Introducing a new currency system which is completely digital and free from any third party intermediaries! Bitcoin or BTC, your own new digital currency which is held electronically and serves the same way as the real currency does.
Bitcoin is an electronically held digital currency which is independent of any Bank regulations. Bitcoins can be traded for goods and services and can also be purchased from a Bitcoin Exchange.
1 Bitcoin is equivalent to approximately 1800 US dollar and 1370 British Pound. This rate is increasing at an alarming speed.
Bitcoin is based on blockchain technology.
Need of Bitcoins
No Banks! No heavy transaction fees and well accepted across all international borders. It’s is damn easy to set up a Bitcoin address with zero fees payable.
The main advantage of Bitcoin currency is that it that it is 100% transparent. Every single transaction of Bitcoin is stored in huge digital public ledger, known as Blockchain. You are not identified by name but by address or your Wallet ID.
It is fast as compared to other digital transactions and keeps your privacy intact.
Creator of Bitcoin
Bitcoin was proposed and created by a person using the alias Satoshi Nakamoto back in 2009. Satoshi wanted to create a digital payment system having digital currency as well.
The generation of new currency would be based on solving some mathematical problems.
The process of getting new Bitcoins is termed as Bitcoin Mining. People around the world use computing power to solve mathematics problems in a distributed network in order to generate new bitcoins.
The winner is rewarded with 25 Bitcoins and from here the bitcoins go for the circulation. Bitcoins are finite and are around 21 million in number. Currently approximately 12 million have been mined out and are in circulation.
How to get a Bitcoin?
Well, there are three ways to get your own Bitcoin. But before that you need to have a Digital Wallet to store them. These are your digital bank accounts held on a cloud or user’s computer.
- You can buy or sell Bitcoins in exchange of real money. Some exchanges where the trading is currently done are coinBase, LocalBitcoins, BitQuick, BitBargain, Xapo etc.
- You can generate new Bitcoins by Bitcoin mining.
- You can send and receive money by trading merchandise and services.
Going Deeper and Exploring Bitcoin Mining
Mining Bitcoins is not similar to mining gold. It is rather a technique to obtain new Bitcoins by verifying the Bitcoin transactions. And believe me it’s just not one single transaction but many.
All the transactions are bundled into a box called as a block, which after the verification are added to the blockchain. A cryptographic hashing function is applied to the block header and then the block becomes part of the block chain.
The hardware used to verify the transaction blocks is called a miner. For each successful verification of transaction, the miner is awarded with 25 newly generated Bitcoins. Block chain is bitcoin’s public ledger which keeps the record of every single transaction made.
Till date, the reward is 25 bitcoins is rewarded after every 10 minutes but it will halve to 12.5 new Bitcoins by the end of 2017.
Getting started with Mining the Bitcoin
Bitcoin Mining software is an open API and is free to download and run even by a novice. The system is designed in such a manner that it becomes easier to mine in the beginning and becomes difficult in the later stages.
In the beginning, Satoshi Nakamoto (founder of Bitcoin), used CPU to mine bitcoins but now this is not sufficient. Now we need is more and more speed and fastness of the processor to mine further.
There are ASIC (Application Specific Integrated Circuits) , which are dedicated to perform only one task i.e. mining.
If you are doing it on your laptop, it will take you more than two decades to mine a single Bitcoin. So, there comes the concept of Pooling. Mining pool is a collection of individual Bitcoin miners who pool their computer power to mine.
Before adding any block to the block chain, the individual must submit the proof-of-work. The other Bitcoin nodes verify the block by using hashcash proof-of-work function.
Proof of Work
As mentioned above, Proof of work in a method to make sure that that the block added was difficult to produce as it is very important to check whether data satisfied the requirements. Bitcoin uses SHA-256 algorithm.
To generate a valid proof of work, a lot of hit and trial is required due to its low probability. This is important so as to decide on the mining difficulty and to limit the rate at which new blocs are generated by the network in every ten minutes.
For any block to be declared as valid, the hash value should be less than the current target. Each block has a hash of the previous block of the block chain.
The Bitcoins were easy to mine initially but now, as more and more Bitcoins are getting discovered, our processors don’t have enough speed to mine more Bitcoins.
