Before you even buy a miner, you should consider what coin you wish to mine, a suitable pool for mining that coin, and a wallet for storing that coin. This will allow you to hit the grounding running as soon as you receive your miner rather than wasting time trying to understand why you're having technical difficulties getting your miner to work or seeking out advice on important decisions that you could have spent time to understand well before you received your equipment.
CHOOSING A COIN TO MINE
While the obvious choice would be to mine Bitcoin with a S9, Litecoin with a L3+, and Dash with a D3, this decision is not always so simple.
S9 / SHA-256
The S9 is a "SHA-256" miner and can mine any coin that uses this algorithm. Due to the growth of Bitcoin Cash (BCH) there have been contentious battles for hashpower between Bitcoin and Bitcoin Cash. In general we don't recommend jumping around between mining multiple coins unless you have a large mining farm with enough hashpower to diversify without constantly changing your pool settings. In the case of SHA-256 an easy thing to do is mine with Nicehash, which sells your hashpower on a secondary market and pays you in Bitcoin. This generally allows you to maximize your earnings since their market typically will sell your hashpower at optimal prices. Their dashboard also allows you to keep track of your stats and your miners' performance very easily from anywhere. Getting paid in BTC also allows you to hold what is generally considered the "most stable" cryptocurrency (which if you follow crypto will understand as an extremely relative concept).
Also, it is critical to consider the transaction volume size of the coin you are looking to mine, as transaction volume influences both price stability and return rate stability. Consider the risks of mining a small coin that can be influenced easily by large buyers or sellers as well as large miners that suddenly increase the network rate/difficulty. If a large holder of coin in a small transaction volume environment decides to sell the price will decrease dramatically. If a large miner enters a small transaction volume environment they will dramatically increase the network rate and dramatically reduce overall returns for everyone. Also, if a hardware manufacturer produces a dramatically faster piece of equipment, the returns will dramatically increase for those who have the new hardware but overproduction of that hardware relative to transaction volume will very quickly kill returns for those who own the hardware. These general principles should be taken into account with any coin you choose to mine and/or hold.
Given that a big part of mining strategy is to choose the best coin to hold over a defined period of time you want to consider carefully how much risk you're willing to take for the reward that you expect. If you want less risk then choose Bitcoin with the S9. If you're willing to take more risk of a loss but also more risk of a bigger return then BCH might be a better choice. In general be aware that most people are very bad at trading coins and timing the market so for 90% of miners you will be better off with the safer and more conservative strategy.
L3+ / SCRYPT
The L3+ is a "Scrypt" miner and can mine any coin that uses this algorithm. Note that there are numerous algorithms with variations of "Scrypt" in their name. If it is not simply "Scrypt" then you cannot mine it. Due to the popularity of Scrypt there are quite a few coins that can be mined with some that are significantly more profitable than others at a given moment. Again, be aware that low transaction volume for that coin can mean a decrease or increase in profitability that occurs within minutes or hours.
Overall, we like mining Litecoin due to the strong governance and relative price stability of the coin. You can follow Charlie Lee, the head of Litecoin, on Twitter, and generally get a sense of when the markets might react favorably to some news. Also, Litecoin usually runs second or third behind Bitcoin in transaction volume and tends not to have contentious issues related to community consensus.
D3 / X11
The D3 is a "X11" miner and can mine any coin that uses this algorithm. Due to the relative newness of X11 as an algorithm and Dash's leadership in developing the algorithm, there are relatively few viable X11 coins to mine. The main alternative to Dash that I would consider viable are Monetary Units (MUE), which appears to be a nearly 1:1 clone of Dash right down to their Master Node and Treasury structure. Due to the currently low returns from D3s I would recommend mining a mix of MUE and DASH with an eye towards MUE prices and a clear price level at which you will take profits and exchange to BTC.
By deploying a smart trading and price target strategy and doing a bit of research on when to expect price movements, you can still profit from D3s despite the currently high network rate. In the near future when X11 hardware production stops entirely the transaction levels will catch up to the initial burst in network rate growth and D3s will regain their value.
Comparatively, D3s are still the most reliable, efficient X11 miners for the cost. Those who invested in Inno A5s or Pinidea DR-100 Pros will likely never break even due to the extremely high upfront cost for those miners. With Bitmain you can count on them to continue supporting their equipment and updating firmware.
