How to Mine Ethereum? Understand how ETH mining works

Mining Ethereum and other cryptocurrencies is one of the most exciting activities in this market. In the topic about Bitcoin, we already know a little about how mining works. Created by Satoshi Nakamoto together with Bitcoin, mining is the name given to the process of issuing new digital currencies.

However, there are thousands of cryptocurrencies today, and each of them has its own type of mining. Ethereum, for example, has a completely different system. In addition to the differences, there may be changes in the mining methods. Ethereum itself went through a similar process in December 2020.

As such, mining of the second largest cryptocurrency by market value has undergone significant changes in recent years. To understand these changes, you need to know how mining works. This article will provide a step-by-step guide on how to mine ETH and the steps required to do so.

What is mining?

First, let’s understand how the mining process works. In simple terms, it involves solving complex codes produced by a cryptocurrency network. The goal of all the machines present in the network is to compete with each other, trying to find the solution to the code as quickly as possible.

These codes are proposed randomly and their results are obtained in the form of hashes. A hash is a random combination of letters and numbers that serves as proof that the machine in question found the code. Since this process requires a large amount of energy, it is said that the machine “put in work” to solve the problem.

After this, the machine publishes the hash code that proves the resolution to the network. This code is the proof of work carried out by that computer. This process generates new cryptocurrencies on the network and whoever solves the code receives part of these coins as a reward.

Ethereum Mining

Ethereum mining initially used a consensus mechanism known as Proof of Work (PoW). In this model, miners competed to solve complex mathematical problems, which, when solved, validated new transactions and added blocks to the blockchain.

This highly energy-intensive process requires specialized hardware, such as GPUs (Graphics Processing Units), for example. But this equipment consumes large amounts of electricity. The reward for miners comes in the form of new ETH generated with each block mined, in addition to the transaction fees included in the block.

This model, although effective in ensuring the security and decentralization of the network, raises environmental concerns due to its high energy consumption and ecological impact.

Ethereum’s transition to a new mining model marked a significant shift in the network’s approach. With the upgrade to Ethereum 2.0, the network began migrating from Proof of Work to Proof of Stake (PoS).

How to Mine Ethereum

In this new model, the traditional process of mining Ethereum no longer exists. Now, the staking process is in effect. Instead of miners competing to solve mathematical problems, validators are chosen to propose and validate new blocks based on the amount of ETH they have and are willing to “lock up” as collateral.

This system drastically reduces energy consumption. After all, it does not require the use of intensive hardware to solve complex calculations. In addition, Proof of Stake is more secure and scalable, allowing the network to process more transactions per second and reduce latency.

The transition to Proof of Stake not only addresses environmental sustainability concerns, but also democratizes the transaction validation process. This is because anyone with a minimum amount of Ether can become a validator, making the system more accessible and encouraging greater participation in the network.

This change also aims to reduce the centralization seen in Proof of Work mining, where large mining pools dominate block validation. However, the full transition to Ethereum 2.0 and Proof of Stake is still underway. Several planned phases will seek to ensure a smooth and secure migration.

Proof of Work (PoW):

• • Miners compete to solve math problems;
  • Requires specialized hardware (GPUs) and consumes a lot of power;
  • High reward to miners for new blocks and transaction fees;
  • Environmental problems due to high energy consumption.

Proof of Stake (PoS):

• • Validators are chosen based on the amount of Ether they hold;
  • Dramatically reduces energy consumption;
  • Anyone with the minimum amount of Ether can participate;
  • Reduces centralization and improves security and scalability.

Casper Protocol and Ethereum 2.0

The Casper Protocol has migrated the Ethereum network from Proof of Work (PoW, in the English acronym) for Proof of Stake (PoS). This means that anyone can store their ETH on the network and become a validator, receiving dividends for doing so. This was partially implemented on the network in December 2020, with the activation of Ethereum 2.0 (ETH 2.0).

Promised for years, Ethereum 2.0 is one of the most promising updates in the second largest blockchain by market value. With its emergence, ETH mining is gradually beginning to migrate to another format. PoS is gradually replacing Proof of Work mining. Here are some differences that ETH 2.0 has brought:

• Greater number of transactions per second;
• Additional security for the blockchain and its transactions;
• Replacement of the mining model;
• More decentralization in the mining process and opening it up to more participants.

With the new update, miners will be replaced by validators. These members will “save” ETH in their accounts. In turn, the amount will be used to validate blocks on the network. To become an Ethereum 2.0 validator, a user must stake a minimum of 32 ETH.

Block validation

Each time a block is found by the network, the validator who found it will receive a certain amount of ETH. The staking reward is ranging between 3 and 4 ETH as of the publication of this text. In reais, the value is equivalent to approximately R$11,600 to R$15,600, at the current exchange rate.

However, you don’t need to have all this capital to start doing PoS. After all, there are some mining pools that allow you to enter with smaller amounts. They bring together small fractions of several people until they reach the minimum limit required to validate the blocks. The pool divides the profits from the validated blocks among the participants, according to the amount deposited by each one.

With PoS mining, the idea is to further decentralize the process of mining Ethereum. PoS eliminates the need for expensive equipment that consumes excessive electricity, for example. In this way, it makes mining cleaner, because it does not release as many pollutants into the atmosphere.

In short, the Ethereum mining process has undergone several changes in recent years. Today, it is on its way to becoming fully PoS. If you don’t have the money to purchase mining equipment, the option of validating blocks can help you participate in the network.

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