trader, you can maximize your profits.
- Building a large ETH position now, in the Proof of Work mining phase, will enable you to earn interest on your holdings if / when Ethereum switches to a Proof of Stake
- If you believe in the Ethereum concept (despite the failure of the DAO and doubts regarding the viability of Ethereum’s approach), you can support and gain voice in the Ethereum network through mining.
Some of the above terms in bold probably require further clarification for cryptocurrency newcomers. Let’s start with the Ethereum blockchain; the distributed digital ledger which you actually mine.
Ethereum Blockchain Basics
All transactions in Ethereum (and other cryptocurrencies) are encapsulated within discrete blocks. These blocks are comparable to the batches of transactions which banks send to each other, except in Ethereum they occur every 15 seconds (on average). Blocks are identified by their “height,” starting from 0 and incrementing sequentially until the current block.
Here’s how the mining process serves to create, verify and record blocks:
- Miners listen for transactions over the network and amass all they consider valid (in terms of fees, code and the accounting history of who controls which coins) into blocks.
- Miners expend electricity hashing that block with the processing power of their GPU(s). A successful hash result produces produce a unique Proof of Work (PoW) proving that the miner worked on that block.
- If the rest of the network accepts the hashed block as valid, the block becomes part of the permanent consensus on valid transactions, known as the blockchain.
- The miner receives 5 ETH plus all transaction and code-processing fees (aka gas) contained in their block, plus a possible bonus for any uncles they include.
How Ethereum’s Blockchain Differs from Bitcoin’s
Ethereum uses a different hashing algorithm to Bitcoin, which makes it incompatible with the special hashing hardware (ASICs) developed for Bitcoin mining. Ethereum’s algorithm is known as Ethash. It’s a memory-hard algorithm; meaning it’s designed to resist the development of Ethereum-mining ASICs. Instead, Ethash is deliberately best-suited to GPU-mining.
Hashrate, Difficulty and Price
Total network hashrate has been climbing rapidly since Q2 2016. A dip occurred on news of the DAO crisis but hashrate has since recovered. This chart from Etherscan tells the story:
So if the amount of hardware dedicated to Ethereum mining is rising, why aren’t blocks being mined ever more rapidly, such that the average 15 second block time has decreased?
The answer is Difficulty. By automatically adjusting the computational difficulty of solving a block, the Ethereum blockchain is able to maintain ~15 second intervals. You’ll notice Difficulty closely tracks hashrate:
The next obvious question is why hashrate and difficulty have been rising in the first place? There’s a simple economic driver; price!
Daily chart of Ethereum’s US Dollar value, courtesy of Trading View
The takeaway here is that hashrate has followed (with some appreciable lag) the ETH price explosion, which began in late January 2016.
Calculating Ether Mining Profitability
With a clearer understanding of the Ethereum blockchain and important concepts like Difficulty, it’s time to perform some economic calculations:
First, head over to Etherscan’s Mining Calculator, which provides up-to-date figures for the current price, block time and network hashrate (as measured in Gigahash per second aka GH/s; denoting billions of calculations per second):
Second, copy these figures into the Cryptowizzard Mining Calculator, a more sophisticated calculator which allows you to set your electricity costs, which are critical to determining profitability. Unfortunately, this calculator doesn’t automatically retrieve the current price, hashrate and block time. So, we copy those over:
Third, select the Graphics card you intend to use for mining. The calculator automatically enters the correct hashrate and power consumption. If your card isn’t listed or you’ve modified its performance, select the Custom option and enter the relevant figures manually. Note that GPU hashrates are entered in (Megahash per second aka MH/s; denoting millions of calculations per second).
So, our example will net 109 ETH annually. If sold at the current price, $1537 will be earned from which we subtract the electricity cost of $493. This nets a respectable profit of $1045.
From that $1045, several subtractions may be required:
- mining pool costs, which generally run around 1% plus a 1 ETH payout fee,
- the purchase price of the example Radeon HD 7990, which is roughly $700,
- depending on your intended setup, it may be necessary to buy a new Power Supply Unit (PSU) to run your hardware. An electrically-efficient PSU costs more but saves on power costs over the long term.
Difficulty is likely to continue its established rising trend (and could spike on the release of more efficient GPUs) and price is extremely unpredictable (and may crash if the market dislikes Ethereum’s solution to its on-going DAO crisis). Further, Ethereum is scheduled to switch to a Proof of Stake model at some unspecified date, meaning it will no longer be mineable.
Before any serious outlay of capital, further research into Ethereum’s prospects is warranted. While GPUs may be set to mining other coins and their costs partially recouped through resale, GPUs depreciate rapidly. This is especially true of cards put to the constant, intensive work of mining.
Choosing your GPU Hardware
Experimentation with various GPU selections in the calculator will reveal a card with the best price to performance to power consumption combination (expressed as MH/s per Currency Unit). Keep in mind that AMD cards outperform NVidia for cryptocurrency mining purposes.
The card should have at least 2 gigs of RAM or it won’t be able to properly mine Ethereum.
Pro-tips: check out the AMD R9 range, particularly the HD 7950 which is readily available as used (try to get it from a gamer instead of a miner, with a warranty if possible).
For a solid budget card, the MSi 370 with 4 gigs of RAM is recommended.
AMD RX 480: Potential Game Changer?
AMD are set to introduce their new 14 nanometer (nm) RX 480 card at a hard-to-resist $200 price. The smaller 14nm fabrication process gives this card impressive performance and low power consumption. If the RX 480 achieves high hashrates as expected, it’ll become the new standard in Ethereum mining.
