So you’ve decided to try your hand at earning Bitcoin, the internet’s leading cryptocurrency. Use this easy to follow, step-by-step tutorial to get started. There are five steps to mining Bitcoin – choosing your mining software, getting a Bitcoin wallet, joining a Bitcoin mining pool, making purchases, and verifying Bitcoin transactions.
Read the first in this series, Bitcoin Basics: What is Bitcoin?.
Now let’s make some Bitcoin!
What is Bitcoin Mining?
Bitcoin mining is a software process where you earn Bitcoin. It’s called mining because it can be easily explained as mining for gold. Sometimes you come up with nothing, sometimes you come up with gold. The size, or amount, of Bitcoin, will vary.
You exchange processing power for the cryptocurrency. You use your computer to mine (or discover) Bitcoins. There are a limited number of Bitcoins that can be mined. At the time of writing this, there are a little over 4 million (out of a total of 21 million) Bitcoins left to mine.
The new Bitcoins you mine are generated into circulation using the proper software (more on that later). The mining software solves difficult math problems. Every time a problem is successfully solved, the miner is rewarded with new Bitcoins. This process also verifies transactions.
Step 1: Choose Bitcoin Mining Software
You have to run specific software to mine Bitcoins and verify transactions. There are several different Bitcoin mining software programs you can choose from. Each software offers its own set of features and works on different OS platforms. Some of the most notable Bitcoin mining software solutions are:
GUIMiner: GUIMiner is a GPU and CPU mining tool that allows users to solo and pool mining through a simple graphic interface. It’s good for both AMD and NVIDIA GPU options and works on Windows platforms.
CGMiner: CGMiner is an open source ASIC/FGPA cross-platform software, which means that it works on Linux, Windows, OSX, and other platforms. CGMiner is a command line software, which means it doesn’t have a graphics interface.
BFGMiner: BFGMiner is one of the most popular open source command-line software programs that enables you to mine Bitcoin on any platform. It features dynamic clocking, monitoring, and remote interface capabilities.
Step 2: Get a Bitcoin Wallet
You need a bitcoin wallet to store all of those coins that you manage to collect. A wallet has its own address which is only available to you. You are also able to receive payments to your wallet. Each Bitcoin Wallet has a public address that you can share with anyone who wants to send a payment to you.
Depending on your needs and plans, there are different types of wallets that you can use. If you want to keep your Bitcoins and wait for a good time to sell them there are web-based wallets such as BitcoinPaperWallet that you can use. Bitcoin Paper Wallet is a website that allows you to keep your profits safe in the form of “paper cash”.
If you want to regularly cash out or make payments, it’s best to use desktop software that keeps your Bitcoin funds stored on your computer. However, you should use this type of wallet in an offline-only computer, otherwise, you risk to lose money if someone hacks your software. Electrum is one of the most popular solutions as it’s compatible with virtually every desktop OS and Android.
Step 3: Join a Bitcoin Mining Pool or Go Solo
Working solo is the most profitable way to mine Bitcoins, but it takes some serious hardware resources. If you’re not ready to spend a few thousand on powerful mining hardware, you will need to join a mining pool. This is a mining method that allows multiple miners to join their processing power and generate blocks (earn Bitcoin) together. The profits are split according to contributed processing power.
In order to join a mining pool, you need to choose one, create a user profile, dedicate a worker, and add your Bitcoin Wallet’s public address so you can receive funds when the profits are split and paid.
Different pools use different approaches when it comes to mining and sharing the profits. The best thing to do is to get informed about all possible options and pick the one that suits your needs. You can find a full list of mining pools here.
If you want to go solo to earn more Bitcoin than you would in a mining pool you are going to need some serious hardware. You can find a full list of Bitcoin mining hardware here.
Step 4: Buying Products or Services with Bitcoins
So, all of that talk about Bitcoin and its value is fun and promising, but what can you actually buy with Bitcoin? The number of companies around the world accepting Bitcoin for products and services is growing every day. There are several ways you can use your Bitcoins to pay for goods and services.
Debit Cards: You can fund your debit card using the Bitcoins from your Wallet, the most flexible way of making payments in the real world, withdraw cash from ATMs, and make payments to another account. However, there are fees, and some services demand to convert your Bitcoins to a flat currency before making payments. This process can result in certain payments ending up more expensive, but that’s the price for comfort.
Gift Cards: You can use Bitcoin to buy gift cards from certain stores that you can give as a gift or just use yourself. The main benefit with gift cards is that most businesses offer discounts. Plus, gift cards always make a great gift for an unexpected occasion.
Online Shopping: Shopping online with your Bitcoins means you can buy directly and pay straight from your Bitcoin Wallet. Many online businesses offer some awesome discounts for Bitcoin payers. The only downside is that you are chained to the stores that accept Bitcoin, but that number is growing fast.
Step 5: Bitcoin Transaction Verification
Since Bitcoin is not on any physical address, it’s record is open to everyone, and it holds the same information for everyone. It’s completely transparent. So, if you want to send a Bitcoin payment to a friend, there are three pieces of information included in the transaction:
- Input: Your Bitcoin address.
- Amount: The number of Bitcoins you are transferring to your friend.
- Output: Your friend’s Bitcoin address.
This is the verification process your payment must go through. The other miners must verify the block that carries your Bitcoin transaction information.
Have fun mining Bitcoins!
Which software do you use? Do you go solo or are you a part of a mining pool? Are you saving your Bitcoins or spending them?
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