Then came specialized machines which are dedicated to only one specific task i.e. mining. These are known as ASIC which is Application Specific Integrated Circuits.
These ASICs are kept in thermally regulated data centers where cost of electricity is also low.
Factors to be Kept in Mind Before Buying a Miner for Bitcoin Mining
There are many Bitcoin Miners available today in the market but you need to look at several factors such as hash rate, efficiency and price before making a choice.
- Electrical Efficiency: Well, an efficient miner will consume a lot of electricity but in return will give you worth the Bitcoins.
- Hash Rate: More are the hashes per second, more are the chances to mine out a Bitcoin.
- Price: Definitely, a good miner will cost more than the other ones as it has more chances of discovering new Bitcoins than the cheap ones.
Some of miners available on online shopping sites such as eBay are AntMiner (S5, S7, S9), Avalon 6, SP20 Jackson. AntMiner S7 and S9 are the most shopped miners today.
Best ASIC Bitcoin Mining Hardware Suggestions
One of the most popular and efficient of the AntMiner series. It has a hash rate of 4.73 Th/s with a power efficiency of 0.25 W/Gh. This 8.8 pounds rig has a manual available with it. Amazon price is $479.95. Average bitcoin earned per month is 0.1645.
The top performer of the Antminer series with a hash rate of 13.5 Th/s. The rig is 8.1 pounds with low power efficiency of 0.098 W/Gh. It has a guide available with it. It has the highest BTC earned per month i.e. 0.3603.
Its efficiency is more similar to AntMiner S7. Approximate Bitcoin earned per month is 0.1232. It’s a bit heavy (9.8 pounds). The advertised capacity is 3.5 Th/s and power efficiency is 0.29 W/Gh.
Exploring Mining Software
As we have discussed different types of mining hardware, now we move on to software used for bitcoin mining, which has the equal share of importance as the hardware has. The software acts as an interface between hardware and the block chains.
If you are mining individually, the mining software connects your miner to the block chain. Mining software also helps you to connect to the mining pool. But in case you are going for cloud mining, then no additional software is needed.
Importance of Mining Software
The mining software delivers the work done by miners (hardware) to the bitcoin network and also receives the work which is completed from the others miners.
The software also keeps a track of the miner statistics such as hash rate, speed, temperature and fan speed while monitoring the input and output of your miner.
Some of the most useful and top rated mining software are:
This software is an open source GPU/FPGA/ASIC miner with C as its coding language. The reason behind its popularity is that its functionality is based on original CPU miner, as used by Satoshi and serves several platforms such as Linux, Windows and OS X.
- fan speed
- remote interface capabilities
- self detection of new blocks
- multi GUI & CPU support
- binary loading of kernels
- BFGMiner:This software is based on CGMiner, or in other words it is a superset of it. It is designed specifically for FPGA and ASICs. The main features are:
- Integrated overclocking and fan control
- Vector support
- ADL device recording by PCI bus ID
- Crypt mining support for CPU and OpenCL (GPU)
It follows a straight and simple approach which is easy mining and High payouts. It is basically a pool mining software. Some of its features are:
- Good mining speed
- Long polling to reduce the stale work
- Compatible to OpenCL
Some other mining software are EASYMINER, BTCMiner, 50Miner, Bit Moose, RPC Miner, Phoenix miner, Ufasoft miner, Flash Player Bitcoin Miner, Remote Minor etc.
Choosing and Connecting to Bitcoin Mining Pool
Well, if you choose to mine solo then you may earn a Bitcoin but the duration will be in decades. Your own processor doesn’t have enough speed to mine fast. Here came the concept of pool mining.
Here you may earn less but the payouts are frequent. All the individuals pool their computer mining power to find a Bitcoin and get their share of payment according to the payment system followed by the pool.
Pool fees varies from pool to pool depending upon which model of payment distribution the pool is following and also determines which party (miner or the pool operator) is at high risk. If the pool operator is assuming higher risk then the fees is higher and vice versa.
Before getting attached with any pool it’s recommended to check the pooling payment system. The standard fee is generally 1%.
When the pool operator is assuming higher risk, it means the operator is going to pay you irrespective of whether you have mined the Bitcoin or not. It will give you its share depending on your PoW (proof of Work).
