Bitcoin Basics: Determining If Bitcoin Mining Is Right For You

Continuing our Bitcoin Basics article, today we review Bitcoin Mining with an article contributed to DC Magnates by Ofir Beigel

Continuing our Bitcoin Basics article, today we review Bitcoin Mining with an article contributed to DC Magnates by Ofir Beigel from 99Bitcoins – an informational blog that helps you get stated with Bitcoin.

Looking to mine Bitcoins? There are some things to consider before you get started, especially if you want to maximize your earnings. That’s why we’re going to offer you a brief guide and also cover some key topics for Bitcoin mining.

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Step 1 – Make sure you’re profitable

Making money from Bitcoin mining isn’t as easy as it used to be because the algorithms that must be solved in order to create new coins have grown increasingly complex. Since the difficulty for mining Bitcoins adjust as more miners join it’s only going to get harder and harder. Here’s a graphical representation of the Bitcoin mining difficulty throughout the past years.

Because of this it’s important to check if you are expected to be profitable with mining BEFORE getting any expensive equipment. One way of figuring this out is by using a mining profitability calculator.  Although many of the variables are known when using such a calculator there are still some things you’ll need to guess. For example no one knows what will be the Bitocin exchange rate in a the future or how much the mining difficulty will grow.

Here’s a more detailed explanation about how to figure out if mining is profitable for you or not.

Step 2 – Select the right rig

Your home computer will almost certainly eat up too much electricity and take too long to mine new Bitcoins, at least if you want to mine at a profitable rate (in other words, don’t even try it). In order to make money you’re going to need a ‘state of the art’ mining rig. What’s considered ‘State of the art’? Circumstances can vary, of course, but a good rule of thumb is one that came to market within the last six months.  After six months, newer, more technological advanced rigs will cause older ones to become unprofitable and obsolete.

There are a lot of options when it comes to mining rigs, so make sure you take your time to do some research. I would avoid buying pre-ordered mining rigs as many companies fail to deliver on their promises of shipping dates and this can mess up your profitability assumptions.

Several companies will also allow you to host your mining rig at their facility thus cutting a bit on shipping cost and maintenance (these rigs get real loud and hot). Other things to take into account are the power consumption of the rig (needed for profitability calculations) and of course the computing power. Today’s standards are around 2TH/s for a decent rig.

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Step 3 – select a mining pool

Mining pools allow people to combine their computing power to mine coins, and miners receive their share of what they mined.  With so many miners, it is nearly impssible to be profitable when self mining.  When combining with a mining pool, it raises the chances that a member of the group will successfully mine new Bitcoins which are then distributed to the entire mining pool.

Joining a mining pool is a great way to mine Bitcoins, but make sure you consider the following questions when selecting a pool:

  • How stable is the pool?
  • What type of reward method do they use? Proportional/Pay Per Share/ Score based, etc?
  • What types of fees are charged?
  • How frequently are blocks discovered?
  • How easily can you withdraw funds? Any stipulations for doing so?

Here’s a chart showing the biggest mining pools available and their share in the Bitcoin network.

Step 4 – Get a mining client

Once you have a mining rig set up and have narrowed down your choices for pools to join, you need to find a Bitcoin Mining Client. This client will allow you to connect your Bitcoin miner and your computer together. Many Bitcoin mining pools have their own mining software programs, so keep that in mind.

If you’re on a Mac, consider MacMiner which seems to work well. If you’re on a Windows PC, BFGMiner and 50Miner are both very popular. There are some other options out there, here’s a list of most of them.

The Last Step Is The First Step: Getting Started

Once you have your rig set up, you’re linked to a mining pool, and the appropriate software is installed –  it’s time to get started! You’ll need to connect your rig and get everything configured. The process for doing so will vary by operating system, mining rig, and mining software. Here’s a short video on how everything looks once it’s hooked up:

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