Before you begin mining Bitcoin, it’s helpful to grasp what Bitcoin mining really means. Bitcoin mining is accomplished by running SHA256 double round hash verification processes so as to validate Bitcoin transactions and supply the requisite security for the public ledger of the Bitcoin network. The speed at which you mine Bitcoins is measured in hashes per second.
The Bitcoin network pays Bitcoin miners for their effort by releasing bitcoin to people who contribute the required computational power.
This comes in the form of each newly issued bitcoins and from the transaction fees enclosed within the transactions validated when mining bitcoins.
The more computing power you contribute then the bigger your share of the reward. In order words in you are mining your own currency.
To begin mining bitcoins, you will need to amass bitcoin mining hardware. During the early days of bitcoin, it had been possible to mine with your laptop processor or high speed video processor card. However, that is no longer possible.
Custom Bitcoin ASIC chips miners are now used and they provide performance up to 100x the older systems.This is sole reason why they have dominated the Bitcoin mining business.
Also Bitcoin mining with anything less than ASIC chips can consume more in electricity than you’re likely going to earn. It’s essential to mine bitcoins with the most effective bitcoin mining hardware designed specifically for that purpose.
Of all the ways of making money off bitcoins, this is the method with the greatest profit margin.
Making Money with Bitcoin Mining
Let’s go step-by-step on how to make money from bitcoin mining.
1) Purchase a bitcoin miner:
You can mine Bitcoins by purchasing Bitcoin Miners and connecting them to the internet. The machines are durable and long lasting as the only moving parts on the units are the fans which can be easily replaced. So First you buy the machine and set it up with a username that is linked to a mining pool.
The reason I advise people to mine in pools is because it’s no longer possible to mine alone in the hopes of finding a block on your own, the chances of that happening is less than 0.01% these days. In a Pool you get paid every day for the efforts your miner contributes to the mining pool proportionate to the amount of hashing power your machine or machines provide.
You need to then open a Bitcoin Wallet to link to your mining profile so the pool can pay you for your efforts every day.
Get a free wallet if you don’t already have one. Make sure your default browser is Mozilla Firefox or an updated version of Google Chrome.
Mining Bitcoin is a long term investment you need to understand and treat as any other investment. The machine does all the work but you need to make sure it has power and internet. After you mined the Bitcoins it gets deposited into your bitcoin wallet.
Before you purchase your mining hardware, you need to decide on which is best for you, and there are three main things to think about when choosing it:
a) Hash rate
This is the number of calculations that your hardware can perform every second as it tries to crack the mathematical problem. Hash rates are measured in megahashes, gigahashes, and terahashes per second (MH/sec, GH/sec, and TH/sec.
The higher your hash rate (compared to the current average hash rate), the more likely you are to solve a transaction block.
The reward for each transaction block solved is 25Bitcoins i.e. roughly $17,500 (1BTC = $700) at the time of writing this article. For a more recent exchange rate check the Bitcoin exchange calculator.
b) Energy consumption
All this computing process consumes electricity, and that costs money. It’s important to look at your hardware’s energy consumption in watts, when making your choice of a miner.
You want to make sure that you don’t end up spending all of your money on electricity to mine coins that won’t be worth what you paid.
Use these two factors to work out how many hashes you’re getting for every watt of electricity that you use. To do this, divide the hash count by the number of watts.
For example, if you have a 500 GH/sec device, and it’s taking 400 watts of power, then you’re getting 1.25 GH/sec per watt. You’ll want to buy a miner that mines with minimal electricity consumption.
How much does the bitcoin miner cost? Cheap mining hardware will mine less bitcoins, which is why efficiency and electricity usage are more important than price.
The fastest and more efficient mining hardware is going to cost more.
Don’t try to buy a miner based on how cheap it is because the difficulty of block mining increases over time making some outdated miners unable to function efficiently.
Types of Bitcoin Mining Hardware
The Bitcoin mining hardware that is currently of relevance is ASICs.
- ASIC Bitcoin Miners: With the advent of Bitcoins the CPU of computers were used to mine coins. However, those days have long become history because the high energy consumption and the extremely slow speed of mining. Other forms hardware that have become obsolete include GPU and FPGA based mining. Mining has moved to involve the use of ASICs which is an abbreviation for (Application Specific Integrated Circuits) and are specifically designed to do just one thing: mine bitcoins at mind-blowing speeds, with relatively low power consumption. Because these chips have to be designed specifically for that task and then fabricated, they are expensive and time-consuming to produce – but the speeds are stunning. There are 3 common types of ASIC based miner and they include
- 1. Standalone ASIC based miner with Stratum protocol
- 2. ASIC based miner connected to your PC or some other dedicated machine
- 3. Standalone ASIC based miner with Getwork protocol support only
Calculate mining profitability:
Before making your purchase, you need to calculate the projected profitability of your miner.This is achieved using online calculators. You can input parameters such as equipment cost, hash rate, power consumption, and the current bitcoin price to see how long it will take to pay back your investment.
One of the other key parameters here is network difficulty. This metric determines how hard it is to solve transaction blocks, and it varies according to the network hash rate.
Difficulty is likely to increase substantially as ASIC devices come on the market, so it might be worth increasing this metric in the calculator to see what your return on investment will be like as more people join the game.