When the miners are assuming risk, this means that they will get paid only if they mine a Bitcoin else not.
So, in order to keep the power of pool hashing table stable, there are essentially two modes of payment.
- Propotional: Here the reward is given proportional to your contribution (hashing power) for that block.
- PPLNS (pay per last N shares): Here last N shares are taken into account and payment is made accordingly. Suppose a solo miner contributed for the blocks 1-5 but somehow there went a power failure at his end while working for block 6, he will still be paid.
Other payments Modes
- PPS: Pay per share
- CPPSRB: Capped per pay share with recent backpay.
- ESMPPS: Equalized share maximum pay per share.
- DGM: A double geometric Method which is a hybrid of geometric reward and PPLNS. Here the operator receives payment over short round but he distributes to miners over longer rounds.
- POT: pay on target
- RSMPPS: Recent shared maximum pay per share
Top Five Mining Pools
Based on the information from the Blockchain’s pool share chart, here are some of the best pools to be considered for mining.
The share of mining it holds is 15% (which is in fact the maximum) of all the blocks. It is maintained by BitMain and is Chinese based mining Pool.
It is also Chinese and also refereed as F2Pool. It mines about 12% of the blocks.
This is a private pool based in Georgia with three data centers. BitFury is currently mining 12% of the blocks and is also the largest manufacture of Bitcoin mining hardware.
It’s a Chinese pool with mining around 8% of the blocks.
This was the first mining pool to be established and is currently responsible for mining 8% of the Bitcoins.
Steps to Bitcoin Mining
As a solo miner, there are essentially four steps involved. Let’s start mining step by step.
STEP 1: Get a Bitcoin Wallet
It’s better to keep your Bitcoins local rather than trusting a cloud or web service. Bitcoin Wallet serves as your digital wallet.
When you download a Bitcoin wallet, such as from coinBase.com which is very easy to install and set up. Make sure you have a backed up all your data.
After installation, you are provided with a long alphanumeric number usually 26-35 letters, this serves as your address and all the transactions are done with this address.
STEP 2: Join a Pool
Don’t go for solo mining. Join a pool instead; you will get a fair payment though less, from the pool operator.
Try to get a pool with low fees and high payments. Get your share by submitting the proof of work.
STEP 3: Get a miner
Buy a good mining hardware, preferably ASIC miners. Miners also use the spare GPU cycles to handle the peer-to-peer processes.
STEP 4: Mind your own money
The more the Bitcoins are getting mined each day; the difficulty level is rising and becoming difficult to mine more Bitcoins. Users with good mining hardware such as Antmine S9, will earn more Bitcoins than a cheaper miner or a simple CPU.
Optimize Mining of the Bitcoin
So, you are now all set to mine the Bitcoins. But WAIT!!! You must be wondering why your output is less than other’s rig? Here is where Optimization comes to play.
Optimization means to get the most out of your miner rig efficiently. I will share some points which will help you to tweak your hardware. I am going to discuss basically graphics card optimization and computer optimization.
You need to go for memory overclocking and undervolting of your graphics card so as to attain significant increase in results.
You need to optimize your computer as well as OS to get high results in mining. You can change your power settings in BIOS, disabling the unused services. You can disable the sleep and hibernate options.
You can change the power settings so that computer turns on automatically and starts mining after a power outage. You can also disable the unused hardware components also such as Front USB ports & serial ports, FireWire, onboard audio etc.
Optimize Bitcoin Earning
Rakesh Kumar, Team lead of a research team in Illinois, has come up with a new theory which can increase the Bitcoin profit to 30%. He has termed his new hardware as Approximate which creates twice as many hashes per second as compared to a traditional CPU.
This mining hardware consists of a number of mining units which are responsible for generating a hash. So, if incase any error comes, it will not affecting other units. It records, measures and sorts the errors with less power consumption.
Ultimately increasing the Bitcoins generated per unit time.
The Final Words
Bitcoin has created much hype in the currency system not just only due to its decentralized nature but also uniting the international borders with a same currency unit with very less transaction fees. Pursue bitcoin mining as a hobby but not as a business.
But one thing which is to be taken care of is that Bitcoins are non-repudiable which means if they are gone, they are gone forever (just like an email). There is no returning back unless the recipient returns it back to you.