What You Need for Mining Cryptocurrency - dummies

What You Need for Mining Cryptocurrency

By Kiana Danial

Before getting started with mining cryptocurrency, you should set yourself up with a few mining toys. When you’ve got everything up and running, mining becomes rather easy because everything happens automatically. The only thing left to do is pay your electric bills at the end of each month.

First things first — here’s a brief to-do list to get you started:

  • Get a crypto wallet.
  • Make sure you have a strong Internet connection.
  • Set up your high-end computer in a cool location. By cool, I literally mean “low temperature” and not “stylish.”
  • Select the hardware to use based on the cryptocurrency you want to mine.
  • If you want to mine solo (not recommended), download the whole cryptocurrency’s blockchain. Be prepared; for mature cryptos, downloading the whole blockchain may take days.
  • Get a mining software package.
  • Join a mining pool.
  • Make sure your expenses aren’t exceeding your rewards.

The mining profitability of different cryptocurrencies

Some tech junkies mine just for the heck of it, but at the end of the day, most people mine cryptos with profit in mind. But even if you fall in the former group, you may as well get a reward out of your efforts, eh? Mining profitability can change drastically based on cryptocurrency value, mining difficulty, electricity rates, and hardware prices at the time you’re setting up your mining system. You can go to websites like CoinWarz to see which cryptos are best to mine at a given time. As of September 2018, for example, that site indicates the most profitable cryptocurrency to mine is Verge (XVG), while Bitcoin is ranked number seven, as you can see here.

cryptocurrency mining profitability
Source: CoinWarz.com

Snapshot of mining profitability list in September 2018.

Even if mining isn’t profitable at the moment, your cryptos can be worth a lot in the future if the coin value surges. By mining cryptos that have low profitability at the moment, you’re taking an investment risk.

Cryptocurrency mining hardware

Different types of cryptocurrencies may require different types of hardware for best mining results. For example, hardware (such as ASICs, which stands for application-specific integrated circuits) has been customized to optimize cryptocurrencies like Bitcoin and Bitcoin Cash. But for cryptocurrencies without dedicated hardware, such as Ethereum, Zcash and BitcoinGold, graphics processing units (GPUs) are good enough to process the transactions. Of course, GPUs are still slow at mining compared to mining farms. If you decide to mine Bitcoin with a GPU, for example, you may wait years before you can mine one Bitcoin! You can find GPUs at any store that sells computer hardware equipment.

As mining became more difficult, crafty coders started exploiting graphics cards because those provided more hashing power, which is the rate at which you mine. They wrote mining software (in other words, developed mining algorithms) optimized for the processing power of GPUs to mine way more quickly than central processing units (CPUs). These types of graphics cards are faster, but they still use more electricity and generate a lot of heat. That’s when miners decided to switch to something called an application-specific integrated circuit, or ASIC. The ASIC technology has made Bitcoin mining much faster while using less power. (You can search “where to buy ASIC miner” on your favorite search engine.)

During crypto hype, mining equipment such as ASICs becomes incredibly expensive. At the beginning of 2018, for example, they were priced at over $9,000 due to high demand. That’s why you must consider your return on investment before getting yourself involved in mining; sometimes simply buying cryptocurrencies makes more sense than mining them does.

Cryptocurrency mining may make more sense to do in winter because it generates so much heat in the hardware. You may be able to reduce the cost of your electricity bill by using nature as your computer’s natural cooling system. Or using your computer as your home’s heating system! Of course, the cost of the electricity used by mining computers far exceeds the cost of heating or cooling the house.

Cryptocurrency mining software

Mining software handles the actual mining process. If you’re a solo miner, the software connects your machine to the blockchain to become a mining node or a miner. If you mine with a pool (see the next section), the software connects you to the mining pool. The main job of the software is to deliver the mining hardware’s work to the rest of the network and to receive completed work from the other miners on the network. It also shows statistics such as the speed of your miner and fan, your hash rate, and the temperature.

