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Bitcoin Mining 101

Bitcoin Mining 101

There are a few factors that affect the ability for one to mine bitcoins. It can seem like a rather confusing concept. It is. Good luck.

Bitcoin mining comes down to a few things: computer hardware required, electricity and mining pools.

To start off here are a few terms to know:

Bitcoin Algorithm/Difficulty: a math problem that when solved (mined) release a bitcoin block.

Bitcoin Block: What miners are trying to discover with their computers. Currently, one block is worth 25 BTC.

Hash Rate: the rate at which your computing power is outputting to solve the math problem, aka uncover a bitcoin block.

Mining Pool: a pool of people combining computer power to discover a block. When a block is discovered the pool members are rewarded.

Need capital to invest in mining hardware.

The cost of computer hardware is your initial investment when you want to start mining bitcoin.

The price of hardware is proportional to how much computing power and therefore hash rate you want to achieve. The price of hardware also is affected by the price of Bitcoin (keep that in mind).

More computing power = more hash rate

more hash rate = more bitcoins mined/time

more bitcoins mined/time = more money/time

Mining Hardware

ASIC BlockErupters miners at 336m/hashes each off of Amazon. Cost around 70-100 $.

If you want to make investment in hardware you can:

A. Buy a ton of these ASIC miners.

B. Buy a RedFury USB miner for 2.6g/hash or ASICMiner Blade for 10g/hash

C. Buy expensive supercomputer miners offered by companies like CoinTerra, Butterfly Labs, KncMiner for a very expensive hardware investment of upwards of 2,400$ to around 5,000$  for 60 g/hash.

Ultimately, you will benefit financially in proportional to how much you want to invest in computing power.

Need electricity to operate the stacks of hardware and keep them cool.

A big issue with bitcoin mining is Return on Investment. The major issue with the ROI of bitcoin mining is not only in the hardware itself, it is because you have to keep these computers running at all times and this leads to increases in energy bills. Often the increase in electricity cost often offsets any profit that one may get while mining bitcoins. However if you buy the hardware and the price of Bitcoin goes up, you can always sell back the hardware that appreciated and make a profit.

You could setup the rig in a state or country where you can get the best rate of USD/kWh. So instead of setting up your rig in california at 15 cents per kWh you can set up your rig in another state where it more around 10 cents. Or you can set up a rig internationally somewhere like Indonesia where electricity only costs three cents per kilowatt hour. Another way to reduce costs is by installing PV or solar thermal systems that can provide off-grid energy to your mining rig.

You also will need to have a fan or some type of cooling system on the mining hardware. This keeps the efficiency of the miners high and will make them last longer over time.

Set Up a Bitcoin Miner with a Raspberry Pi

Raspberry Pi + Raspian Software on SD Card + WiFi + cgminer + USB powered hubs + ASIC Miners

First things first you are going to need to buy the essentials to make a Raspberry Pi computer. This is a ARM computer board that operates on Linux. The following is hardware you can buy off Amazon and will need to make a Raspberry Pi Bitcoin Miner:

Setting up your Raspberry Pi is not too difficult. First you need to download Raspbian Operating System to your SD Card. For windows this can be done using win32diskimager, a program that can be downloaded to write images to SD cards. You will need to visit the RaspbianImages site and extract the image. Insert the SD card into your PC and write the image to the SD card.

You can buy the SD card with the software pre installed on it from above, either way will work fine.

Next plug in your keyboard and mouse, your Raspbian SD Card, your HDMI cord from the Raspberry Pi to your TV, and lastly plug in the micro USB power cord.

You will see your Raspberry Pi boot up and it will ask your for:

Login: Pi

Password: Raspberry

Then in the command line: startx

You should see the Raspberry Pi Desktop. You now have a functioning Raspberry Pi computer.

Next plug in your USB powered hub into the wall and into the Raspberry Pi.

You will then need to set up your Edimax EW-7811Un WiFi. Instructions on how to configure the dongle can be found here. Plug in the wifi dongle to your USB powered hub. You should see a blue light blinking meaning it is connected to the WiFi.

You can also use an Ethernet cord and connect it to the Pi.

After your WiFi/Internet is set up you are ready to set up your miner.

Software

Now you have to: Download cgminer and join a mining pool.

CGminer runs a command line mining software. Instructions on how to install and configure cgminer on raspberry pi can be found here.

Next you will need to join a Mining pool.

A mining pool is group of bitcoin miners that are all combining their computing power to solve the math problems and discover a block. When a block is discovered by your pool you are rewarded for your contribution. People join pools because it is more lucrative than mining on your own unless you have a TON of computing power.

I recommend joining Slush’s pool. You just have to setup an account by email.

After you have downloaded cgminer and configured it to your mining pool, plug in your ASIC Miner Block Erupters into your powered USB hub. You should see the idle green led lights on. Start the cgminer program and the idle green lights will go off which means they are now mining bitcoins.

If you have any questions, contact me by email dominicsteil@hotmail.com . I probably will able to troubleshoot what you’re having difficulty with.

Tips Appreciated: 1FiYresjQP7GV9EUxr9fudWm3Xz7WC2VMC

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Once again, Good Luck!

3 thoughts on “Bitcoin Mining 101 Leave a comment

  1. I found your post comments while searching Google. It is very relevant information. Great work. Regularly I do not make posts on blogs, but I have to say that this posting really forced me to do so. Really awesome post. Really fantastic and I will be coming back for more information at your site and revisit it! Bitcoin Mining .

    Like

  2. If we bypass the BitcoinXT crap and war then yes probably 2016 will be the year of bitcoin , if we don’t it may kill Bitcoin instead of making it mainstream , Halving block reward should give the price a boost aswell on July .
    But as I said the huge problem is on the BitcoinXT it makes people and make investors stay away from it and this could preventt us from going Mainstream .

    Like

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