Mining Ethereum can be done in several different ways – you can buy a cloud contract and get someone else to do all the hard work for you, or you can mine on your own computer (GPU mining), or buy a mining rig (multiple GPUs hooked up to a motherboard customizing into one unit) if you want to invest in high-end hardware.
The Ethereum blockchain is different from the Bitcoin protocol in one main aspect – it uses proof-of-work as a way of confirming transactions, whereas Bitcoin uses proof-of-work to generate new coins (you can read more about it here). This means that if you want to mine ether, you have to dedicate computing power towards finding the solution for the block that will be generated on the blockchain.
To find this solution, you have to input random numbers into the mining software until one matches with what is called a nonce; finding this number consumes computational power, and it takes an extremely long time to find even just one. The probability of finding it on your own is so small, that joining a pool is a good idea – it means that all the other members will help you find this number, and then you share the profits with them.
The more powerful your mining rig is, the more likely it will be to find a solution first – if you have a top-notch GPU in a custom rig, getting the first solution means you get all the money for the block.
It can take up to several months to mine one block, depending on how powerful your rig is. However, if you are using a cloud contract instead of mining yourself, the company running it for you will give you your ether after providing enough proof of work.
The Ethereum blockchain has its own cryptocurrency called Ether – this is what is actually being mined when someone successfully mines a block. You can read more about the difference between Ether and Bitcoin here.
The Ethereum protocol is set so that every 12 seconds a new block is generated, containing some pending transactions – if a miner manages to solve it first, they get the reward for generating this block. At the moment, this is 5 ethers.
However, you do not just generate any old block – to be able to mine a block and claim the reward for it, you have to include a special transaction in your block where you send all of your earnings to yourself. This means that almost all ether miners are mining with every bit of power they have, and they have to compete with each other for the reward.
This means that it can take up to several months to mine one block if you try to mine alone with a regular computer – however, if you join a mining pool, it might take only a few hours.