How to Mine Ethereum: Step by Step Guide for Canadians

In 2022, mining the world’s second-most popular cryptocurrency is lucrative, but competitive.

New miners face significant competition, higher costs and an upcoming upgrade that could change the mining process altogether.

Nevertheless, the incentives are still attractive enough to justify an attempt.

Here’s how you can start mining this crypto asset right away. 

What is Ethereum Mining?

Just like Bitcoin, Ethereum relies on a network of “miners” to keep the network operational.

This is what keeps the network decentralized.

Instead of relying on an intermediary or trusted third-party to verify transactions, the Ethereum network delegates this task to a group of miners spread across the world.

These miners deploy computational power to verify transactions, add another block to the chain and earn newly minted ETH as a reward for their efforts. 

The Ethereum mining framework was inspired by Bitcoin.

However, there are some key differences in the mining process on these two networks.

Ethereum’s Proof-of-Work model was designed around commercial-grade GPUs, which makes it more resistant to specialized mining tools like ASICs that are popular on the Bitcoin network.

That makes Ethereum potentially more accessible for amateur miners. 

If you’re looking to spin up an Ethereum mining operation in 2022, here’s what you need to do. 

5 Steps to Mine Ethereum

1. Create Ethereum wallet

To get started, you need an Ethereum network address.

This address can be managed on a piece of software that lives on your phone, desktop or a small flash drive.

This is known as a wallet and can be used to store or transact in ETH. 

There’s a long list of wallets you can choose from.

AlphaWallet, ZenGo and Rainbow are great for beginners, while advanced users can sign up for Loopring, D’Cent or Keystone.

However, the most popular options are Exodus, myetherwallet and MetaMask.

If you’d rather hold your crypto offline, you could also buy a Ledger Nano device that serves as a cold storage wallet. 

Step 2: Upgrade and Update Your GPU Drivers

Mining Ether is more accessible than mining Bitcoin.

You don’t need specialized hardware.

However, this lower barrier to entry intensifies competition.

To gain an edge, you need to ensure that you’re getting maximum efficiency from your hardware.

You may need to buy the latest and most powerful GPUs from chip manufacturers like Nvidia or AMD.

You’ll also have to update and maintain your GPUs regularly to ensure they’re functioning well and meeting minimum requirements for the Ethereum network. 

Step 3: Install Ethereum Mining Software

Once you’ve got the wallet and hardware ready, you need to install the right software to get started.

There are a variety of different mining software available for beginners.

However, the most popular mining software are Minergate and EtherMine.

There are other options including Go Ethereum, Cudo Miner and WinEth.

You may need to check the developer fees, system compatibility and special features of each software to find the best one for you.

Step 4: Choose a Mining Pool

While solo mining is certainly an option, you need to consider that your mining rig will be actively competing with publicly-listed miners with industrial-scale operations.

Put simply, your chances of being profitable solo are slim unless you have the right experience and deep pockets. 

Instead of trying to mine alone, you could hook your rig to a mining pool with other miners to take advantage of collective scale.

The mining software you use could help you connect to a mining pool directly.

Or, you could dig deeper and choose the pool that suits you best.

Take some time to analyze a mining pools’ payout ratio, scale, mining requirements and administration fees.

Also, focus on the pools with the best reputation and success rate.

Step 5: Collect Your Rewards

Once you’ve set everything up and connected to a mining pool, you can get started.

The mining process should be relatively passive.

The mining pool should deliver payouts on a regular basis to your wallet if it allows for auto-payments.

Otherwise, you can manually withdraw your mining rewards whenever you need.

You might also have to keep an eye on everything to make sure it’s well-maintained and performing optimally.

Besides a little monitoring and upkeep, you don’t need to do much else. 

Advantages of Ethereum Mining

More Accessible

The GPU-centric design of Ethereum’s PoW model makes it relatively more accessible.

Most amateur miners can get started with a basic rig that’s made of commercial-grade devices and off-the-shelf parts.

In other words, you don’t need expensive, high-end equipment to get started, unlike Bitcoin’s network which has higher barriers to entry.

CNBC recently built an Ethereum mining rig from scratch and the cost of their set-up was roughly $1,400.

That rig had a single GPU.

With more GPUs, the mining power was expanded but the rig’s total costs rose to $4,400.

