Beginner’s guide: Cryptocurrency mining

If you have already had your first contact with mining and are just thinking about how to improve it, then we suggest reading our Beginner’s guide: Migrating to the advanced mining monitoring and management system. For those that are still learning about cryptocurrency mining, we have prepared this beginner’s guide which will answer all the questions you have or should have about mining.

The article is written in a simplified manner with the purpose of giving a basic understanding of cryptocurrency mining. It is an article we all wish we could read when we first encountered the world of crypto mining years ago.

💡 What is cryptocurrency mining?

Simplified, mining is solving different mathematical equations. By solving equations, miners can provide a block solving solution and when they do, they get the reward for it - coins that are in this block (block reward + transaction fees). Because mining alone is hard, miners usually organize and share the work (jobs) to solve a block on a pool. Pool then distributes the rewards from the blocks between the miners that participated and helped to find these blocks.

In practice, mining means running mining software on your mining hardware. In the software settings (configuration), you define which coin you want to mine, to which pool, and to which wallet you want to get paid. Then you have to let your machines running and wait to reach a certain amount of coins on the pool. When you do, the pool sends the coins to your wallet.

📘 Crypto mining dictionary

Here are the most popular terms you will hear in the cryptocurrency mining industry and you need to know about them before you start mining.

Coin

A coin is a cryptocurrency that you are going to mine. Some of the more popular coins are BTC, ETC, ZEC, RVN, XMR, BEAM, GRIN, ETC, etc. The most important thing to understand when you are starting is that you cannot just mine any coin, but you will learn more about this later.

Algorithm

An algorithm is a mathematics behind mining - the equations your machine is solving. Usually, a coin can be mined using only one algorithm, but there are exceptions that run on multiple algorithms. Some of the more popular algorithms are SHA-256, Ethash, Etchash, Equihash, KAWPOW, etc.

Wallet

A wallet is a place that holds your coins. It is usually presented with two long strings of random numbers and letters. One is a private key and the other is a public key. A private key is used as proof of ownership and shouldn’t be shared with anyone else - it is used for accessing the coins you own and signing the transactions that you are sending out. The public key is the address you can share with others and it is the address others use to send you the coins. The public key is also what you usually use on pools. Each wallet is unique, so if you make a mistake and replace only one character, this is an entirely different wallet address that can be owned by someone else.

Miner / Mining client

Miner or mining client is software that is solving the equations that are defined in the algorithm. The software can be programmed differently, so not all mining clients perform the same - some are better than others. More popular known mining clients are Phoenix, Claymore, lolMiner, Gminer, etc.

Pool

The pool is an organization of miners. Because mining alone is difficult, miners are collecting into groups and mining together and then sharing the rewards.

Share

A share is one solution the mining client finds and sends to the pool you are mining to. A pool can accept the share, rejects the share, or mark the share as stale (sent with a too-long delay). The goal is to have as many accepted shares as possible as each lost share means fewer rewards.

Hashrate

Hashrate represents the number of solutions per second and can also be understood as the speed of mining. Each algorithm uses its own unit for hashrate - most of them use MH/s (megahashes per second). For BTC - a coin with the greatest hashrate - a TH/s (terahashes per second) unit is used. Because mining clients are counting solutions directly from the software and pools are calculating hashrate from the number of shares you sent to them and share difficulty, there can be a difference between what the mining client reports and what the pool calculates.

Password

Mining clients usually require entering something that is called a password. Keep in mind that in real life password is almost always just x. If it isn’t, the pool will tell you what you need to enter as a password, but never enter personal information or anything that is connected to your account.

GPU and GPU rigs

GPU is hardware that you can use for mining some popular coins, such as ETC, RVN, GRIN, etc. When you combine multiple GPUs and connect them into a machine, such a machine is called a GPU rig. GPUs can be used for mining different algorithms, but are also used outside mining for any graphically extensive tasks, such as gaming, rendering, etc.

ASIC

ASIC is a special machine that is dedicated only to mining. It is designed specifically for the mining of a certain algorithm and can’t mine any other algorithm. Bitcoin is being mined with ASICs.

Mining monitoring and management software

Minerstat - is mining monitoring and management software. It is software that helps you get around all the terms described here, switch between different pools and wallets, monitor the hashrate, temperatures, and power consumption, and will help you manage things faster. However, minerstat won’t pay you, as you learned by now, the pool is the one that sends the rewards to you and minerstat will help you set things up and get you connected to the pool.

Services that pay you for mining

There are some services that pay you for mining (minerstat is not such a service) - where you aren’t actually mining to your wallets on the pool you choose, but to the wallets and pools the service chooses for you. Such services will pay you for mining and usually, they will offer several ways to get paid: BTC, ETC, or even fiat. While such services are attractive for beginners as you don’t need a lot of knowledge to get started, be sure to do proper due diligence, check how this falls with your tax reporting, and what are the fees the service takes.

Cloud mining

Cloud mining is a term that denotes buying hashing power of machines that you don’t own (minerstat doesn’t offer such a service). Usually, payouts are made on a daily or monthly basis and with a few terms that you should always read before subscribing to such a service. Before you sign up for any contract, make sure to learn more about cloud mining, what it means for you, and how it compares to buying coins directly instead of signing a cloud mining contract.

