Thanks to new technologies, the world is going digital, from smart homes, to innovations that are promoting seamless financial transactions. Across the world, these technologically-driven goals can mean maximizing profits and promoting sustainable development. Cryptocurrency was launched as part of this development and Ethereum includes applications that help users engage in tasks related to bitcoin.
What is mining and Ethereum mining and where does Ether come from?
Mining is computationally-intensive work that requires a lot of processing power, time, and consensus to participate in a peer-distributed cryptocurrency network. The miner is then rewarded for providing solutions to challenging math problems using mining applications with computer hardware.
Cryptocurrency transaction information is embedded in data blocks and each block is linked internally to several other blocks to create a blockchain. The blocks must be analyzed quickly to ensure smooth transactions on the platform, but since the issuers of currencies don’t have the processing capabilities to handle that work on their own, miners are needed to help them.
Miners are investors who devote time, their computers, and energy, to sorting through blocks. When the mining process is successful, hitting the right “harsh,” miners will submit their solutions to the currency’s issuer. After the work is verified, in what’s called a proof of work system, the issuer of the currency will offer rewards in the form of a portion of the transactions they helped to verify. They will also give miners digital coins in exchange for their work. Some currencies depend on only this system, while others use a combination of proof of stake and proof of work.
The word mining is used for cryptocurrency, because it is labor intensive, similar to the mining of gold. Just like precious materials, digital currencies are challenging to mine and digital mining must take place to increase the amount of digital currency in circulation, just as traditional mining is needed to add more precious metals to the marketplace.
Ethereum is used with the products from mining, but mining Ethereum means more than increasing the volume of Ether in circulation, it is also needed to secure the Ethereum network, and to produce, verify, publish, and perpetuate the blockchain. Ethereum mining is the process of mining Ether to help secure the network and ensure verified computations.
Ether is needed as the fuel for the Ethereum platform and another way to look at it is as an incentive to motivate developers to create innovative applications.
Developers who want to make smart contracts on the Ethereum blockchain need Ether, which is also known as the fuel that runs Ethereum — this is a less expensive way of running transactions on the network as compared to buying Ether, and people may also decide to sell Ether after mining.
There is limited Ether supply and the total amount of ether and network operations were decided in a 2014 presale, such that no more than 18 million Ether is issued every year — which is about 25 percent of the first issue, with a goal of reducing inflation.
Blocks must be validated reaching a consensus, following a level of difficulty and an algorithm for validation called Esthash. This algorithm has to do with identifying nonce input below a changing difficulty threshold, and by manipulating the difficulty, a miner can control how much time is required to find a new block.
In Ethereum Mining, which can be done from anywhere using script and command line code, difficulty is adjusted dynamically so the network produces one block an average of every 12 seconds.
The Basics of Ethereum Mining
Mining Ether takes up a lot of electricity, but if mining is efficient, income can be generated from it through the sale of Ether. Ethereum mining calculators can help to project those numbers.
Any computer can be used to mine Ethereum, following certain specs including a Graphic Card (GPU) with at least 2GB of RAM. Central Processing Unit (CPU) mining however is slow and may result in minimal profits. GPUs are 200 times faster than CPUs when it comes to mining Ether and AMD cards are more efficient than Nvidia cards.
To go into the Ethereum mining software folder, you’ll type ‘cd cpp’ then the tab and enter keys. You’ll press tab once again and the terminal should display ‘C:\Program Files\cpp-ethereum>.’
To start mining with your GPU, key in ‘ethminer – G’ followed by the enter key. This will initiate the mining process after building the DAG ((Directed Acyclic Graph), a large file stored in the RAM of your GPU for the purpose of making it ASIC (Application Specific Integrated Circuits) resistant. You’ll want to make sure you have enough space on your hard drive before moving forward.
CPU mining is also possible by typing ‘ETHMINER’ then hitting the enter key to start the process. A DAG is still required in this step after which Geth takes over communication with Ethminer.
The Future of Ethereum mining
Ethereum uses the Proof of work (PoW) system, a system which also supports blockchain technologies like bitcoin and Ethereum. Proof-of-work refers to solving complex equations, which is also a basic requirement for a miner to clear for their block to be added to the blockchain. This system has been criticized for environmental damage and electric costs, however, using the Dagger Hashimoto algorithm, Ethereum has allowed home computers to mine efficiently.
With Ethereum’s next update, tagged Serenity, the concept of mining is expected to be replaced with a new mechanism called Proof of Stake, which will be powered by a consensus algorithm.
The Ethereum network is a string of connections maintained by computers, whose impact is undeniable, with an unlimited capacity for gaining profit. Many people believe mining could change after the consensus algorithm.