The Bitcoin network is gaining more and more popularity as time passes and people see the merits of the existence of such a system.
Bitcoin solves the problems and headaches that are usually the hallmark of other types of monetary transactions.
The Bitcoin network is quick, secure and doesn’t require most of the additional fees you’re stuck with when you use normal banking.
Also, since Bitcoin is not centralized and works on the basis of a public “ledger” all members of the network have access, there can be no artificial inflation.
New bitcoins are created in a process called “bitcoin mining” (also referred to as mining) – solving a complicated series of math problems in order to confirm transactions on the network.
The people who keep track of the ledger and transactions are called miners. But how do you mine bitcoins? Find out with the help of your bitcoin mining guide.
What is Bitcoin Mining?
Mining is the process of solving complex mathematical problems on the Bitcoin network – we’ve already established that much.
The result of these complex problems is unique for every block on the network, and is referenced in the next block, thus creating the so-called block chain.
This is how we know that all transactions are legitimate and since they are public record, should you choose to (and know how to) you can check them up to the beginning of the system.
How to Mine Bitcoins
When new blocks are introduced into the network, miners compete to be the first to solve the block in order to get the reward from it. The reward started at 50 bitcoins for block with the plan to be halved every 210,000 blocks (or approximately four years). The current bounty for solving a block is 25 bitcoins and is expected to become 12.5 in 2017.
In order to start mining, a miner needs three things – a bitcoin wallet where he will store his winnings, mining hardware and mining software. In the beginning, people were using normal CPUs (central processing unit) to mine, but then they figured how to bitcoin mine with GPU (graphics processing unit)that turned out to be way more effective in this sort of computations than CPUs.
Today, however, even GPUs are not really all that competitive. Instead, most miners use ASIC (application-specific integrated circuit) bitcoin miners that process hashes faster than standard GPUs.
The speed is measured in gigahashes per second (GH/s). If you really want to be competitive, you will need to invest in good hardware – browse around and look at the offers. There are plenty of comparisons, as well.
You will be able to generate bitcoins at a much faster pace with a faster hardware.
While you’re looking up the hardware, it would be a good idea to have a look at a mining calculator, as well, so you can estimate what potential profit you will be making with your investment.
Remember though, that those estimates almost always differ from the real numbers. The best course of action is to do as much research as possible before you begin. Otherwise, you might be in for a surprise.
However, hardware alone is not enough for mining bitcoins. You will also need a bitcoin wallet so you can collect your profits, as well as bitcoin mining software. This is the easy part, though. Creating the wallet is fast and easy.
The software download will take a while since it will have to sync every transaction that’s ever been made on the network. However, once that’s done, you’re basically good to go.
The software works on most popular platforms (Windows, Mac, Linux). Bear your hardware in mind when you choose your software. Some tools work better with GPUs than ASIC and vice versa. You can also find tools that are really easy to use and offer you full GUI control. Browse around to find the right fit for you.
A general consensus is that the best way to mine bitcoins is by joining a mining pool.
This way you’re a part of a group of miners and you will be getting your profits depending on how much you have contributed.
This means that you will get paid less (because the reward is split once the block is solved) but you will also be paid more frequently (since more miners will be joining you, thus speeding up the process).
Once again, do your research in order to find something that fits your preferences and style.
Of course, you’re still free to mine alone and collect the entire bounty for a block you solve, but that will take longer and chances of you getting it first are smaller.
If you think you’re up to the task, you’re welcome to try, but most miners prefer being a part of a pool. Note that this is a beginner’s guide to bitcoin mining.