Bitcoin? Have you heard this thing on the internet anywhere?
And don’t say you clearly understand what exactly does that mean.
Well, no need to hesitate, it’s something really new and non-techy, as well as the less techy people across the globe, don’t have any idea about the thing.
Call it a future of currency or a total failure, but the fact is that it is something that has attracted (or made afraid) many governments, banks, and large corporations.
What is Cryptocurrency?
The original term is basically cryptocurrency and Bitcoin is just an example of it. 😉
Now, what exactly is “cryptocurrency”?
Well, that definition doesn’t make sense at the first moment so you have to dig into it furthermore to get the original concept.
The question arises here is that what was the need of cryptocurrency and how did it originate?
In order to understand the need of digital currency, take the example of your bank where you store most of your money.
For its service, bank charge some of your money on account of annual fees and some as other miscellaneous charges.
Other than that, you have to trust your bank for secure payments and keeping your identity and information private. Furthermore, we rely on our governments to tell us the worth of money as whole economic ecosystem adjusts itself in accordance to dollar nowadays.
All these things make banks having a centralized system where people have access to your data, transactions, information and the list goes on to keep the check of double spend.
Well, banks sure have barriers to keep the hackers out of reach but still, you can’t say everything in the bank is safe. So that really creates an issue.
So you see our problem here is with the centralized system and it has some very clear vulnerabilities which can’t be ignored. 😉
Originally announced in 2008, Bitcoin was created as a byproduct because Satoshi was just trying to come up with peer-to-peer electronic cash system which would help in making the secure transaction through a decentralized system.
Have you used BitTorrent?
Now being decentralized means there’s no central authority to track your transaction and no third party to look after and make your payment secure. 😀
In short, there are no servers to make rules.
So when we have no organizations to decide when to make more Bitcoins and keeping track of where they are, then how does this system actually work?
The answer is that there’s an online ledger that keeps the record of the transaction and no one, yes no one can manipulate with it because cryptography has made it harder to do. Things are a little bit complex to understand but that’s how things work in the digital world.
Why Mining Cryptocurrency?
A question arises here is if there’s no central authority to control the things, then how Bitcoins and other cryptocurrencies have their values increased up to that level.
The answer is that this isn’t a human-free system at all.
Although no one is going to take control over the ledger there are people known as “miners”.
Sound familiar? A miner is a person who updates the ledges when the transaction is processed through cryptocurrency.
Well, what exactly does that means? When a person let’s say John send Bitcoin to Bob, how would John know that it was Bob who received the money?
Basically, a person going through transaction has two keys; private key and public key.
These keys act as a signature we use for bank transaction with the only difference that they can’t be scammed by the artist. The private key is private to you and the public key is used by miners to update the ledger by tracking it.
Are Cryptocurrency Miners Social Workers?
You might be thinking that do these miners update the ledger as a social welfare work?
Well hmm no, no one in this world work without having an advantage. And cryptocurrency mining isn’t inexpensive as well. You have to install computers with some heavy hardware such as MotherBoard, Graphics Cards, Hard Drives, RAM, Power Supply Unit and cooling systems.
Moreover, all these components consume a hell of electricity. The fact is, a miner gets a tip for updating the ledger. The tip is something, not a good large amount but the next prize is jaw-dropping. Updating a ledger will reward you some 12.5 Bitcoins at the moment. 12.5 Bitcoins mean some 48,899 USD at the time of writing.
A mouthwatering amount indeed. That is why miners invest in heavy computers to take the advantage. All miners get into the series known as Blockchain.
So that’s is basically how the ledger is updated. With tons of people keeping the record of your transaction, it becomes nearly impossible to exploit with cryptocurrency.
Furthermore, your information will be private under the hood of the private key. Only thing miners will get access to your account number and account number of the person to whom you want to send the currency. The transaction will be signed by your private key which is unknown to everyone except you.
Is Cryptocurrency Mining That Easy?
You might be thinking if updating the ledger and getting the reward is that much simple, what is stopping you from mining.
