I have encountered certain difficulties in learning the Bitcoin mining for investment and profitability and one of the major issues I had was having problems with regards to learning through websites written and understandable for advanced users only.
I am basically not a professional coder, hence I am not familiar with Ubuntu, Linux and I only have basic experience with Mac. In line with this, I am writing this article for people who want to learn Bitcoin mining the easy way.
You can never enter as you please with Bitcoin mining, for it such a competitive place to get into. The difficulty to mine rises each day as new miners come on board with the newest mining hardware.
Therefore, you need to do your due diligence and conduct thorough assessment first for you to find out if Bitcoin mining is even profitable for you.
Using a Bitcoin mining calculator is the most excellent method to do this. You can check ahead how long it will take you to recover expenses or earn a profit by just entering the data of the Bitcoin miner you wish to buy.
But if you don’t have a few hundred bucks to start with, I can tell you right now that you probably won’t be able to mine any Bitcoins.
By the time you are satisfied with your calculations, you are now ready to get your miner. To understand which miner is best for you, do your research first and read on different Bitcoin mining hardware reviews. The Antminer S9 is currently the latest and most powerful miner.
In addition, it’s important to state that it was viable to mine Bitcoins with your computer before or with a graphics card (GPU mining). But in the recent days, mining has become so competitive that the use of ASIC miners ( special computers built strictly for mining Bitcoins) are highly needed.
The next important thing to do is to secure a “Bitcoin Wallet“– a place to store your Bitcoins since it is an internet based currency. As soon as you own a wallet, make sure to get your wallet address which is a long sequence of number and letters.
Though most wallets can be pretty straight forward, each has its own distinct way to get the public Bitcoin address. Take note that you’ll need your PUBLIC bitcoin address not your PRIVATE KEY which is like a passcode for your wallet.
However, one further important step should be done by those people who opted to use a self-hosted wallet (not an internet based service but a downloaded program to your computer). Don’t forget to secure a backup copy of the wallet.dat file on a flash drive and print a copy out and store it in a protected place.
You can learn how to create a secure wallet in this tutorial. This is a very crucial step for instances where your computer suddenly crashes and if you were unable to secure a copy of your wallet.dat file, you will suffer the loss of your Bitcoins. Like burning cash, it will disappear forever.
Another significant step if you want to actually make Bitcoin (money) is to join a Mining pool - a group of Bitcoin miners that combines their computing power to make more Bitcoins. Joining a mining pool is important since Bitcoins are awarded in blocks, currently 12.5 at a time hence you won’t be having any of those coins unless you get very lucky.
You need to solve algorithms to earn Bitcoins. What happens in a pool is you are assigned to solve smaller and easier algorithms and your combined work will make you more likely to solve the bigger algorithm therefore having greater possibility to earn Bitcoins that will be distributed out among all of you based on your contribution.
A good return on your investment will be highly likely since primarily you will make a more consistent amount of Bitcoins.
It is vital to consider these factors first when choosing the best mining pool for you:
Their reward distribution: Proportional/Pay Per Share/Score Based/PPLNS
Fees for mining and withdrawal of funds
Frequency of finding a block
If it is easy to withdraw funds
Kind of stats they give
Stability of the pool
For further learning of these factors you can read this excellent post from BitcoinTalk. In the Bitcoin wiki you can check for a complete comparison of mining pools. I will use Slush’s Pool when mining for Bitcoin for demonstration purposes. You will get a username and password for your chosen pool (which will be used later on) after you signed up.
To answer most of these questions you can use this excellent post from BitcoinTalk. You can also find a complete comparison of mining pools inside the Bitcoin wiki. For the purpose of demonstration I will use Slush’s Pool when mining for Bitcoins. Once you are signed up with a pool you will get a username and password for that specific pool which we will use later on.
Click the link to go their website and tap the “Sign up here” link at the top and follow the step by step instructions. When you’re done with setting up your account, a “Worker” should be added. For the pool to keep track with your contributions, a worker ID is needed for every miner that you have running.
Most of the essentials were discussed so basically we are all set to mine. A mining client is needed to run on your computer that will enable you to control and monitor the mining rig.
Looking for right software is vital but it depends on what mining rig you are using. Although a number of mining pools have their own software like Bitminer, some don’t have.
You can check a list of Bitcoin mining software here.
Since I am using a mac, I’ll prefer to use a program called MacMiner. I’ve found though that BFGMiner and 50Miner are among the top programs used for PC. A complete comparison of different mining software can be found here.
Now let’s try to run through the steps to set things moving. Begin with connecting your miner to a power outlet to start up. Usually via USB, connect it as well to your computer and open up your mining software.
Before you can start mining Bitcoins, you need to input your mining pool, username and password.
Once configured, you are now ready to mine Bitcoins though you will be only collecting shares depending on the amount of work you contributed in finding the next block.
Be sure to enter your address in the required fields when signing up to the pool for you to get paid of your share of coins. Here’s a full video of me mining in action:
Among the things discussed above, is it really profitable to mine Bitcoins? Or are we safe to say that buying Bitcoins with the money you plan to spend on Bitcoin mining is more profitable? There are instances that buying Bitcoins will give a higher ROI (return of investment) than mining itself. For more information about it, you can read this post here.
Have fun mining!