Nevertheless, these set-ups were still less expensive than the average Bitcoin mining ASIC machine.

Put simply, Ether mining is more accessible for the average user. 

Significant Liquidity

As the world’s second-most popular cryptocurrency, there’s plenty of liquidity for miners to tap into.

This means you can offload your ETH rewards easily and convert them into stablecoins, fiat currencies or other crypto assets with little friction.

At the time of writing, Ether’s combined market capitalization is $417 billion with roughly $18 billion in daily trading volume.

In other words, you’ll easily find a counterparty if you want to buy or sell these assets quickly. 

Track Record

There are 18,696 cryptocurrencies on the market at the moment and many of them offer better incentives than Ethereum.

You could mine them more easily or expect bigger rewards and airdrops.

However, few have stood the test of time.

Ethereum, meanwhile, has been around since 2014 and has lived through multiple crises and cyberattacks.

These challenges have shaped the network and made it more resilient.

This time-tested platform should be a top choice for beginner miners. 

Incentives

The market value of Ether has appreciated immensely over the years.

In fact, in recent years, it has even outpaced Bitcoin.

Bitcoin’s price is up 800% over the past two years while Ether is up 2,553% over the same period.

That means miners who started mining ETH in 2020 have had a greater return on their assets and efforts than Bitcoin miners over the same period.

This price action will also have an impact on your net profit margin as a miner.

The incentives are clearly better for an asset with more growth potential. 

Disadvantages of Ethereum Mining

No Fixed Supply

Unlike Bitcoin, there is no fixed cap on the number of ETH tokens.

Bitcoin’s supply is restricted to 21 million by design, whereas there are over 120 million ETH in circulation and that number steadily increases every day.

Some argue that this makes Ethereum less valuable. 

Obsolescence

Ethereum’s core developers have been implementing a transition from Proof-of-Work to Proof-of-Stake.

This transition is expected to be completed in 2022, which means mining with traditional rigs will become obsolete imminently.

Beginners investing in new equipment today may not have enough time to earn a healthy return on investment before this transition is completed. 

Is ETH Mining Profitable?

Although Ether mining is still profitable, it’s not nearly as lucrative as it was a few years ago.

During the recent crypto boom, many new miners joined the network to take advantage of higher prices.

That’s made the network much more competitive and compressed returns for most miners. 

Mining profitability used to be as high as $0.21 per day per Megahash/s in 2016.

That has since declined to $0.04 today.

However, this rate of profitability is somewhat unpredictable and volatile.

It could dip significantly lower when too many miners join the network together or it could rise significantly when the competition wears off.

In January 2022, one miner got lucky when the network’s difficulty rate suddenly plummeted.

This miner was rewarded 168 ETH for a single block which is far higher than the 4 ETH that is typically delivered.

It was worth $540,000 at the time. 

As such, mining profitability is highly variable.

To figure out precisely how profitable an operation could be, you need to consider several factors such as the cost of electricity where you live, the cost of equipment and the mining pool fees. 

Will Ethereum 2.0 Make Miners Obsolete?

As mentioned previously, the Ethereum network is being transitioned away from its traditional Proof–of-Work consensus mechanism to the more contemporary Proof-of-Stake model.

Most recent crypto assets are based on the PoS model because it’s seen as more energy-efficient, democratic and secure.

It’s also easier for all users to access since the only thing they need to start earning yield is the native tokens. 

Ethereum’s transition to this model hasn’t been easy.

It’s been something the core development team (including founder Vitalik Buterin) have been working on for several years.

Now, the monumental upgrade known as ETH 2.0 is finally being completed this year. 

As part of the transition, the development team has scheduled a mechanism to activate after the transition to PoS is complete.

It will make the difficulty of mining via traditional “work” infinitely harder which means miners can no longer validate transactions or earn rewards.

Essentially, mining is being phased out for staking.

That means ETH miners face obsolescence. 

Fortunately, there are several other alternatives for investors looking to earn a reward from the Ethereum network. 

Alternatives to Mining Ethereum

Mining Ether isn’t the only way to make a profit from this rapidly expanding asset class.

Here are the top three alternatives for investors looking to bet on Ethereum’s growing influence and utility.

Frequently Asked Questions