✋ Things you need to know before mining

1. Mining with a laptop: Laptops get hot very fast and have integrated GPUs which aren’t suitable for mining. Not only that, they are personal computers with personal data. We advise against mining on laptops.
2. Mining with a personal computer: Mining on a PC is not recommended as most of the mining clients are closed-source and you really can’t know what is in them. If your PC doesn’t have a powerful enough GPU (minimum requirement Nvidia GTX 1050 or AMD RX 480), you probably won’t be able to (profitably) mine anyway.
3. Mining Bitcoin: You can’t just start mining Bitcoin. These days Bitcoin is being mined with a dedicated machine called ASIC and an ASIC that is making reasonable earnings costs a few thousands of dollars. Getting to Bitcoin mining requires large investments. There are services that pay you for mining with Bitcoin, but this does not equal Bitcoin mining.
4. Where are my coins? When you start mining, don’t expect that the pool will send you the rewards in an hour or two. If you are mining with only one GPU, it can take weeks before your first payout. Every pool has a simple dashboard where you can check your earnings, so make sure to do that and calculate when you can expect the payout in regard to the pool’s minimum payout threshold and your mining tempo.
5. Estimated earnings: Estimated earnings change every second as they depend on the current network hashrate, difficulty of mining, block reward (including transaction fees), and block time. Sometimes, they are really high (when transaction fees are high) and other times they are low (when there is not as much traffic on blockchain and transaction fees are lower). You can explore estimated rewards on our coins’ profile pages, for example, ETC mining.

🚀 What do you need to start mining?

To start mining you will need at least these four things:

1. Proper mining hardware.
2. Pool on which you will mine.
3. Wallet to which you will mine.
4. Mining software that you will run on your hardware.

1. Hardware

First and foremost, to start mining you need proper mining equipment. Days, when you were able to (profitably) mine with your personal computer, are long gone and mining has already become a very competitive activity. So without good hardware, you won’t be able to mine. With some hardware, you won’t be able to mine profitably (low reward and high electricity costs) while with others you won’t be able to mine at all (not enough memory and high difficulty).

• ASIC: For mining Bitcoin, Litecoin, and other older cryptocurrencies, one needs a dedicated mining machine called ASIC. ASICs are designed specifically for the mining of a certain algorithm and can’t mine any other algorithm. For example, Antminer S9 can only mine SHA-256 coins (BTC, BCH, BSV, etc.) and Antminer Z15 can only mine Equihash coins (ZEC, ZEN, ARRR, etc.). ASICs are expensive and consume a lot of electricity. Explore ASIC miners.
• GPU: While you can mine with a single, powerful GPU, miners usually organize several GPUs into one machine called a mining rig. Typically, a rig will have up to 10 GPUs connected to one system, powered up by several PSUs. Some miners like to mix the GPUs and connect AMD alongside Nvidia, but most miners like to see a clean rig with all GPUs being the same brand. This causes fewer troubles with different driver support. The more powerful the GPU, the higher will be the speed of mining (hashrate), the more solutions found, and the higher the reward. Older GPUs tend to be less powerful, but there are some models that have extremely good hashrate and power consumption ratios. With GPUs, you can mine different algorithms as they are not as limited as the ASIC machines. Explore GPU mining.
• CPU: CPU mining is currently very limited and is giving reasonable results only on the RandomX algorithm (XMR). However, to profitably mine a coin that can be mined with a CPU, you need a very powerful CPU, which is also expensive. CPU mining usually results in high temperatures, so most of miners avoid it.
• FPGA: FPGA machines are kind of a hybrid between ASIC and GPU. Their chips are dedicated to mining a specific algorithm, but the chip can be reprogrammed to support other algorithms too. However, a bitstream (software) upgrade is needed, so they aren’t as flexible as GPU.
• Mobile phones: No. You can’t mine on your mobile phone. Once upon a time, there was a cryptocurrency Electroneum that allowed that, but they switched to POS, so Electroneum is not minable anymore.
• Servers: No. You can’t mine with AWS or any other rented server. Not only that it is probably against the ToS of the provided service, you wouldn’t be able to properly run the mining client or mine anything.

You will also need to keep in mind that certain mining hardware is limited to certain algorithms and coins. If the hardware doesn’t have enough RAM, it can’t mine some coins, even though it supports its algorithm.

2. Pool

While there are people that are solo mining, don’t think about it until you have some decent hashrate. After you have a decent hashrate and you know how mining works better, you can explore more about solo mining to see if it is worth it for you. In the meantime, stick with pools.

There are a lot of pools available, so you will need to select a pool in regard to different parameters: pool’s reward scheme, pool payout threshold, pool’s fees, and pool hashrate. Also, keep in mind that you can’t mine all coins on all pools. If the pool supports ETC, you can mine ETC there to your ETC wallet. You can’t mine BTC to an LTC wallet.