CHOOSING A POOL
When choosing a pool you want to consider a number of things.
- You want to avoid pools that are too big and pools that are either too small or appear unreliable. The last thing you need to worry about is why your pool's server is unreliable. Avoiding pools such as Antpool and F2pool are generally good for keeping the network decentralized, which is critical to the future success of cryptocurrencies in general.
- You want a pool that is easy to administer and has good security for login and protecting your account information. If you can't easily figure out how to configure your workers and pool settings then move on. Your pool should always have 2FA (2 factor authentication) available for login and a multi-step withdrawal confirmation that requires an email verification. This limits the likelihood that a hacker can steal your password and then login to withdraw your funds without going through multiple challenges.
- The pool needs to have servers close enough to you so that you don't have high latency and large numbers of stale shares. You can test latency by running "ping" in a terminal window followed by the pool's IP address and seeing what numbers you get. Generally anything over 100 ms is bad but ok for a backup server. When setting your pool settings you will have three servers with one primary and two failovers. Your worker info and password will typically be the same unless you are choosing to failover to a completely different pool. If you have chosen a pool that has server uptime issues you should find another one to use right away.
some quick notes on pool settings
In the case of Nicehash, you don't have to worry too much about configuring workers or wallets as you can choose to either mine to your wallet of choice in the following format in the "worker" field WALLET.WORKERNAME with any worker name and password of your choice or you can register for a Nicehash wallet and then use that same info in the WALLET.WORKERNAME format. The advantage of mining to a Nicehash Wallet is that you save at least 0.8% compared to mining to an external wallet. Their fees vary based on your withdrawal amount so this may not apply to your situation.
Most other pools will require registering and setting up worker names first. You never have to setup individual worker names so if you want all workers in one location to have the same name the system will track them under one name. If you want to see individual worker performance then you can set S91, S92, S93 etc. and have separate stats per machine.
In general, most pools tend to use the format "username.workername" for the worker name field. So if you are registered with Litecoinpool as "jayz101" and you have a worker name configured as "l31" then you would enter "jayz101.l31" in your pool settings under "worker name" and the password would be whatever you set it to for that worker name. In general, most miners set passwords to "x" or something simple since this isn't a critical security concern.
S9 / SHA-256
For Bitcoin pools I really like Nicehash. They have been generally very good. If you are more technically minded you might try P2Pool. A number of mining sites have multiple pools such as Suprnova and MiningPoolHub. Use these at your own risk. Again, we generally try to point people away from Antpool and F2pool, both of which are controlled by Bitmain and tend to put the network at risk of an attack and excessive centralization.
L3 / Scrypt
If you are mining Litecoin we recommend litecoinpool.org, which has probabilistically a 1% better return than solo mining. They have good stats and a lot of big miners use them.
Nicehash also has Scrypt servers but you will get paid in Bitcoin so if you want to be more diviersified you should mine Litecoin.
As far as other pools and coins we don't have enough experience to recommend them, but the usual players tend to be ok. Zpool.ca seems a bit more technical and harder to use but probably worth a try if you are looking to experiment.
D3 / X11
For Dash I have used Suprnova's Dash pool and experienced numbers that were inconsistent with what mining calculators estimated for my returns but in retrospect I believe there may have been server issues. I've used Nicehash and seen decent numbers. If you believe Bitcoin will appreciate more than Dash or MUE then you will want to mine your D3s with Nicehash and get paid in BTC. Zpool.ca also allows you to mine D3s with payment in the coin of your choice.
CHOOSING A WALLET
Your wallet choice is very much like choosing a bank. Except this bank is part of the Wild West of cryptocurrencies where you could get robbed at a moment's notice. Understanding how wallets work and how to secure your funds in your wallet may be the most critical aspect of participating in crypto.
MAJOR PHISHING / HACKER WARNING
With ANY WALLET you NEED TO BE EXTREMELY CAREFUL about PHISHING scams. NEVER click a link claiming to be your wallet or exchange page/site. NEVER provide your password to a site in which you have not verified the identity of the site owner by clicking the "lock" icon in the browser next to the URL. Common phishing scams involve similar website names. For example a hacker might buy "coinbase.io" and fool someone into thinking it is a legitimate Coinbase site. It is especially important to enable 2FA with Authenticator or Authy for any online wallets you may have and secure your phone by contacting your phone company and ensuring that no other users can be added to your account or requiring an extra security step for any changes to your account. Scammers have been using this phone scheme for several years now to add themselves as an authorized user and requesting login credentials to the new device they've added.
