Many people often question how to mine Ethereum. They wish to understand the procedure involved in its mining and how it works. For starters, those who are aware of the procedure needed to mine Bitcoin will not find it very different. In fact, it is very similar to how Bitcoin is mined.
Despite popular opinion, blockchain miners don’t just collect cryptocurrency tokens. They are individuals who fill the function of the transitional people –a systematic approach, we don’t find in decentralized systems.
To fully understand the role played by an Ethereum miner, we first need to visualize how an orthodox monetary system works. PayPal and banks consist of checks and balances that ensure no fraud is being committed or mistakes made. Although very exceptional, these institutions run everything from one central point. All the transactions made or to be made have to run through this center in order to be processed further.
Now, one may again question, how these Ethereum miners differ from these institutions? In Ethereum mining, it is upon the miner to verify any changes in the established network. Whenever any modification or transaction is made, there are more than one computers that need to verify that modification or transaction.
For example, let’s assume there are ten computers that need to verify any modification made by a client. If nine of the ten computers verify the modification but one doesn’t, it is very easy to detect which computer didn’t. This makes spotting mistakes easier. Sadly, we don’t see any such system in banks. Whenever a mistake is made, there is no one to rectify it. This approach is what differentiates Ethereum miners from financial institutions. The record keeping model is far more superior to the one we see in centralized models.
Earning of Ethereum Miners
All banks charge a fee for the services rendered. These are usually charges spent on the internal confirmation system. However, when using Ethereum, clients pay the Ethereum miners for the verification services. Each of the modifications or transactions made by the clients are organized or tape-recorded in the form of blocks. Every time a block is completed on the blockchain, a miner earns 5 ETC.
So, how does the mining work? All the modifications made by the client on the DApp takes space –similar to an image storing on iCloud. Since data can be numerous, each set is compressed in the form of a hash. The hash is a string of the code containing all the information –like a zip file on a desktop.
Miners compete to determine the best hash for that specific block of information on the blockchain. This means that more than one miner can work on the same block of data simultaneously. Whichever miner cracks the hash code first is given the 5 ETC. All the other miners than stop working on that code. You can also calculate profitability here.
The Journey from Proof-Of-Work to Proof-Of-Stake
No one can really predict the future of Ethereum mining. Even though the current systems work well, the minds behind Ethereum are on the lookout to find a replacement. The current mining system is labeled proof-of-work. This label makes perfect sense since only Ethereum miners who have, in fact, hashed a block of information are given Ether for their contribution.
As predicted, proof-of-stake might be the future. This new approach may seem a bit harsh as it will limit miners in favor of Ether holders. This means that only those who own Ether towns will reach a consensus.