Early on with Bitcoin, simply downloading the Bitcoin software started us on the road as Bitcoin miners. We started the software for Bitcoin, and it would show how our computer processor was mining Bitcoins as it solved the cryptographic code-breaking problem. It was a slow process for earning Bitcoins on normal PC's.
More powerful computers could dramatically increase the rate for solving the puzzles or hashing as it is referred to in the Bitcoin lexicon. The creator(s) of the software anticipated that Bitcoin mining would go big. The software code and mathematics creates more difficult problems to solve - or mine - as the number of Bitcoins in circulation increases.
The Concept Of Bitcoin Mining
Gold and silver are mined into existence. Costs for finding, licensing, mining ore, culling ore from gold and silver, then minting coins and bars, creates a value for gold and silver. Bitcoin has a similar set-up, though not as costly or involved. The key difference is that mining for Bitcoins involves solving codes or cryptographic mathematical puzzles.The most important aspect of mining Bitcoins, is that anyone can get involved. There is no central bank, no government treasury, no board room filled with supposedly all knowing people deciding how much money to produce. We can all produce Bitcoins, provided we can set-up a mining operation.
Read More: The Bitcoin Secret Trading Full Giude
Terms BTC Miners Use:
Mining - Solving the math puzzles for generating the next block. Miners hash at a certain rate based on computing power and the difficulty of the Bitcoin hash over time.
Rig - the complete set-up for solving the Bitcoin algorithms involving power source, processing unit, code, input and output controllers. These are normally dedicated Bitcoin servers, but could be any form of computer or graphics card devoted to solving the BTC block puzzles. This involves a red-hot fast CPU, GPU (Graphic Processing Unit), ASIC (Application Specific Integrated Circuit), and now dedicated computer boxes called FPGA. Field Programmable Gate Arrays are taking the speed championship from ASICS for cracking codes.
Hash Rate - The speed a rig can solve or make calculations for the Bitcoin network. It is expressed as TH/S for Trillion Hashes/Sec or GH/S for Giga Hashes/Sec.
Block - A record that confirms many waiting transactions. It then becomes part of a block chain where each block relates to previous and future blocks through agreement of code segments.
Block Chain - A grouping of blocks forming the public record of all Bitcoin transactions in chronological order. It is shared among all Bitcoin users for verifying the false from true Bitcoin spends, the balance of Bitcoin addresses, and prevents double spending of Bitcoins. Think of the block chain as the ledger for Bitcoin, with encoded entries.
Bitcoin - These are unique codes “awarded” to miners for solving the problems that allow for creating the next block in the block chain. Bitcoin was awarding 50 Bitcoins per solution and now is awarding about 25 per solution. This will go down to 12.5 Bitcoins per block in 2017. Every four years the number of Bitcoins created per 10 minutes will go down by half, until 2139.
How To Mine Bitcoins
For learning about mining (and not creating any Bitcoins for a long, long time):- Visit - http://www.Bitcoinplus.com/generate
- Click “Generate”
- Watch as your computer begins solving the Bitcoin codes - and makes almost no progress over time.
For those that want to make money with Bitcoin mining, here are a few considerations:
- Select the lowest cost electricity state possible. CA is among the highest, and here are a few others at either end
- Lowest-Cost States:
- Wyoming
- Idaho
- Utah
- Kentucky
- West Virginia
- Rhode Island
- Alaska
- Connecticut
- New York
- Hawaii
Here are a few sources to buy the rigs:
FPGAmining.com
Ebay.com (sample shown below)
Amazon.com for GPU's
We can also buy and assemble our own Bitcoin mining rig. This is similar to building our own computer.
- We need a power supply. Bigger is better. 500 W + is ideal.
- We need a motherboard with multiple graphic card slots.
- We need a mid-range processor of either Intel or AMD brand.
- We need input output cards to handle extending to other graphics cards.
- We need multiple graphics cards from ATI. The faster and more memory the better and at the lowest price possible.
How to assemble and get the system working together is beyond the scope of this e-book. One of the better resources is from Scribd at: http://www.squidoo.com/how-to-build-a-budget-Bitcoin-mining-rig
Fortunately, building our own mining rig is not the best option for mining Bitcoins. Much like in the real investment world, the best option is buying shares in a mining group. It’s almost like buying stock, but without the downside risk and plenty of upside. Still, there are risks.
Problems In Mining Bitcoins
Initially, Bitcoin mining was not very profitable. With BTC/$ values as low as $.06 - $.30, there was not much incentive to mine too actively. As the value of the Bitcoins increased, miners began to make huge margins mining Bitcoins. At the peak, ($/BTC of about $260), miners could be making 50 -60 times their investment in the mining rig and electricity. The complexity of the puzzles to solve has increased, as has electricity cost, and the number of miners working to solve the next block, all while the $/BTC value crashed. These factors have made it so the individual miner does not stand to make much profit from Bitcoin mining unless they invest in serious equipment. Some of the top end Bitcoin mining boxes run over $10,000.A better approach for most would-be Bitcoin miners is either to buy into a mining group, or join a mining pool. Mining pools allow individual members to get a smaller piece of the BTC awards given for solving a single block in the chain. Otherwise, an individual miner could be mining for a long time before ever solving the block at the right point to receive their 25 BTC's. Not a wise investment.
We can either build or buy a Bitcoin mining rig as previously described, or join a mining group. We would link our solving power with the rest of the group and split the Bitcoins awarded based on calculations performed.
You can see one of these mining pools here: https://deepbit.net/
This area of Bitcoins is ripe for scams, so “buyer beware” applies here.
The website is looking bit flashy and it catches the visitors eyes. Design is pretty simple and a good user friendly interface.
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