The good news is that AMD, anticipating high sales, are producing the card in considerable quantity so it should be readily available at a fair price upon its release. Previously, the strong demand for high-end mining GPUs drove up the prices of cards like the R9 290(X) and led to supply shortages.
It’s definitely worth waiting for this card’s performance to be benchmarked before investing in any other GPU. Check out r/AMD for the latest info and rumours!
Getting Started with Ethereum Mining the video guide
If you haven’t already done so, install Ethereum!
If you’re familiar with the command line interface, get the latest Geth app for your system. Geth (abbreviation for “go-ethereum”) allows you and your miner to interact with the Ethereum network but requires some programming knowledge.
If you’re not used to the command line, it’s recommended that you download Mist instead. This package contains a simple Ethereum wallet as well as a browser with various other uses, such as messaging. Download the Ethereum Wallet zip file, extract it and run the Ethereum app. This video should help if you get stuck!
Whichever method you use, you will now have to wait while the blockchain is downloaded and synced. You are now ready to begin mining!
For a simple miner with a graphical user interface (GUI), download the Aleth One mining software for Windows, Mac or Linux. After installation, you’ll have to wait about 10 minutes as the miner sets about “building a DAG.” This is a 1 GB+ data file stored in your GPU’s RAM to make the algorithm memory-hard.
The next step is to setup pool mining, as solo-mining is unlikely to make you any Ethereum unless you have a warehouse full of GPUs. This helpful video will guide you through the process of creating your Ethereum and pool accounts and starting to mine.
Mining ethereum on your PC (Windows) – the text guide
If you’re reading a newbie’s guide to Ethereum mining and have a GPU powerful enough to make it worthwhile, we’re going to assume you’re running Windows so we’ll focus on mining Ethereum on that platform.
If your intent is to purchase multiple GPUs and run them from a single controller, your best option is to use Linux from the command line. The availability of the latest and most essential apps for control, mining, monitoring, etc. is better in that environment than in any other OS.
1. Install Visual C++
First, you’ll have to download and install the Microsoft Visual C++ package. It’s available on Microsoft’s official download center.
Choose either the “vcredist_x64” or “vcredist_x86” file depending on whether your system is 64 bit or 32 bit. To check which kind of system you have, visit this Microsoft page and read the info under the heading “Automatic version detection results.”
Note: a 64 bit system is strongly recommended for this method. 32 bit systems may experience errors when running the mining app.
2. Install Ethereum
If you’re not used to the command line (aka “DOS mode,”) it’s recommended that you download Mist, with its friendly and familiar GUI (graphical user interface):
The Mist package contains the Ethereum wallet which you’ll need to receive any mining profits. Mist also includes an Ethereum browser with various functions, such as messaging and a social network and tutorials. As a tip, these tutorials and the social network are helpful learning resources. Don’t be scared to ask the Ethereals if you’re experience difficulty with any part of this process.
To download Mist, head over to https://github.com/ethereum/mist/releases and select the most recent release. In our case it’s 0.8.0:
1) Select the latest release, it’ll have the highest number.
2) Scroll down to the Downloads. Choose Mist, not the standalone Ethereum Wallet.
3) Choose a memorable download folder for the “Ethereum Wallet” zip file. Extract it with a suitable file extraction tool, navigate to the new folder the extractor creates and then locate and run the Ethereum app.
3. Get the Blockchain
The next step is to hurry up and wait, as the Ethereum blockchain downloads and syncs. It’s over 10 gigs so this process may take a while…
When it completes, spend a few minutes to familiarise yourself with the Mist app; the interface is fairly self-explanatory. The Mist app isn’t yet fully polished so expect a few bugs.
4. Setup your Wallet
Next, open the Ethereum wallet and generate a new account and contract based wallet. This wallet will contain the payout address at which you’ll receive mining rewards from your pool or directly from the blockchain.
1) Add your new account, give it a memorable mining name. Store the password securely!
2) After generating the Account, add a wallet and write down or copy to a text file the unique address. This address will start with the characters “0x”. It’s necessary for receiving ETH mining rewards!
A Note on Geth
Mist also contains Geth, a popular command line interface. You may choose to get only the latest Geth app for your system, it’s able to perform all the functions of Mist (and more) from the command line. Geth (an abbreviation for “go-ethereum”) allows you and your miner to interact more directly with the Ethereum network but Geth definitely requires some programming knowledge. As you become more proficient in Ethereum mining and coding, Geth will become more useful to you.
5. Install AMD openCL SDK or Nvidia Cuda
A) Choose the latest AMD SDK for Windows, download and Install OR
B) Choose the Windows version of Nvidia Cuda. Download and install that.
6. Install AlethOne Miner
For a simple miner with a graphical user interface (GUI), download the AlethOne mining software for Windows (or Mac). AlethOne depends upon the Visual C++ Redistributable Packages for Visual Studio 2013 from Microsoft which we installed earlier. Note that 32 bit systems may experience problems running AlethOne.
7. Wait (again) for DAG Initialization
After installation, you’ll have to wait about 10 minutes as the miner sets about “building a DAG.” This DAG is a 1 GB+ data file stored in your GPU’s RAM to make the algorithm memory-hard and therefore ASIC-resistant.
Once the DAG is complete, begin Solo Mining in AlethOne to ensure everything is working as expected!
AlethOne solo-mining in action.
8. Join a Mining Pool
The next step is to setup pool mining, as solo-mining is unlikely to make you any Ethereum unless you have a warehouse full of GPUs. Your first step will be to choose an Ethereum mining pool. There are plenty to choose from but we recommend Nanopool.
Nanopool’s Help section will be of great benefit to you. You’ll need to copy some of those settings into your AlephOne mining settings, along with your address… And that should be it, good luck with mining Ethereum!