Want to mine Ethereum and make some extra money on the side? Is it even possible to make a profit mining Ethereum? The simple answer is: yes, but you have to look at it like a boss.
What is Ethereum mining?
Ethereum mining usually refers to the process employed in the validation and security of every transaction that occurs on the Ethereum blockchain. The mining process is in many ways similar to the mining process on Bitcoin blockchain, in that it runs on a mechanism called Proof of Work (PoW). And much like the PoW mechanism in Bitcoin mining, that is the method the founders of Ethereum use to maintain the network, and to be sure it remains functional and secure.
If there is one major difference between the Bitcoin and Ethereum PoW systems and how it works, the Ethereum system features a larger number of miners, which they have chosen to call volunteers. These volunteers not only add new blocks to the Ethereum blockchain, but they also manage to verify transactions. The right to verify transactions, however, must be earned by miners, who must solve a difficult math problem. They solve the problem first, and then they are awarded the right to verify other transactions.
The logic to this is relatively obvious, in that finding the solution to the math problem serves to demonstrate a relatively advanced level of computational power, which makes them a qualified specialist in transaction verification. After they have validated a series of new transactions, they are also able to add a new block to the Ethereum blockchain, and they are awarded with the native cryptocurrency Ether (ETH).
Basic steps to mining Ethereum
Prior to even beginning your Ethereum mining adventure, you’ll have to find a safe place to store what you earn, which means creating an Ethereum wallet. One of the most important aspects of this means storing the private keys of your cryptocurrency assets, which is how anyone gains the authorization to sell, exchange, or transfer your Ethereum. That is why the first thing you should do is to establish an Ethereum wallet to keep your future holdings of Ethereum as safe and secure as possible.
The second step you’ll have to take will be to pick out the best graphics card for your Ethereum mining. To begin mining ETH, the computer you use must have a Graphics Processing Unit (GPU), or graphics card, that has all the acceptable features to make for a successful Ethereum mining trip. The GPU itself determines the power output of your computer, which in turn determines the likelihood of your being picked to mine ETH. In most cases, you will have to choose from a wide range of GPUs, to find the one most suitable for you.
Next, you will have to install the right kind of Ethereum mining software. The software is the main method for connecting your computer to the Ethereum blockchain, and to provide you with the ability to validate transactions and, then, to add a brand-new block to the blockchain. Of course, the right software is the only way to be rewarded with ETH. If your mining experience means you are comfortable using the command line, then you can download and install the preferred mining program called Geth. Of course, if you are unfamiliar with code and or using the command line, other software options, like Ethminer, or even MinerGate, are easily available.
The next step to being successful as an Ethereum miner is to join a mining pool. As Ethereum mining has become increasingly popular, it has also become an increasingly competitive system, which makes it close to impossible to meet the power output of mining organizations on a somewhat level playing field. Mining pools formed to give individual miners the ability to combine resources and improve their ability to compete. Unless you have a power output that is in line with many of the most powerful miners in the system, it would probably be a good idea to join a pool and help choose a leadership strategy. ‘
Finally, the last step is to start mining. Once you have the hardware and software you need, and it’s been configured properly, and you have joined a sufficiently powerful mining pool, it will then be possible to simply follow prompts and start Mining ETH. In order to make sure you receive the rewards you earn, make sure you have configured your ETH wallet address properly.
How much profit can an Ethereum miner earn?
It’s simply not possible to predict whether a particular miner will be able to earn through the Ethereum mining process. The first thing to keep in mind when deciding whether to mine Ethereum is this: to make a profit from mining Ethereum, the returns must always be greater than the costs. That is business 101.
Successful miners always maintain a high and constantly sustained computing output. That is, after all, the only way to improve the chance of earning more ETH. It’s necessary to keep a cap on the cost of hardware and electricity. And if you manage to earn plenty of ETH, you will have to consider the possibility of paying taxes. Whether you have to or not will depend on the local tax laws where the miner is located, as well as the prevailing price of ETH. In fact, the prevailing price of ETH will be a major factor in determining how much a particular miner earns overall, whether they pay taxes on that amount or not.
Factoring costs into profits with Ethereum mining
As mentioned, a miner’s level of profit will be determined by the level of costs incurred while mining Ethereum. While the process of mining Ethereum is less costly than mining Bitcoin because the hardware is less expensive, all miners must understand the costs to determine the profitability of Ethereum mining going in.
For example, it is certain that, since all rewards are gifted in the form of ETH currency, it becomes crucial that every Ethereum miner hoping to make some money keep a keen eye on the price of ETH. That means any changes in price, no matter how small or large, will have an impact on profits, since all miners earn their rewards in the form of that cryptocurrency. Since other hard costs, like hardware and electricity, will likely be paid with a fiat currency, like the USD or CAD, any fluctuation in the price of ETH could actually determine profitability.
The overall cost of mining will depend on many factors, but one thing that will cut into a miner’s costs, when compared to mining Bitcoin, has to do with hardware. It is possible for an Ethereum miner to complete his job using a graphics card manufactured by a major supplier like AMD or NVIDIA, which means a standard laptop or desktop computer will often be adequate for the miner’s purposes.
Once the miner has the hardware they need, the electricity is the next cost they consider. Most Ethereum miners attempt to keep their electric bills as low as possible, in order to keep their costs low and their profits higher. That is also part of doing business. Miners will often find that electricity costs will continue to add up and creep into profits. That is why so many miners also search carefully for the best possible place for their mining set-up in the first place.
The only additional cost factor to consider is the cost of joining a mining pool. Again, a mining pool allows a collection of individual miners to pool their computing power in a way that allows them a greater chance of meeting the competition at a relatively level playing field. However, the cost of admission must be low enough to keep it profitable.
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About The Author: Emma Martin
Emma Martin writes about the curiosities of finance. Her obsession with cryptocurrency keeps her writing most days about the best exchanges and wallets, and the wild world of NFTs. Her favourite exchanges right now are Bitbuy, NDAX, and VirgoCX.
Emma also invests in the stock market using Wealthsimple Trade. Other than crypto, Emma spends her time with her dog Brutus and shopping online with her Mastercard® KOHO Prepaid Card.
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