Like Bitcoin, Ethereum now employs a proof-of-work (PoW) consensus process. Mining is essential to the survival of proof-of-work systems. Ethereum miners are machines that run the software and use their time and computing capacity to process transactions and generate blocks.
Why do miners exist?
We must ensure that everyone agrees on the sequencing of transactions in decentralized systems such as Ethereum. Miners contribute to this by solving computationally challenging puzzles to generate blocks, thereby securing the network from attacks.
Ethereum mining in a nutshell
- Ethereum is fundamentally similar to Bitcoin. It is a decentralized ledger that is verified and updated by Ethereum network participants.
- Ethereum, like Bitcoin, requires mining. Mining a new block of Ethereum transactions is the only way to update that block.
While the two are conceptually similar, there are significant technical differences. Some are more obvious than others; for example, Ethereum blocks are added every 15 seconds (on average), whereas Bitcoin blocks are added every 10 minutes (on average).
Ethereum miners are rewarded with 2 ETH as well as all transaction and code-processing fees (aka gas) contained in their block, as well as a possible bonus for any uncles they include.
In terms of mining algorithms, Ethereum employs the Ethash hashing algorithm, which differs from Bitcoin’s hashcash algorithm. Ethash does not work with the specialized hashing hardware (ASICs) designed for Bitcoin mining.
Furthermore, it is a memory-hard algorithm, which means it is designed to withstand the development of Ethereum-mining ASICs. Ethash, on the other hand, is designed specifically for GPU mining.
Can anyone mine on Ethereum?
Technically, anyone with a computer can mine on the Ethereum network. However, not everyone can profitably mine ether (ETH). In most cases, miners must invest in specialized computer hardware in order to mine profitably. While anyone can run the mining software on their computer, it is unlikely that the average PC would earn enough block rewards to cover the mining expenditures.