Mine Ethereum the Right Way
Mining Ethereum can be fun and easy, and it should be! If you’re confused about which hardware to buy, check out my Mining Rig Tour, and my article on the Best Ethereum Mining GPU. In this article we’re going to focus on the software and logistical side of mining, rather than the hardware.
Step 1: Get an Ethereum Wallet
The first thing you need to do is get an Ethereum Wallet. You can get the free wallet from the Ethereum Project, or setup an online wallet at a site such as Coinbase. There are some inherent risks to both of those, but you’ll probably need a Coinbase account at some point to sell your Ethereum.
PC Based Wallets
PC based wallets are software wallets that run on your local PC. If you want to mine Ethereum you’ll want to have a PC based wallet to send your coins/ether to. There are some risks to a PC based wallet you need to be aware of though:
- If your PC is compromised, a hacker can send your coins to his wallet. You will be unable to get them back.
- If your PC crashes and you can’t find your recovery keys your coins will be lost forever.
- Your wallet will need to sync with the Ethereum network each time you open it.
The good news is that most of those risks are fairly easily mitigated. With proper backups and a safe place to keep your recovery keys these can be overcome. A PC based wallet is also great because you own the wallet. It is not owned by a 3rd party who could go bankrupt or get hacked.
Web Based Wallets
Web based wallets are much like they sound. A website operates the wallet on your behalf, keeps it secure and allows you to access it from anywhere or on any of your devices. Coinbase is probably the most popular web based wallet. There are of course some things to consider with web based wallets:
- The wallet is only as secure as the owners of the website keep it. Nicehash for example was hacked and all coins were lost to the hackers.
- If the company goes bankrupt you will likely never see your coins again.
- If their site goes down you will likely lose access to your coins during that time.
- It is unwise to mine Ethereum directly to a web based wallet, as the wallet address could change on you.
But there are some major upsides to a web based wallet. Selling your Ethereum to Coinbase (also GDAX) is quick and easy. Coins in your Coinbase wallet can be converted to cash in a matter of minutes. PC based wallets may require you to transfer them before you can sell them or convert them to other coins.
Hardware Based Wallets
The hardware based wallet is probably the best way to go for a miner. Hardware wallets live on something physical. They usually look similar to a USB stick. The Trezor hardware wallet is the most popular. A hardware wallet is basically (theoretically at least) immune to viruses and hackers, since it is offline and disconnected from the Internet most of the time. It is only plugged into your PC or smartphone when you actually need to access it. I recommend most miners have one. If you plan to mine Ethereum, I’d highly recommend it.
Step 2: Get the Claymore Miner
There are several mining software packages out there for mining Ethereum. The simplest is EthMiner. It’s sort of the stock Chevy if you will. There is a better option. If you plan to mine Ethereum, I highly recommend you use the Claymore mining software. Claymore is capable of dual mining. Meaning you can mine Ethereum and another coin at the same time without losing any performance (only for coins that use different architecture).
The Claymore miner does have one caveat you need to be aware of. While the software is free, the Claymore miner does have what is known as a developer fee. In a nutshell, the developer will use 1% to 2% of your GPU time to mine Ethereum on his behalf. This is how the developer gets paid. 2% is fair in my opinion, if not for one main reason: In my experience Claymore is 8% or more faster than EthMiner. So you’re going to be ahead regardless. I don’t mind one bit helping a developer out who writes quality software.
Step 3: Join the EtherMine.org Pool
You’re likely not interested in solo mining. At least not as a beginner. In most cases, solo mining should be reserved for those who are experienced and have a large amount of hashing power. A mining pool is where lots of miners come together and put all of their hashing power into a central pool. When one miner finds a coin, the proceeds are divided and shared with everyone in the pool. This is a very fair system and makes for much faster and consistent payouts.
Ethermine is my favorite pool (by far). Its incredibly simple to setup and the payout is fast, usually within minutes of reaching your goals. Complete instructions on setting up Claymore to connect to Ethermine are right on their homepage. One thing that’s not always clear to newbies. The ID is the receive wallet address of your Ethereum wallet (or Trezor), a period, and a name to identify the machine. If you have more than one mining rig, use the same ID, with different machine names.
As with all shared services, the owners of the pool take a 1% cut of the work your machine does for the pool.