Mining profitability can be calculated using a basic profitability calculator which does not factor in variables like power consumption or can be more advisable calculated using a standard profitability calculator which factors in some other essential variables like power consumption etc. Note 1000GH = 1TH.
Based on all these, the Antminer S9 is strongly recommended as it clearly satisfy the above requirements.
Review of some Bitcoin Miners
A good Bitcoin mining hardware needs to be efficient and an efficient Bitcoin miner means that you pay less in electricity costs per hash.
The miners in the table below are currently the most efficient Bitcoin miners on the market. The table shows the estimate cost, hash rate and power efficiency of these top bitcoin miners.
|Miner Brand||Hash Rate||Estimated Price||Power Efficiency (J/GH)||Expected Revenue/day (USD)|
|Antminer R4||8.6 TH/S||$1000||0.11 J/GH||$0.90|
|Antminer S7||4.73 TH/S||$489.99||0.25 J/GH||$2.0|
|Antminer S9||14.0 TH/S||$3000||0.098 J/GH||$6.5|
|Avalon 6||3.50 TH/S||$559.95||0.29 J/GH||$0.75|
The antminer R4 in addition to having a power efficiency almost similar to that of antminer S9 has the added advantage of being super silent with little heat generation and so is good for home use.
The Antminer S9 is the world’s first Bitcoin miner using 16nm chips. It is the most power efficient miner, mining at 0.098J/GH.It currently has the highest estimated revenue per day. Another important feature which sets the
Antminer S9 on a class of its own is it utilizes a combination of conduction and convection cooling to make the world’s most powerful miner perform best without getting hotter than any other terahash bitcoin mine.
Also, its enhanced user-friendliness entails that after accessing the Antminer’s user interface, all you have to do is to enter your wallet address and mining pool settings before you start mining.
I’ll advice anyone interested in bitcoin mining to purchase the Antminer S9. Though expensive, it is currently the only miner that is profitable giving the advanced level of block mining difficulty and as such will mine its worth within the shortest possible time.
When purchasing either of these miners, it is important to also purchase a Power Supply Unit (PSU) for maximizing power.
For installation of Antminer S9 after purchase, make sure you read this installation guide.
2)Downloading the software
Bitcoin mining software:
After purchase of miner, the next thing is to ensure that the appropriate software is installed. The function of the software is to connect your computer to the network and enables it to interact with the bitcoin clients, forwarding transactions and keeping track of the block chain.
Download of software is only important if you purchased an ASIC based miner like a Bitcoin USB miner connected to your PC or some other dedicated machine.Today, however, USB miners don’t generate enough hashing power to mine profitably.
Also there is a high possibility of damaging your PC. If you just want to get a Bitcoin miner USB to learn, eBay is a good place to buy a cheap Bitcoin miner.
The following software packages are NOT supported especially by an ASIC miner:
Only mining software packages supported at this moment by ASIC miners are:
However, some newer ASIC models like Avalon 6, Antminer S7 and Antminer S9 are already pre-configured and as such don’t require software download, so that all you need to do is plug it in the wall.
3) Join a pool
Now, you’re all set up. It is advisable to mine in a pool rather than mining solo. It is true that if you mine solo and successfully solve a block, you will be awarded 25BTC, but the chances of you achieving this almost 0%.
Mining in a pool entails that the profits are shared accordingly amongst people in the pool. You will stand a better chance of success mining bitcoins with other people in a pool than mining solo.
The most profitable and reliable of pools currently in existence is Slush Pool. It is the first Bitcoin mining pool in the world, established since 2010 with a long history of stable and accurate payouts. This is also the pool I use and hence more conversant with.
In order to start mining you basically need just two things, create an account with a mining pool, preferably Slushpool and configure your miner.
1. Sign-up for a new account
1. Sign-up and wait for a confirmation email.
2. Login to your account.
4) Configure Your Device
a) To configure the Standalone ASIC based miner with Stratum protocol:
Your miner has to be pointed to one of the stratum servers below and user credentials for your account have to be specified. Slush pool is currently operational in the following regions: US east coast (us-east), Europe (eu), China mainland (cn), and Asia-Pacific/Singapore (sg).
The login credentials needed for your miner especially when using the Standalone ASIC based miner with Stratum protocol looks like this: (please, fill your user ID and worker name)
User name: userID.workerName
Password: ************(anything you like)
The servers can be chosen from the following list based on your geographical location:
b) To configure ASIC Based Miner Connected to Your PC and Other Dedicated Machines:
In this case, you need a mining software installed on your computer. I recommend using CGminer or BFGminer
c) To configure a Standalone ASIC based miner with Getwork Protocol Support Only:
The getwork protocol is now considered obsolete. However, you can still use such mining hardware with Slush pool through the use of Stratum proxy. They have provided this as a free software for Slush pool miners.
Now you are officially ready to start mining!!!!!!!!!!!!
5) What should I do with my mined bitcoins?
Well that is entirely up to you. You can sell Bitcoins you mine or make with Arbitration to people that want Bitcoins directly.
The easiest way to do this is creating a Facebook page for yourself and market yourself as a Bitcoin trader.
You can then sell the bitcoins to the clients at a rate you choose between what the current exchange rates on the exchanges are, making it cheaper for the client to rather buy from you than the most expensive exchange with the convenience of getting his Bitcoin as soon as possible.