Mining? Is it reasonable?
Bitcoins are based on blocks. Blocks are data containing information about past transactions and contain a hard to solve mathematical problem. To add a block to the block-chain demands some serious processing power. As an incentive whoever solves this problem and sends the solution to the network (i.e. is able to produce a block) receives (at the time of writing) 25 Bitcoin as reward.
If somebody solves the operation before you do it, your work is lost and you receive no reward. Furthermore the difficulty of the problem is increased or decreased every 2016 correct solved blocks, depending on the total amount of calculation power available in the mining network. In addition, the reward per block is halved every 210.000 solved blocks. For that reason, also the number of existing coins is limited to 21 millions. Given the current progression in mining capability the last coin is conjectured to be mined between 2033 and 2140.
Summarizing: Who offers calculation power to the Bitcoin network is rewarded with coins. Hence, every day new Bitcoins are created from miners and new miners join the network every day. In order to keep the complexity of mining steep self-regulating algorithms have been included to Bitcoin to adjust to new processing power.
Therefore the work or mining becomes harder for each block.
Assuming you had decided decided to start mining in 2009 and never sold a mined coin prior to 2013, you should be rich by now.
If you want to you can start today, you can still make some money, but keep in mind: the golden mining era is past.
Let us give you more details about why that is: The amount of total existing Bitcoins is limited and the amount of Bitcoins that can be mined per successful solved block is also fixed. The performance when you are mining Bitcoin is measured in MH/s, meaning millions of hash operations executed per second by your PC. In 2009, a normal PC with a common CPU was able to produce hundreds of Bitcoins per day, basically because the network had low computing power and there were almost no transactions (A geek hobby). But with the success of Bitcoins, the rising of brokers and the increasing value in dollars per coin, more and more users discovered this fascinating world. Hence, mining became ever more unyielding. To counteract this trend CPUs were replaced by GPUs, which were replaced by Multi-GPU rigs and now ASICs (Application Specific Integrated Circuit), hardware specifically designed with only one purpose: mining Bitcoin.
For this reason, mining Bitcoins with a common CPU is useless today. Mining with a good AMD distinct GPU (AMD 78xx, AMD 79xx) is ok, but will not make you rich. Making money heavily depends on your local energy price, hardware costs, and (obviously) the exchange value of Bitcoin.
Using an NVIDIA card at the time of writing also seems to be useless, since there are no good GPGPU implementations
Get Your Automated Bitcoin Trading Robot at www.btcrobot.com
for mining for this manufacturer. To give you an impression about the current situation, at time of writing, an AMD 6970 is able to produce 0.0077 BTC per day, this is less than 0.8$ at an actual Bitcoin price of 100$.
We recommend to do the math before you start mining.
A Tip: Use a mining pool where you can share the work (and also the reward) based on the provided calculation power with other miners.
The links at the end of this chapter give you information for mining pool pages and Bitcoin itself. We suggest you make use of BTC Guild or Slush’s pool. They provide as a good starting point.
Links:
Here some comparisons and calculation links to give you an idea and help you to make your math.
[1] http://bitcoin.org/bitcoin.pdf
[2] Hardware comparison for GPGPU mining
http://mrlithium.blogspot.co.at/2013/02/bitcoin-mining-hardware-comparison-7850.html
[3] To give you an example of the power of special mining hardware in comparison to GPGPU
http://bitcoinexaminer.org/7-awesome-asic-bitcoin-miners/
[4] Calculation sheet to determine how much money your mining rig brings you
http://www.bitcoinx.com/profit/
[5] Bitcoin Mining pools
https://en.bitcoin.it/wiki/Comparison_of_mining_pools
Get Your Automated Bitcoin Trading Robot at www.btcrobot.com
Conclusion
If you want to start with Bitcoins and you don’t want to spend money on brokers, you can still mine coins. But this is pretty much to search for gold nuggets in a river or trying to find the needle in a haystack. Maybe you find something, maybe you waste your time. Our suggestion: if you want to make money with Bitcoins, don’t mine them, trade them!
What do I need to start?
The first thing that you should install is a so called Bitcoin wallet. Bitcoins are a decentralized currency. No bank account is needed. For that reason, a Bitcoin wallet is the counterpart to your real money wallet. You can store your Bitcoins in it, use it to send Bitcoins to other persons, and of course receive Bitcoins even if you are offline. If you lose your wallet, forget your password, or (heavens forbid) somebody steals it, then your contained Bitcoins are lost. Bitcoins are like real banknotes, they belong to the person that owns them. So keep your wallet secure, make regular backups and choose a secure password!
