Alternative Cryptocurrencies: What to Mine?

After branching out into testing Hashco.ws and doing some Frozen mining, I started to realize that there's a huge amount of potential to make more money simply by mining some of the lesser known coins. New coins in particular can be quite profitable -- in the first couple of days of mining FZ, I managed to get something like 10K FZ. I traded that for roughly 6 LTC at the time, but today that same 10K could fetch probably 30 LTC. Even with the recent price drop, that would be a rather staggering $540 in two days. What's more, that was from mining with eight CPUs -- CPUs that were otherwise sitting idle on my GPU mining rigs!

Frozen is somewhat unique (or at least rare) in that it uses the Quark algorithm for proof of work, and Quark is more resistant to GPU mining as I've already mentioned. However, there are other altcoins where you can still generate a decent return without using your highest power GPUs. Most of these coins are newer or not traded as heavily, so you'll want to be cautious and not put all your eggs in one basket (at least not all the time). Personally, I am trading most of my altcoins for BTC right now, but with patience I could probably get far more by holding and waiting for a higher price. YMMV.

So which altcoins are the most profitable right now? The "created as a joke" DOGE (Doggy) is actually pretty common, but we'll have to see where that goes in the coming weeks. I wouldn't hold onto too much DOGE as all value could evaporate...but then again, never underestimate the power of humor! Hashco.ws and Multipool are both doing a fair amount of DOGE mining, for example. But if you want to go out a bit further on the fringe, take a look at Coinchoose.com. Here's a couple screenshots of the current average profitability relative to BTC and LTC:

What you can see in those charts is that quite a few coins are potentially outperforming LTC and BTC mining, sometimes by a substantial amount. If you go after one of the coins with a really low network hash rate, the risks -- and rewards -- can be even greater. But how do you go about mining these alternative coins?

Assuming you don't want to use a multicoin pool, you will either need to find a pool where your mined coins will be held, or set up your own wallet for each currency and then configure your miner(s) and pool(s) to send coins to the appropriate address. So let's just take the current top coin as an example, Diamond. Note that I have not mined any Diamond to date, so this will be a test run for me as well.

First, let's go find some information on Diamond. I searched for "Diamond Coin" and found this thread at Bitcointalk, announcing the coin, and later in that thread we find that Diamond has recently been revitalized. It looks like Diamond was launched back in July 2013. It has a steady state of generation of 1 block every minute, with each block being worth one Diamond (coin). So far so good. It also adds some other features to potentially secure the coin against a 51% attack, like Proof of Stake along with Proof of Work -- I won't get into that here. Diamond is scheduled to run for eight years at 1 block (and 1 coin) per minute, with bonus blocks randomly given out each day, yielding a total of 4,380,000 coins total (give or take). The current exchange rate can be found on Cryptsy: 0.0037 BTC per DMD. Network difficulty on the other hand is reportedly very low at only 1.27MHash/s, but perhaps that's not showing up correctly. Everything looks reasonable, so let's try mining some Diamonds.

First, decide if you want your own Diamond wallet (e.g. for long-term storage). If not, you can skip steps 1-4 and go straight to step 5.

1. Download the Diamond client/wallet.
2. Run the diamond-qt.exe (for Windows) client once and then close it; it creates a default directory (C:\Users\[UserName]\AppData\Roaming\Diamond) for you, though you could create that on your own if you prefer.
3. Create a diamond.conf file in the above directory. There's an example given at the official site, but below is what I've put in my diamond.conf file.
4. Run diamond-qt.exe again, and now it should begin syncing with the network. This may take some time as there are roughly 200,000 existing blocks to download. You don't need to finish syncing before you can begin mining, but you do need to be synced up to send/receive any DMD.
5. Mining is pretty simple, as this is yet another scrypt-based coin, so you can mine with the usual cgminer, bfgminer, cudaminer, etc. But first we need a pool to mine with (unless you want to go solo).
6. I created an account at this pool, since it looks active at around 12MHash/s (so the network hash rate is much higher than what Coinchoose is reporting). After verifying your account via an email link, create a worker in the usual way.
7. Using your normal cgminer settings (or whatever miner you run), point it at the pool stratum and start mining. For a Radeon HD 6970, here's what I run:

cgminer.exe --scrypt --auto-fan --failover-only -I 20 --thread-concurrency 8000 --gpu-engine 925 --gpu-fan 50-100 --gpu-memclock 1400 --gpu-powertune 25 --gpu-vddc 1.1 --temp-cutoff 99 --temp-overheat 95 --temp-target 85 -o stratum+tcp://dmdpool.digsys.bg:3333 -u trogdorjw73.tester -p tester

With the miner up and running, you should start to see shares periodically. Based on the pool's information, it looks like the rate of return is around 0.08 BTC per 1MHash/s. At a current price of $650-$700, that works out to $52-$56 per day per MHash (1000KHash). If you were mining LTC instead, you'd be earning about 0.3 LTC per day, for around $6 per day.

So here's the question: do you actually get that much DMD (or other altcoin) into BTC? I'll start one system mining as a test and report back later....