Minerstat has partnered up with some of the top mining pools in the industry and when you open a coin’s profile from the coins list you will be able to see a list of partner pools. You can go with any of them and if you will need help to start, let us know.

3. Wallet

You will need your own wallet address for a coin that you want to mine. There are several ways to get a wallet address:

1. Generating your own private key (the hardest and the safest approach);
2. Generating wallet address on the hardware wallet, such as Ledger or Trezor;
3. Generating wallet address on one of the web or mobile platforms that offer wallet services, such as BitGo;
4. Registering on an exchange, such as Binance or Coinbase, and generating an address there (the easiest and the least safe approach).

It is extremely important to know the number one rule of crypto: Not your keys, not your coins. This means that if you aren’t the owner of your private keys (meaning, someone else is managing your wallet), you can lose everything. Take this risk into account and act appropriately to make sure your coins are safe.

It is worth mentioning that some pools require a username as an identification. In such cases, you need to identify with the username and not with the wallet address. If this is the case for your pool, the pool’s dashboard will allow you to withdraw coins and you will need to enter your wallet address at that step.

4. Mining software

Choosing the right mining software can be tricky as there are dozens of them available. If you use our coins’ profiles pages you can see which mining clients are supported for certain coins. For ETC the most popular are Phoenix, TeamRedMiner, and T-Rex.

Running mining software means you need to download the software and run it with certain configuration parameters, which are defined in very raw form. If you have never programmed any code, it might be a little bit difficult to understand what needs to be done, but there are tons of examples on the internet that can help you with that.

Minerstat got this covered perfectly and will make it easier for you. It offers you a simple configuration setting so setting up the config looks like this:

1. You select which mining client you want to use.
2. You select which coin you want to mine.
3. You enter the pool’s stratum address.
4. You enter your wallet address.
5. Optionally, you enter a password or you leave it as x.

In case you want to use the advanced configuration and enter parameters manually, you can also switch from a simple view to an advanced view.

Flag. Block. Crash.

There is a high chance that you are reading this because you want to mine on your GPU with your Windows computer. If that is the case, keep in mind that flagging, blocking, and crashing are the middle names of Windows mining.

Most of the mining software is flagged and blocked by firewalls, Windows Defender, or any antivirus. Even if this is a false positive, it is correct that it gets detected, because people can download software from different sources and you never can know if a close source software is really clean. That’s why we don’t recommend mining on personal computers in the first place.

Make sure to always download mining software only from an official source. Keep in mind that downloading it from a website that holds the same domain as the mining client’s name is not proof that this is a real mining client. A good source for downloading is Bitcointalk, but even there you shouldn’t download just anything. There are some people that are sharing harmful links, which get deleted only when someone reports them to the administrators.

On the other hand, Windows mining is known for crashes, unexpected updates, and the requirement to spend a lot of time to install all necessary dependencies, correct driver versions, and additional software that you need for successfully running mining software. You can read the 7-Point Checklist: Prepare your Windows rig for mining.

🕒 Is cryptocurrency mining worth it?

It is really important to note that to enter the mining world you will need a lot of nerves, a lot of courage, and a lot of time for settings things up and googling.

While there is a lot of software and solutions available, you will still face numerous software errors, hardware issues, mining client updates, coin forks, and it will get some time to get used to it. If you aren’t familiar with computers, and technology, and don’t know how to troubleshoot, cryptocurrency mining can be discouraging.

If you don’t own the hardware yet (for example, at least a gaming computer with a powerful GPU), we suggest first trying renting out hardware to see if this is something that you want to deal with. We have seen numerous examples when people take mining as an investment and buy tons of equipment, then they don’t know how to handle it properly, they forget about the electricity that this hardware consumes, they buy hardware that isn’t profitable anymore, or they don’t know how to properly optimize their hardware to be more efficient.

Cryptocurrency mining is learning through trial and error.

And while it is time-consuming, most of the miners simply love their mining machines. They enjoy setting up the different configurations, overclocking, and the most rewarding part is usually when you find just the right spot between high hashrate and low power consumption or when the drivers finally work for these new GPUs that you bought.

💸 Is crypto mining profitable?

It depends. Checking only a mining calculator won’t be sufficient as there are several factors that you need to take into account when you are calculating the returns of your investment:

1. Hardware price
2. Electricity price
3. Fees
4. Other operational costs

1. Hardware price

You have paid for hardware to set up a mining machine and usually, first few months, you mine only to cover the expenses of this investment. If the GPU costs 400 USD and you are making 2 USD per day, this means 200 days until you pay off the GPU. After 200 days, you are making profits.

2. Electricity price

Higher electricity bills will come every month and there is no such thing as free electricity. That’s why it is important to optimize your rig to spend less power for the highest hashrate.

3. Fees

Pools, mining clients, and exchanges take fees. Each entity has its own rules on how large the fees are and you should take them into account when you are calculating if mining is worth it to you.

4. Other operational costs

If you plan to build a larger operation, you will also need to take into account these operational costs: utility costs of renting the place where you host your rigs, costs of salaries for people that will take care of your equipment, costs of mining management software so you will be able to manage your operation more efficiently, and taxes.

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