A wallet in itself is a very small piece of software for windows, linux, or your smart-phone. You can see the transactions in it, you can receive Bitcoins and send Bitcoins using it. There is nothing more, small, simple, easy to use.
Bitcoin.org is a good starting point if you need a wallet. You can find several different wallets there. We recommend the use of an open source version of a wallet, don’t use web-based wallets or versions where the source is not available. Remember: the web is dark and full of terrors (Yes, nerdling, this is a direct quote from GoT).
Get Your Automated Bitcoin Trading Robot at www.btcrobot.com
We suggest the original version of the wallet called bitcoin-qt. But also the mobile version works very well and you can have your coins always with you.
Bitcoin-qt (windows version)
Download the wallet from bitcoin.org first. After the installation, you will see the main page of the wallet. Now you have to wait. As explained, there is no central authority in the Bitcoin network. Check the validity of the transactions: No Bitcoin can be spent twice from a user. You cannot send or receive Bitcoins until this synchronization is done. Unfortunately this needs time. Actually you have to download around 8 GB of data containing the block-chains. If you have a limited available data rate, you can also order the block-chains via DVD.
After you start your wallet, you will see the following screen. As you can see, also my new installed wallet was out of sync and I had to wait several hours till the system was synchronized.
Get Your Automated Bitcoin Trading Robot at www.btcrobot.com
After that initial step is done, it is highly recommended to encrypt your wallet. Over “Settings-> Encrypt your wallet”, you are able to protect your wallet. For every transaction you will need to enter your secret password from now on. So please use a secure password and store it in a secure place. If you loose your password, also your Bitcoins are lost. There is no central authority that can reset your password, so be careful!
Bitcoins are sent and received using addresses. Addresses are unique, long, alphanumerical strings that represent the id of the person you want to send Bitcoins. If you’re not careful it is entirely possible that you send Bitcoins to the wrong person! Sending Bitcoins to non-existent addresses does not work. To protect your anonymity, a good wallet usually creates a new address for each transaction. If you’re not interested in that feature you can also opt to always use the same address. For example if you send Bitcoins to some broker.
We strongly advice you to change the address for every single transaction, since transactions are (as opposed to urban legend) not anonymous! In order to secure transactions, every single step in the transaction history is recorded. But since you can change your address for every transaction, you improve the protection of your anonymity even if all steps are logged.
Synchronization of your wallet allows you to send and receive Bitcoins. The fancy part of synchronization is that you don’t have to be online to receive Bitcoins. In fact, if you are offline and receive some coins, the transaction(s) corresponding to the coinds is stored in the global block-chain. Hence, when you finally come online and synchronize your wallet Bitcoins come trickling in.
Get Your Automated Bitcoin Trading Robot at www.btcrobot.com
Important to remember here is, Bitcoin transactions not instant are (Yoda-speak!). You can send Bitcoins to a friend, but in order to avoid fraud, the nodes in the network have to confirm your transaction. You need to have 6 confirmations in order to have a 100% confirmed transaction. Usually this needs around 10 minutes, but since this is a dynamic network, sometimes some more time is needed. From the first confirmation on, you are able to re-transfer received coins to another wallet.
So, now lets start. As a little welcome gift, go to freebitcoins [1] and get your first 0.02 BT for free!
Links:
[1] https://freebitcoins.appspot.com/
[2] If you need a more detailed description about the installation of bitcoin-qt, please have a look at https://en.bitcoin.it/wiki/Getting_started_installing_bitcoin-qt
[3] Also an important further reading is http://bitcoinplaza.blogspot.co.at/2013/02/how-to-backup-bitcoin-wallet-walletdat.html where you can find information about how to backup your wallet. Remember, if your wallet is lost, your Bitcoins are also lost and nobody can give it back to you.
Mobile Apps
You may want to carry your Bitcoins with you, to pay at a local restaurant for example. Or maybe you want to trade them with local friends or resellers. Then a mobile application (or App, as Hippsters call them) may be the right tool for you. You can send and receive coins via QR-code or use NFC. For more information about mobile apps, visit the following sites