Now let us consider the above example of John sending X Bitcoins to Bob. In order to be a miner, you have to download the whole 107 GB of the ledger to update it.
Now, who would get to update the ledger and get the reward? Bitcoin has a fairly simple procedure to handle it and it is called “Cryptographic hash function is known as SHA256”.
A hash function is a cryptographic function that takes the input of variable size and turns it into an output with a fixed size.
Hard to understand? Let’s make it easier for example.
And in those 10 minutes, computers would make some millions of guesses before getting to the right one.
So one you guess the right answer earlier get the changes to update the ledger and thus the winner. And that is basically how mining really works.
Sounds difficult now hah?
Well, there are thousands of people into it and the number is increasing. And that concludes our answer to the following questions:
- What is cryptocurrency?
- How is it useful against traditional currency?
- What is mining?
- And finally, how does mining work?
Ethereum- A Bitcoin Competitor?
Next thing we are going to cover is a comparison between big names in cryptocurrency.
I will discuss on Bitcoin and Ethereum here because I have Ethereum as my primary target.
Most of you are already familiar with Bitcoin as it is the first cryptocurrency and has created a huge hype in last two years. Ethereum is relatively new currency in the market but it has the structure of Bitcoin’s blockchain and its own innovation.
So let’s break the things into points.
|Founded in 2007||Founded in 2013|
|Founded by Satoshi Nakamoto||Founded by Vitalik Buterin|
|No human authority||Well, some sort of.|
|No smart contracts||Uses smart contracts|
|No decentralized apps||Utilizes decentralized apps|
|Works on proof of work||Works on proof of stake|
|Based on C++||Based on Java|
|Digital transaction only||More than digital transaction|
What is Ethereum? This is basic comparison table between Bitcoin and Ethereum. Sure there are things which demand an explanation, so get yourself a cup of tea because it is going to be really long.
The best way to define Ethereum is by saying:
Founded by Vitalik Buterin, a former Bitcoin miner, Ethereum works on the basis of Smart Contracts.
It has different blockchain than that of Bitcoin and there are some real people to whom you can talk to about it.
Why this system involves humans?
- The answer is that they do not act as the central authority necessarily.
- Secondly, Ethereum wants to involve people into its initiative of decentralizing the web.
I will cover the decentralizing of web later in this post but let’s consider is as same as decentralizing the currency for the time being.
As defined, Ethereum is one step ahead of Bitcoin in terms of flexibility. I will be discussing decentralized apps which would make the term flexibility easier to understand. And finally, it has its very own currency known as “Ether” which has some solid purpose as well.
The flexibility of Ethereum:
So you see Ethereum is drastically different from Bitcoin in terms of flexibility. Now let me explain you the factor of flexibility by an example.
You might have guessed that Bitcoin is a decentralized system that makes the role of central or regulatory zero. There’s no central authority to access your transaction information and thus no fraud or scam.
Now just like digital payments, our data and websites are also stored into web servers and clouds, owned by big names such as Google and Facebook etc. It’s a very nice way to keep the data stored and in the same way we believe our banks to keep information private, we also trust these companies to do the same.
But this data has the very same problem–The central authority. A hacker with superior skills can break into the systems and steal the information.
Other than that, our governments and agencies also pressurized these companies to provide them with our data.
And what if the main server gets down or corrupt and most of our information gets lost?
A very painful scenario and a very unwelcoming move and most of us won’t appreciate it.
So centralization also exists here. Many senior experts in this field argue that internet should have been decentralized just like digital payment to end the vulnerability of getting data manipulated.
And that is basically what Ethereum is trying to do. Decentralizing the internet by removing the role of central authority completely. It seems scary though but normal people don’t understand the issue at this level. So you see how Ethereum has a wide range of application across the globe and beyond the payment system.
Decentralizing the Web:
Just like you have Windows as an operating system where you put your applications, Ethereum is also trying to be the same thing by making something called decentralized apps.
But there’s one confusion and that is how would Ethereum make the web decentralized? Because it is an easier approach to digitalize and decentralized the currency but the web has much bigger and wider scope.
