Maybe you’re already a bitcoin user and you want to start mining bitcoin, or maybe you’re totally new to the bitcoin world. Either way, we’ve got you covered with our guide to how to mine bitcoin. It’s not a walk in the park, but it’s a doable process if you have the time and resources.
Bitcoin Basics
Bitcoin is a digital currency. To mine bitcoin, you don’t go into a mine in the ground – you use your computer. Mining bitcoin involves solving puzzles – but not Sudoku-style puzzles, puzzles that require a lot of computational power. It’s not a simple process.
Because bitcoin prices fluctuate, you can make money on bitcoin through arbitrage. Ideally you would acquire bitcoin and then sell them when the price is high, just like you would when trading stocks. If you don’t resell your bitcoin you’ll need to use them to pay for things, which can be tricky since the currency isn’t universally accepted. If you want to join the process of adding to the world’s share of bitcoin (and getting some for yourself) you can become a bitcoin miner.
So how do you mine? First off, mining on your own is a difficult and time-consuming process. You can set up the computational process to run itself, but then you have to maintain and power that process for what may turn into years. In other words, you might not reap rewards that equal or exceed the money you invest in mining.
If the power of the individual won’t do it, what’s the alternative? Joining with other individuals to mine bitcoin cooperatively. In one of the most common pooled mining methods, you’ll work on finding a block of coins and then you’ll get a share of that block once you’ve arrived at a solution. The bitcoin you earn will go in a bitcoin wallet that will keep your digital currency secure. There are several options for bitcoin wallets in mobile, desktop, hardware and web storage options.
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Bitcoin Mining with Others
When you’re getting started with bitcoin you can use a site like Coinbase that will walk you through the process of converting your dollars to bitcoin. Sending and receiving bitcoin through the site is free but exchanging bitcoin carries a 1% fee. The site has its own wallet built in. However, while a site like Coinbase will help you buy and spend bitcoin it can’t help you mine them. For that, you’ll have to join a mining pool.
There are several sites that help you find others to join in a bitcoin mining pool. Popular options include Slush Pool, AntPool, F2Pool, BTCCPool, p2pool and more. Different sites may use different payment methods, so read the terms of sites carefully before committing.
You’ll need to get a miner such as GUIMiner, CGMiner or DiabloMiner. Download the program of your choice, make an account and get a miner/worker. Run the program and select your pool. To join, enter the username and password of your miner. You can then click “start mining.” If you’re just using your computer to process your mining, this will go slowly.
Alternatively, you can buy hardware to add to your computational speed and keep up with the rest of the bitcoin mining world. This hardware can get expensive, but if you want to make money by mining bitcoin it’s pretty much required at this point. Your options for hardware include a Field Programmable Gate Array (FPGA) and ASIC Bitcoin Miners.
If you decide to buy hardware to enhance your mining speed you’ll have to weigh several factors. The first is the up-front cost of the hardware itself. The second is the likely cost to maintain that hardware (this is where reading online reviews can come in handy). The third is the cost of the power needed to run the hardware, and the fourth is the potential gain you can get from the hardware. That gain takes the form of more bitcoin mined more quickly. You can find mining profitability calculators online to help you estimate what you stand to gain.
Bottom Line
The more bitcoin blocks are found the harder it is to solve each subsequent block. Making money by mining bitcoin is not as easy as selling on Etsy or other side hustles. The current difficulty level is high enough that joining a pool and using hardware are pretty much requirements for success. If you don’t want to go to the trouble of buying and maintaining bitcoin mining hardware but you’re still interested in making money in the bitcoin economy you may want to look into trading bitcoin. Whether you choose to explore mining bitcoin or trading bitcoin it’s a good idea to start small and not invest your entire retirement savings in a bitcoin experiment. It’s also important to keep your bitcoin safe. There’s no FDIC insuring bitcoin, so if a hacker steals the bitcoin from your bitcoin wallet you’re out of luck. You’ll never get that currency back.
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