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How Ethereum Mining Will Work

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December 5, 2017 in Economics

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Every day there is some new development in technology to make digital transactions more secure and simpler. So, almost every industry is experiencing new innovations and everywhere the aim is the same; to increase revenues. This objective and a drive to make our lives even simpler have generated the need for the emergence of cryptocurrencies. In this regard, it is important to discuss about Ethereum mining too. Using this platform, people can perform everyday tasks easily.

When we speak of mining, we refer to an intensive task which needs a high degree of processing and a lot of time. It is basically an act of taking part in a distributed cryptocurrency network. Miners are provided with rewards for finding solutions to critical math problems. For mining, you need computer hardware which then uses mining applications.

Data on transactions made in cryptocurrency have to be embedded in blocks. Every such block is internally connected to other blocks to form a block chain. The blocks must be evaluated quickly to make sure that transactions run smoothly. Since those issuing these currencies cannot handle processing of such data independently, you need miners. The miner is therefore basically an investor that will be spending time, energy and computing power to sort through these blocks. When their solutions are verified, issuers will hand them rewards. These rewards are nothing but part of the transactions that they helped to verify. The result of this activity is called the proof-of-work system and many currencies will depend on this while some others rely on a mix of proof-of-work and proof-of-stake systems.

The best way to use Ethereum is to mine it. But mining Ethereum is not only about increasing the numbers of Ethers that are in circulation. It is important to secure the network because it will build, publish and verify blocks within the block chain. Ethereum mining, simply put, is the process used for mining Ether. The Ether is needed to ensure a seamless operation of the Ethereum platform. So, Ether basically helps to encourage developers to build even better applications. The developer will make use of what are called smart contracts in the block chain. The supply of Ether is not endless; there will not be more than 18 million issued annually.

You can carry out Ethereum mining even within the comforts of your home. This needs knowledge of command prompts and script writing. It is simple and exciting at the same time. But, Ether mining is likely to consume a lot of electrical power. You can take the help of Ethereum mining calculators for calculating the profits. When you can carry out mining efficiently, you are likely to get more income produced by selling Ether. It is possible to mine Ethereum using personal computers. You only need a GPU or Graphic Card having 2GB RAM. The GPU is preferred as it is much faster than the CPU for mining Ether.

Ethereum mining works very similar to Bitcoin mining. Miners will make use of their computers for every block of transactions. They use their computers over and over again to guess solutions to puzzles quickly. So, the miner runs the block’s header metadata through hash functions and this returns a scrambled string of letters and numbers which impacts the hash value. When a miner discovers a hash which matches a current target, the miner is given Ether. When miner B finds this hash, miner A stops work on that block and repeats the same process on the next block.

Miners cannot cheat in this game and this is why the method has been called proof-of-work. A miner will be able to find a block in a matter of 12-15 seconds. When miners take more time or less time to solve puzzles, the algorithm changes by itself to readjust the difficulty levels of the problems. Miners will be able to earn Ether at random and profits largely depend on their luck and amount of computational power being invested in the process. The proof-of-work algorithm which Ethereum uses is “ethash”.

When you are a miner you are not likely to be able to mine the Ether independently. This is exactly why many miners join together their computational powers. They form a mining pool so that their chances of solving cryptographic problems become higher. They will then split the profit depending on how much computing power each of the miners has contributed.

Mining pools are not going to be around forever. Their computing power keeps changing. And this is why there are many factors involved in taking a decision as to which mining pool you should join. The mining pools will also have varying payout structures. There is typically a sign-up process and miners can thereby connect to the pools and start mining Ether. But the mining world will be dynamic; so tools which you have used today may not hold good the following year.

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