BUT! Ethereum has the solution and it is pretty much same as in case of currency. Ethereum wants to make a “World Computer” just like Bitcoin’s ledger. All servers and clouds to be replaced by nodes run by thousands of volunteer known as miners in this very case too.
In the very same manner, there would be a competition among the miners to offer the best services on the base of Ethereum. It is currently on-going project but if Ethereum managed to implement it successfully, then no one would have the access to data but the owner and that’s how the internet would become decentralized.
What have nodes to do with it? Each time you access your data and make a change to it, nodes would update it on the decentralized network and the competition goes on.
What Exactly Is Smart Contracts?
At this moment, Ethereum has a total of 5.4 million of wallets being used and it’s increasing day by day. Ethereum employs the method of smart contract for the secure and tamper-proof transaction.
You might ask what better Ethereum has to offer as Bitcoin also works on updating the ledger and securing the payment. The answer is that you have diversity here.
In addition to payment, you can even exchange, sell, buy stocks and properties in the very same manner. It would take some time to understand the full concept of buying and selling stocks on Ethereum but still it is a very interesting concept.
Use of Ether makes its way into smart contracts system. It is basically a transaction fee and that’s how it basically works.
Programs run by nodes will consume some amount of processing power. For example, if your transaction requires X times the processing power to perform the transaction, the user has to pay the cost in terms of gas. It is actually the payment of utilizing the service to run the process by the nodes.
When you make a transaction for a product based on if-then condition, nodes will notice it. The exchange will take place and nodes will update the ledger.
You can take the example of software here. You pay for the software to the company and everyone running the nodes will make a checkmark from your side. And in return, if the company gives you license to the software, the program will execute because the if-then condition has occurred.
In case the company fails to provide you with a license key, you will get refunded because smart contracts failed to update the ledger as if-then condition fails.
Going to Ethereum Mining:
As we have seen how Bitcoin mining works, let’s head to Ethereum mining. It is a fact that Bitcoin has been soaring in the sky lately and at this point, it has a market value of some 50K USD roughly. The next big name after BTC is Ethereum and it enjoys the value of some 340 USD which isn’t very close to Bitcoin but still, senior journalists and bankers think that it would gain the very same potential in upcoming years.
The reason is pretty much clear: Taking BTC blockchain mechanism beyond the currency.
We have pretty many same rules for mining here with exception of working principle of the blockchain. Now we have smart contracts that play the helpful role in the transaction and getting information about updating the ledger.
Ethereum has its very own blockchain and ledger and it requires some extra performing processors and time to do mining. The reward of mining is Ether which comes as a result of solving complex mathematical problems. So you see, we need some tough and solid computer components to get the solving machine running. 😉
Moreover, as a miner, you must understand that these components would cost you thousands of dollars of initial investment before testing your luck at Ethereum blockchain. Cost of running these machines on electricity comes as an additional burden. And last but not the least, you have to give your time and energy to it and maybe health too.
How Does Mining Work?
I will get to the components within few minutes but before that, have a look at the nature of Ethereum mining.
Taking the very similar example, a transaction occurred between John and Bob and you are to verify the transaction. You will have to solve the complex mathematical problem generated by ethash or simply hash function that would be a guesswork basically.
The computer system will then make billions and billions of guesses before reaching to the correct answer. Once you got the right answer, you have to submit it to the issuer. Wait for completion of the verification process and you will be rewarded with tokens. Other than that, there are digital coins too which could be rewarded as well. That is the basic working principle of mining.
It seems easy at the first look but my friend it is going to take some extra time of yours. You can consider it as mining for precious stones or metals physically.
You don’t always get to the final products, do you? Same is the case here and sometimes you even have to struggle hard for it.
Essential Components of Ethereum Mining:
Okay, now you are at the critical point and you are damn serious about mining. You understand the working and conditions but you better ask yourself a question. Where to start with? Any idea? Hah? No need to get yourself frustrated about it, let me explain this for you.
First thing is that you can start with your personal computer too if it has some good moves.
