Gas is a clever mechanism that Ethereum uses as the network’s internal pricing fee for running a transaction or contract. When referring to Gas, users can mean either Gas limit or Gas price.
The Gas limit would be equivalent to the amount of computing work needed to accomplish something using the Ethereum network (like a transaction or the implementation of a smart contract). The Gas price is how much a user is willing to pay for that amount of work to be done. Combining both factors determines the total transaction fee, which in turn is to be paid in Ether.
If your gas price is too low, your requirement will not be processed by miners. If you are paying a fair rate but the cost of your requirement goes over budget or is not satisfied for any other reason, but it went to the network regardless, you won’t get the money back for the computing work done by miners.
The Gas mechanism ensures that every item deployed to the network has a running cost, which in turn makes people more careful about the code they intend to deploy over the network, protecting miners and users from shabby or malicious code.
What Is Ethereum Mining?
Ethereum is run on a worldwide network of computers. In order to reward the computational costs of the “miners” who sustain the network, a reward of 3 Ether is issued to the miner who created the latest block to be added to the chain. On average, a new block is created every 15 seconds. Due to the architecture of the algorithm that creates these blocks, this process of generating a “Proof of Work” (creating a block) is purposely random and rewards are assigned in proportion to the computational power of each participating miner.
A computer’s effectiveness at mining is governed by a difficulty value, so, an increase in the mining algorithm difficulty (caused by more miners joining the network) means it becomes harder to create blocks, which therefore leads to fewer rewards given a fixed amount of computing power. Right now, Ethereum’s difficulty is at an all-time high due to its very high demand and popularity.
How Can I Mine Ethereum?
Before you start mining, there are some things to consider:
- Mining uses a lot of electrical power. Depending on your location, mining Ethereum could even prove unprofitable because of electricity-related costs. There are several mining profit calculators online so you can check this factor before jumping into the mining world.
- Cryptocurrency prices are highly volatile. You should be fully aware of the risks involved with cryptocurrency investing. You could end up with a low-value cryptocurrency or make exchange mistakes if you are not well-informed.
- Be aware of your country’s laws. Cryptocurrency mining may be subject to investigation and penalty in some countries. It’s better to be prepared.
Now, if you are still willing to mine Ethereum, here are some basics you should know:
Choosing Mining Hardware
You will need special hardware that you will dedicate full-time to mining. You can mine using your CPU or GPU. GPUs are more effective at mining, which will net you higher profits. There is plenty of advice online to will help you decide which GPU to choose. A simple Google search is a good starting point.
Installing the Software
The next step is installing the mining software needed to connect to the network. You can use Geth (https://www.ethereum.org/cli), which allows you to mine Ether and to deploy your own smart contracts using the command line.
You can try downloading ETHMiner, easily available online. Once installed and running, your mining node will help in keeping the Ethereum network secure. For more detailed instructions on installing and other details, you can visit the official Ethereum website (https://www.ethereum.org/).
Joining a Mining Pool
Since the amount of computer power needed to find Ether blocks is considerable, miners often unite their efforts to find them, so they join what is called a “mining pool”. When the pool finds a block, the profits are split in accordance with how much computing power each miner contributed.
There is plenty of discussions online about the different types of pool, so you should find out more before making your decision. Subjects to keep in mind are pool computational power, payout structure, and pool fees.