TYPES OF WALLETS
There are generally 5 types of wallets. Each type has its advantages and disadvantages.
- Exchange Wallet / 2. "Hot" Wallet - You need an exchange wallet if you want to exchange crypto funds to fiat currency though not all exchanges can do this. This wallet resides on a company server and you do not own your "private keys". Essentially, you are entrusting this company with your funds and any kind of technical error or security lapse on their part could put your funds at risk of a loss. See for example Parity Wallet's several recent fiascos that have resulted in over $100 M in lost or "locked" funds. We generally do not recommend keeping funds solely in an exchange wallet or "hot" wallet. If you will need to sell your mined coin then you generally will need an exchange wallet such as Coinbase or Poloniex. Coinbase is the most reliable and secure exchange followed by Gemini. Others have had issues and should be used with caution. Do not blindly trust a wallet that you found on the Internet or the App store. That is a recipe for disaster as scammers have been setting up wallets and exchanges to steal coin since the beginning. A good strategy is to use Coinbase with Shapeshift and a non-exchange wallet in your choice of alt-coin if you are looking to diversify. This allows you to avoid having too many exchange accounts that put your funds at risk.
- Node / Proxy Node Wallet - This type of wallet allows you to own your private keys and requires a copy of the blockchain on your computer or on another computer accessible via proxy at all times. Generally, this type of wallet is more secure than an Exchange Wallet if your computer is secure. Note that with the proliferation of malware you can never be too careful and for some people, simply having the computer hosting your wallet connected to the Internet is problematic. However, using a Node Wallet combined with a hardware wallet can be a good practice that minimizes how much coin you keep on a machine that a hacker could access. By having access to your private keys you also have more control over transactions and should a transaction fail for some reason your funds can be "recovered" whereas failed or stuck transactions in exchange wallets often require significantly more work to locate and restore. Note that this is not an area in which I am deeply familiar with the technical details.
- Hardware Wallet - This type of wallet allows you to hold your funds on a secure device that has been designed with cryptocurrency security in mind. To my knowledge there have not been any instances of lost funds from hardware wallets being hacked though the founder of KeepKey had a close call when someone tried to hack his email. The three main hardware key companies are Trezor, Ledger, and KeepKey. All three are generally well regarded with Ledger having the most advanced device in the Ledger Blue, which has a few more features than the other wallets. At this time no wallet supports Monero though Ledger has been actively developing integration. These devices usually run about $100 with the Ledger Blue being quite a bit more. Even if a hardware wallet should fail or be lost or stolen by keeping multiple copies of your "restore words" in a secure place you can restore that wallet to a new device using those words.
- Paper Wallet - For some, this is the most secure type of wallet and allows you to keep your funds completely out of reach of hackers with backups kept in different secure locations. Some even generate their paper wallets offline, which ensures that your wallet remains anonymous. Essentially, your private keys could theoretically never touch the internet and your funds are generally harder to exchange / sell. For most people paper wallets are impractical and hardware wallets provide similar security with a superior user experience.
Nearly everyone has a Coinbase account, and if you are mining Bitcoin and/or Litecoin then you will find it easy to mine to a Coinbase wallet and sell/transfer funds as needed in your local currency to a bank account or transfer coin to a hardware wallet. Coinbase offers "vaults" that are "cold storage" and comparable to a paper wallet. This is a viable alternative to a hardware wallet, but again, your funds and private keys will be entrusted to an organization. In the last year or two a large Chinese exchange claimed to have had their cold storage hacked with a significant loss of funds. If there's a way to steal something hackers will find that way.
For Dash you can setup a wallet quite easily from the dash.org website or buy a hardware key and withdraw directly to the hardware wallet.
As with anything cryptocurrency-related, we are still in relatively early days. It is much more important to stay aware of current events and changes within the crypto community than for example, staying aware of activities at the Federal Reserve or of banking regulations. In general, our goal is to help people get into cryptocurrencies and cryptocurrency mining in the most secure, efficient way possible. By following our guides you can avoid much of the difficulties experienced by others trying to navigate what is still a somewhat unfriendly user experience.