Bitcoin is an independent currency that requires computing power to function. By mining Bitcoins, money can be made. If you quickly want to see how simple it is to mine Bitcoing try generating Bitcoin at http://www.bitcoinplus.com/generate?for=20848677 🙂
Many of us have heard of Bitcoin but few know how it really works. The Bitcoin currency is gaining rapid momentum especially now that WordPress.com accepts payment with Bitcoin. Besides trading in Bitcoin (just as one would trade with money e.g. you pay for a service or product), Bitcoin can be earned by mining (mining is essentially using a computer to solve calculations that power the Bitcoin network).
What is needed for Bitcoin Mining
It’s possible to mine Bitcoin using your home computer. Here is what you need.
What services, hardware and software are needed
Here is what you need to mine:
- A computer (more about using computers to mine later in this article*).
- GUIMiner software (free to download and use).
- Bitcoin software or an Online wallet using an independent service (I use Block Chain)
- Optional: Join a mining pool (I use BTC Guild); joining a pool is advises as you’ll then earn money on a regular basis rather than having to wait months or years to mine enough to earn your first payout.
*A note about using your home computer to mine; as the number of Bitcoins that will ever be mined is restricted, the algorithms keep getting more complex requiring ever increasing computing power. In the early days of Bitcoin mining a CPU worked well for mining however now high performance Graphics Processing Unit (GPU) is needed as GPUs are able to compute the Bitcoin algorithms way quicker than CPUs. If you tried generating Bitcoin at http://www.bitcoinplus.com/generate?for=20848677 you were using a CPU therefore you would have noticed just how slow a CPU is at mining Bitcoin.
How to be a miner
First, either install the Bitcoin software on your computer or use an Online Bitcoin wallet (as mentioned above I use Block Chain but I really don’t know if they are any better than the others). Then join a mining pool and add your Bitcoin Address (which you’ll get from e.g. Block Chain) so that you may receive any Bitcoin you’ve mined in your Wallet. Now, run GUIMiner on your local computer and the settings so that you mine for your pool (e.g. I use BTC Guild so I enter BTC Guild in the GUIMiner Server field). Once ready click Start Mining! in GUIMiner and watch as Shares are accepted (a Share is your contribution to the pool which has an economic Bitcoin value).
How much will I earn?
Here is the bad news; it’s very unlikely that mining at home will be profitable. First of all will take a very long time (months or years) to mine any significant amount of Bitcoin using a standard home or office computer. In addition, the electricity used to run your computer will increase with mining and, if you mine at work, your IT department will soon be asking you to stop using near 100% GPU or CPU on your computer.
In addition the computing power needed to mine Bitcoins is increasing rapidly. Oh and also, the payout amount for mined Bitcoin is due to fall sharply anytime soon. This is because there is a finite amount of Bitcoins that will ever be available to be mined and the more people there are mining, and the fewer Bitcoins available to mine, so the cost of mining goes up in relation to the rewards (i.e. basic supply/demand economics).
It’s fun to learn how to mine Bitcoin but it isn’t profitable.
P.S. Amazon AWS EC2 (Elastic Compute Cloud) has high-performance GPU servers available. But, if you do decide to try using the massive processing power of these EC2 instances be aware that using Australian based servers is usually more expensive than using U.S. based servers.