Those keen to mine Ethereum should understand that both Bitcoin and Ethereum mining are founded upon the blockchain technology. The blockchain basically acts like a public ledger online. When you perform cryptocurrency mining, you are essentially making use of computing power to verify transactions which are then added to this public ledger. Digital coins like Bitcoins and Ether are thereafter distributed as rewards for solving a cryptographic puzzle or a block successfully.
How does the blockchain technology work?
Blockchain technology is integral to decentralization and it helps to prevent hacking. Since it is decentralized the transactions take place in the absence of any third parties; there is no single point of failure because it involves distributed cloud storage. It eliminates the chance of identity thefts because there is no one source which can be hacked for stealing private credentials. The transactions are time-stamped so that there is proof that they have occurred and the block records cannot be falsified.
Things to remember when mining cryptocurrencies:
When you have access to the right kind of mining hardware, it is indeed possible to earn profits by mining Ethereum or Bitcoin. When you earn a reward the coins get deposited into your wallet. You could either keep it or use it up in trading for other cryptocurrencies. When you do not own a sophisticated and top of the line computer, you will need a dedicated rig for mining cryptocurrencies. This is because the standard PCs are not powerful enough. You will end up spending a fortune of electricity in the process. What you earn in a month will depend primarily on what your electricity costs are and your hashing rates.
Moreover, it is important to remember that mining difficulties will keep increasing over time. This means that profits are also likely to become lower. The Ethereum mining algorithms will alter and there will come a time when you cannot mine it any longer and you need to switch to other currencies. The prices of cryptocurrencies are highly volatile and they will never be what they were a week ago. Hardware is also likely to crash when you run them beyond limits. These are some of the risks which you must be prepared to face when you wish to experiment with mining.
Finding the hardware and software for Ethereum mining:
The mining rig can be conveniently assembled using some basic elements. You could start with a processor and motherboard and 4GB RAM. The principal areas which need heavy investments are the GPUs and the power supplies.
You will need a substantial amount of electricity to be able to run a rig for mining. According to the rating systems for PSUs, a gold or platinum rating is found to be ideal for mining.
The processor is not expected to perform a whole lot of work in the mining rig because it cannot do the calculations needed. The GPU is what is suited for mining and this explains why you need powerful GPUs. It is therefore likely to be the costliest component of the mining rig, costing more than the RAM, hard drive, motherboard and processor combined.
Because the GPUs work incessantly, you will also need good ventilation and air-flow. This is why rigs are typically kept open. They appear like racks which help to stop the heat from accumulating continuously.
For mining, not much software is needed. You can use any operating system, preferably Linux as it is free of cost. You may even use custom OS which are made for mining purposes.
You will need to register for what is called a digital wallet. You may choose to either mine solo or join a mining pool which will assure you of a steady income flow. In a pool, you combine your hash rate with others thereby increasing chances of frequent payouts. Unless you have a very robust mining rig, you should ideally join a mining pool.
You have to typically settle for a power supply of 1200 watts and more. This is usually not required unless you have about 8 GPUs working for which you will also require a specialized motherboard. When you begin with a single GPU, you should select a power supply that can accommodate a couple of GPUs more if needed.
For GPUs, research shows that most people advise using the AMD cards. But being very popular, these are usually all sold out and their prices have also gone up considerably. Therefore, you can also try the Nvidia cards which are less costly but have lower hash rates. However, they are power saving compared to the AMD cards and this means lower power costs.
Using these guidelines it is possible to build a mining rig for Ethereum at affordable costs.