Again, you must search for the best software at the time you’re ready to start. Here are some popular ones at the time of writing:

  • CGminer: CGminer is one of the oldest and most popular examples of Bitcoin mining software. You can use it for pools like Cryptominers to mine different altcoins. It supports ASICs and GPUs.
  • Ethminer: Ethminer is the most popular software to mine Ethereum. It supports GPU hardware such as Nvidia and AMD.
  • XMR Stak: XMR Stak can mine cryptocurrencies like Monero and Aeon. It supports CPU and GPU hardware.

These options are just examples and not recommendations. You can go about selecting the best software by reading online reviews about their features, reputations, and ease of use. This market is evolving, and navigating your way to find the best options may take time. Personally, I rely heavily on my search engine to find a number of resources, and then I compare the results to choose the one I feel most comfortable with.

Cryptocurrency mining pools

Mining pools definitely bring miners together, but luckily you don’t have to get into your beach body shape to join one. (But if I had stuck to my hot miner guy image, a mining pool would’ve just made that picture perfect. A bunch of hot guys, wearing helmets, sipping cool drinks in a pool… .)

Simply put, a mining pool is a place where regular miners who don’t have access to gigantic mining farms come together and share their resources. When you join a mining pool, you’re able to find solutions for the math problems faster than going about it solo. You’re rewarded in proportion to the amount of work you provide.

Mining pools are cool because they smooth out rewards and make them more predictable. Without a mining pool, you receive a mining payout only if you find a block on your own. That’s why I don’t recommend solo mining; your hardware’s hash rate is very unlikely to be anywhere near enough to find a block on its own.

To find a mining pool that’s suitable for you, I recommend doing an online search at the time you’re ready to jump in. That’s because this market changes rapidly, and so do the infrastructure and the participants. Here are some features to compare when selecting the best mining pool for you:

  • Minable cryptocurrency: Make sure the pool is mining the cryptocurrency you’ve selected.
  • Location: Some pools don’t have servers in all countries. Make sure the one you choose is available in your country.
  • Reputation: This factor is an important one. Don’t get in the pool with nasty people.
  • Fees: Some pools have higher fees than others. Make sure you don’t prioritize fee over reputation, though.
  • Profit sharing: Different pools have different rules for profit sharing. One thing to consider is how much of the coin you need to mine before the pool pays you out.
  • Ease of use: If you’re not tech-savvy, this feature can be important to keep in mind.

A cryptocurrency mining setup example

The figure shows what my husband’s mining setup looked like at the beginning of 2018 to mine Ethereum. Keep in mind that he already had these systems sitting in his game room, so he didn’t really make much investment with mining in mind. He did invest in the hardware wallet, though.

  • Two custom-made, high-end gaming computers from boutique PC builders (one from Maingear and the other from Falcon Northwest)
  • Two Nvidia GTX 1070 Tis in his first PC; two Nvidia Titan X Pascals in the second PC
  • Two Ledger Nano S hardware wallets
  • org pool to mine Ethereum
cryptocurrency mining setup
High-end gaming rigs that can be used for mining.

Make sure cryptocurrency mining is worth your time

After you have all your tools together, you then need to set up and start mining. It can certainly be challenging to do so, and the dynamic of the mining community changes regularly, so you must make sure that you are up-to-date with recent changes and have acquired the latest tools for your mining adventure. You can always do so by researching the key elements I mention in the previous sections on your search engine.

If you’re looking to mine Bitcoin, keep in mind that your profitability depends on many factors (such as your computing power, electricity costs, pool fees, and the Bitcoin’s value at the time of mining), and chances are very high that you won’t be profitable at all. You can check whether Bitcoin mining is going to profitable for you by using a Bitcoin mining calculator. Mining calculators take into account all the relevant costs you may be paying to mine and show you if mining a certain cryptocurrency is profitable for your situation. Simple mining calculators ask you questions about your hash rate, the pool fees, and your power usage, among others. The figure shows you a sample mining calculator powered by CryptoRival. Once you hit the “Calculate” button, it shows you your gross earning per year, month, and day.

cryptocurrency mining calculator
Source: CryptoRival.com

Example of a simple mining calculator.

By doing the mining calculation ahead of time, you may realize that mining other cryptocurrencies may make more sense.