The minimum criteria of the system should be as follows:
- We need GPU of no less than 2 GB of RAM.
- 30 GB of free storage in your system to store blockchain and software.
Well, as a starter, you must have above-mentioned components. There are basically two types of processing units—CPU and GPU. A central processing unit isn’t that much efficient in mining, therefore, graphics processing unit is recommended for mining because of its enhanced ability to solve the complex problems. CPU being an old component will take the annoyingly extra time that would make you lose the chance of solving the problem within time.
Storage of 30GB would be enough at this point. You have to download the blockchain to update the ledger effectively. On a serious note, make sure you have high-quality electricity supply for uninterrupted operation. If everything worked right, you can get to earn Ether within a specified time.
Furthermore, you can also calculate the whether it is profitable to use either when setting against electricity cost or not.
Above mentioned criteria constitute the minimum capabilities of components for newbies. For those who are working as a team or are looking to solve more problems have to make a mining rig.
What exactly is the mining rig? A mining rig is a series of GPUs and another powerful component that aim at the much larger scope of mining. It would consume extra space and electricity as well. You might even spend your whole week to build and install it correctly. It’s just like a large gaming system where you use additional components attached to your PC to power up the game’s graphics and much more.
A mining rig has many additional components when compared with simple PC. You can’t use CPU here and even single GPU doesn’t make it a rig.
It took me some two to three weeks in making of my rig and I used six basic components. GPU, motherboard, power supply unit, RAM, and cooling system. All these ingredients are necessary to keep the whole system running without any interruption.
Point to be noted: At this point, you may find it harder to get GPUs right on time because of the mass buying of GPUs by miners. Who thought that purely gaming processing unit will have an additional market of buyers to mine for the cryptocurrency.
Best GPU for Mining Rig:
So let’s start with our first component and that is Graphics Processing Unit (GPU).
GPUs are basically used for enhancing graphics in gaming and they can start the same process again and again without any delay. Sounds familiar? Yes, that’s basically what effective mining requires.
These GPUs can work continuously and thus a perfect match for solving hash problems where you have to make guesses again and again. If you have been a gamer in the past, you must have known the capabilities of graphics cards. Most of the gamers prefer Nvidia graphics card while AMD also produces some good titles.
One problem that exists here is the indirect relation of cost and performance. If you want a healthy working Graphics card, you must be ready to pay some extra bucks for it. And who said that mining would be a cheap thing to do. My rig had a total of 6 GPUs and I think they are enough to power up the system.
Another thing that might create an issue is that there’s not enough spacing to adjust all GPUs between PCI Express slots. You can get rid of it by using GPU riser which is basically the extension of PCI express slot to make the easy adjustment. Here’s the recommendation list below. You can check which suits you the best depending on the number of GPUs you aim to establish the rig.
Best Motherboard for Mining Rig:
Now coming to the second one and that is the motherboard.
The motherboard has basically the function of communicator between different components of the computer system. For example, between GPU and RAM of the rig. In simple words, the motherboard is the base of the computer upon which everything runs. A motherboard has fixed number of slots on which you can fix your GPUs so keeping it in mind before buying both of them.
But don’t panic if you can’t fix GPUs into the slots due to limited space available because riser can help you deal with it. Have a look at the list of best motherboards.
Power Supply Unit:
Who is going to handle that much of electricity consumption? You guessed it right.
The very next component is power supply unit that would power all components. For example, if a single GPU consumes some 150 watts and you have five GPUs in series, you better come up with 1000 watts power supply unit.
These units have different sizes and I recommend you to calculate the total power consumption of your rig before buying them. Small rigs can even work with 750 W while larger ones with a minimum of 6 GPUs might need more than 1500 W. Now it’s your choice what kind of rig do you wish to make.
Here are some recommended units for you.
Random Access Memory:
RAM is the basic and one of the most neglected components in my opinion.
Many miners do not pay attention to the capacity of RAM and I think it might affect your mining. After all, it is RAM that recalls the information and calculates the function. So general recommendation is to buy RAM ranging from 4 GB to 6GB.
