All Ethereum-based coins use Ethash algorithm. Ethash is a tweak of SHA3-256, SHA3-512 algorithms to try and make mining more resistant to ASICs, but still easy enough so that the network can easily verify it. It’s a proof-of-work algorithm, the creators say that Ethash is ASIC-resistant because mining it requires a lot of computer memory.
In effect, when mining Ethash computers try to repeatedly guess the right solution – effectively repeatedly hashing each block of the transaction. Where a miner finds the right answer the reward is paid in Ether. While Ethereum currently uses proof of work, the plan is to move to proof of stake over time. The result will be that distributed consensus can more easily be achieved using less in the way of resources. This will affect the way ETH is mined.
Like we said, Ethash is a member of the SHA or secure hash algorithm family. Ethash is very clearly documented, and this documentation is continuously updated. It means that developers can readily build their own apps based on Ethash.
Which coins are based on Ethash algorithm?
By far the most popular coin that makes use of Ethash is, of course ETH – or Ether. Vitalik Buterin designed ETH because he had a vision to develop not just a coin, but entire decentralised application across large networks of computers. The Ethereum blockchain has a value token – and this is called Ether.
Smart contracts alongside the Ethereum Virtual Machine has enabled hundreds of different ERC-20 tokens, all of which use the same hashing algorithm that is used by the original Ethereum coin – Ether. In 2016 Ethereum had a hard fork, splitting it into a new coin called Ethereum Classic that also uses Ethash – but which has slightly different characteristics.
What hardware can be used to mine ETH?
In theory you could build an ASIC miner to mine Ethash-based coins, but the high memory requirements mean that ASIC miners are usually not efficient. In contrast a CPU+GPU mining rig with enough RAM can usually mine ETH profitably.
However, you need to keep an eye on the direction of travel for ETH because it is due to switch from proof of work to proof of stake. Proof of work requires a lot of computer power to solve for Ethash blocks and the computing power that miners have access to will determine how much they earn in rewards – the miner that calculates a transaction the quickest will get rewarded.
Point of stake is different: rewards are based on the amount of Ethereum you hold at any given point in time – it no longer depends on the computing power you have available to you. It is all based on the creation of master nodes. As a result, the way Ethereum is mined will change but we don’t quite know when that will be.
So, for Ethash, it’s an advantage that ASIC miners cannot be used to mine it and that home computers can still effectively mine Ethash coins. However, it’s not all that easy to put together an Ethash mining rig and there is of course the pending switch from proof of work to proof of stake.