You can select any of the following that suits you the best.
The hard drive is your storage for blockchain.
You can buy it according to your need. We basically need storage for installing an operating system that is Windows 10 in this case and blockchain. Both Bitcoin and Ethereum have different blockchains and at this point, Ethereum’s blockchain isn’t that much heavy and doesn’t require that much space. 120 GB of hard drive worked well for my rig and I think it would be enough for you too.
Best options for the hard drives are as follows:
Where to put all these components? :/
The fact is that they claim most of the space and you simply can’t jot them over each other as they all potentially fire hazardous. Furthermore, if you are employing GPU risers, they will take some extra space too.
So basically we need a case to bind them all. You can build it yourself but that will require some specials skill so you don’t end up having an even worse look. You will have to use mechanical components such as drills, screws, metallic and wooden plates etc. to make the case.
Or you can buy specially made cases online but at a heavy cost. After all, you just bypassed the processing of construction. Here are some recommendations that you might love to see. Remember to check the size and slots of components before buying the case.
So these are basically the necessary components of a mining rig. You don’t need to have super RAM and CPU for Ethereum mining rig (at least for now) because you aren’t going to do some serious multitasking.
So average RAM of 4 GB to 6 GB would be fine. Similarly, 3.0 GHz processor would carry out the operation without any problem. All these ingredients will constitute a huge mining rig and you better have a separate room for them.
Now all hardware section is done. We are heading to software section to get started.
The best choice for the operating system is Windows 10 as it provides better support for graphics cards. Be sure to have at least Anniversary Update for the best experience. You must have some initial grip over CMD because the whole set of software needs you to work on these commands.
Keep following these steps to set up your mining rig efficiently.
- Down Geth software that will be used to communicate with Ethereum network.
- Unzip the Geth file that will come in zip format. I prefer unzipping it in the C section where the operating system is located.
- Next thing is running the CMD command to execute the software. Enter the following command into the CMD windows: C:\Users\Username>. Where username is the name of your computer being used.
- Now locate the Geth program using CMD by entering cd/ in it. Change the directory to C drive by using C:\> command.
- Next step is to create the Geth account. You can access to it by using “get account new” command. Press enter and you will receive following command as result: C:\>geth account new
- Next thing is setting up a password for the account. Carefully type the password as you can’t see what you are typing.
- Link your system to Ethereum using “get –rpc” command.
- Then your system will be sync to the Ethereum severs and blockchain will start downloading into your system.
- Download the mining software Ethminer and install it. This software will run hash function into your rig.
- Now head back to CMD and repeat the process.
- In the new terminal window of CMD, type “cd prog” that will lead to C:\Program Files> after two presses of the tab.
- From there, move to ethminer folder and enter “cd cpp” and terminate it using tab.
- Now type “ethminer –G” and your GPU will start mining.
- And finally, type “ethminer” to get your CPU start mining.
- Both CPU and GPU mining commands will create DAG file and will take 20 minutes in total before starting the process officially.
Took me some 45 minutes to install the software because of the debugging errors. But finally, the thing is ready.
In the end, I would like to advise you something valuable.
Ethereum mining requires time and patience. You are going to recover all your losses in a single day. Furthermore, cryptocurrencies have volatile nature.
Some think that it would be in dust within few years while other see its future bright. No denying that cryptocurrencies have capabilities to change the future and at this point, there’s no major problem. So let’s just wait and see what’s next.
One thing I must mention that Ethereum is still an evolving platform. It has properties of Bitcoin in the background but it is even more flexible.
We can argue about the future of cryptocurrencies but still the fact that Ethereum has potential to be the platform of the future can’t be denied.
The best thing about Ethereum is decentralized applications. It took us roughly six years to understand the decentralization of currency and application has an even bigger scope.
Ethereum has taken the initiative and developers are taking serious note of the development of the platform, we simply can’t say that Ethereum is going to fail anytime soon.
We are just underestimating the potential of Ethereum at the moment but it isn’t going to be the same in future. Well, at least that’s experts are predicting.