BitCoin Mining 101

I don’t think I really took an interest in BitCoins until I heard about BitCoin mining, I was so intrigued by the concept behind mining BitCoins I immediately dove into research mode. This post is essentially the summation of my hours of research and calculations related to mining BitCoins. I would love to hear from anyone that has taken the leap and decided to mine Crypto-Currency. I would like to continually update this Post with real life profit/loss results for your BTC mining rig! Leave a comment or shoot me an E-mail and I will update this post with your stats 🙂
Happy mining!

 

Before we dive in, Here is a brief history of Bitcoin!

History of Bitcoin

 

Click to expand a section!

[learn_more caption=”What Is BitCoin Mining”]

The good folks @ bitcoinmining.com have put together a great video that gives first time miners a brief overview of BitCoin mining. It’s short and sweet and does a great job of covering the basics.

[/learn_more][learn_more caption=”The Math Behind It All”]

The Bitcoin mining landscape has changed dramatically over the last few years, it has evolved from simple CPU mining, to GPU, to FPGa and now ASIC hardware is the new king of the mining jungle. And for good reason, an Asic mining device was designed to do only 1 thing and do it very, very well. It’s sole purpose for being is to crack SHA256 hashing algorithms.

With the advent of ASIC technology, consumer grade hardware simply can no longer compete. Spending any less than $2,000.00 on ASIC mining equipment now would insure that you will never get a ROI. Using this awesome BTC calculator, I will calculate the expected ROI on 3 different systems.

[/learn_more][learn_more caption=”Entry level / Low end”] This is probably one of the most cost effective entry level BTC mining rigs I could find. In terms of both initial hardware cost and energy requirements. It is also scalable if you wish to purchase a larger powered USB hub or some of the newer, more powerful USB ASIC mining equipment.

Raspberry Pi – BitCoin Miner

x4 – USB BTC mining erupter (333mh/s each) =  ~$160.00(used on E-bay)
x1 – Raspberry Pi – Model B = $40.00
____________________________
~$200.00  for 1.3 GH/s Mining Machine

Let’s take a look at the calculations for such a machine….

BitCoin_MiningCalculator_LowKeep in mind that these calculations do not factor in power costs of the device.

x
So without factoring in Power or Difficulty changes… It would take you exactly 13.44 months to break even. Now if we factor in the average power usage of such a mining device, it will then take us ~14.2 Months to break even. There is a great blog post on a user that went through this project and he calculated that his mining machine will be obsolete in 10 months time and he will forever be out $44.00 out of his $213.00 initial investment!!

So without a steep jump in the value of BTC, it is unlikely that investing in special ASIC equipment at this price point will yield an ROI. It is also more difficult to re-purpose the ASIC mining device once BTC mining becomes UN-profitable, since out of all the cyrpto-currencies on the market – almost all of them are scrypt based(and ASIC doesn’t work with mining scrypto based hashing algorithms!) . So your ASIC mining device will be essentially worthless 🙁

You can use the great BitCoin Mining calculator @ mining.thegenesisblock.com/ to calculate the total cost & potential profit of your own setup!

[/learn_more][learn_more caption=”Enthusiast level / Mid-Range”]

Although this is still technically on the lower end of the spectrum, I still feel it’s within reach of anyone that is really interested in pursuing BTC mining on a serious level. While it still doesn’t turn a profit based on my own calculations below – It’s helpful in illustrating my point regarding profitability on mid-range ASIC mining devices.

ASICMiner Block Erupter Cube 38GH/s Miner $800.00 (New Amazon)

Let’s take a look at the long term projections for this Unit…

BitCoin_MiningCalculator_MIDKeep in mind that these calculations do not factor in power costs of the device.

 

Using the ROI Calculator @ mining.thegenesisblock.com/ , I’ve calculated the lifetime profitability of running this mining device. According to these estimations, this unit will become obsolete by April and I would lose ~ $124.00 after all is said and done.

BitCoin_MiningCalculator_MID_ROI

 

[/learn_more][learn_more caption=”Competitive level / High-End”]

This is one of the best machines on the market for BTC mining equipment! The upfront costs are huge… but it will also stay relevant the longest due to the huge amount of Horsepower this thing is packing!
(Also I should mention that calculations will be slightly skewed since this unit is still in pre-order status and doesn’t ship until Jan 2014.)

600 Gh/s Rack Mount BitCoin Miner – $4,680.00

Let’s take a look at the long term projections for this high end Unit…

BitCoin_MiningCalculator_HighEnd

Once more Using the ROI Calculator @ mining.thegenesisblock.com/ , I’ve calculated the lifetime profitability of running this mining device. As you can see from the screenshot below, these estimations are a lot more favorable than our Low/Mid range options. Resulting in a max profit of $8,510.00 in July 2014.

BitCoin_MiningCalculator_HighEnd_ROI

 

So if you are like me and were hoping to earn some easy cash with little to no initial investment… you are probably a bit disappointed by the reality of the numbers. But just because the BTC currency is out of your reach – doesn’t mean you can’t still get involved with Crypto-currency!

Coinwarz.com is an awesome place to start digging in and exploring all the different crypto-currencies on the market today. If you have been researching BTC a bit, you have probably heard other people mention LiteCoins. Since BitCoin mining is essentially limited to only a handful of people due to the high price of the high powered ASIC machines required to make a profit…LiteCoin ( along with several other Scrypt based crypto currencies) have seen a huge surge in popularity.

This increased interest in Litecoin is the result of 1 major factor – Since GPU mining Bitcoins is no longer profitable, all of the users that were once farming BTC have moved to LiteCoin mining! What makes LiteCoins so appealing to the average joe-schmoe miner guy, is that ASIC devices WILL NOT work to mine Scrypt based Crypto Currency like LiteCoins! LiteCoins is experiencing a kind of gold rush, where everyone is trying to get in on the ground floor and rack up as many LiteCoins as possible before the increased difficulty makes staying competitive financially out of reach.

If you are interested in mining LiteCoins, Check out this great Hardware Guide to help get you started! No matter what Crypto-Currency you are interested in, you were probably drawn to mining for one very simple reason – $$$$. Your best bet @ quickly and easily racking up the (virtual)cash is to start mining early in the currencies lifetime while the difficulty is simple. The trick here is to pick a currency that you feel will be successful one day, for me – My money is on QaurkCoin or PeerCoin.
[/learn_more]
[learn_more caption=”Your Bitcoin Wallet”]

Although I encourage you to look into alternative Crypto-Currencies if you are working on a limited budget – Every Crypto-Currency has their own “wallet” to store your virtual loot. For the sake of this guide, I will be covering the most popular currency – Bitcoins. Even if you do not plan on working with BitCoins, the below information regarding BitCoin wallets can be a great resource for your other mining endeavors.

Your BitCoin wallet is responsible for 3 important things:

  • Spending BitCoins
  • Receiving BitCoins
  • Storing BitCoins

Each BitCoin wallet can be identified by a unique string of letters & numbers – called your BitCoin wallet address. Each address is publicly visible if you know where to look, your only real security in regards to your sweet, sweet coinage is a strong password – So take care in creating a complex password.

[/learn_more][learn_more caption=”Choosing A BitCoin Wallet”] There are a number of different options available to you for storing your BitCoins and processing transactions. I was planning on creating a section that detailed some of the popular choices here, but if I’m being honest – I don’t think I could of done any better than the BitInnovate.com link below.

Here are 2 great resources to help you make your decision:


For the purposes of this guide, I will be covering how to Install & Use the MultiBit BitCoin wallet. If you are interested in a slightly easier alternative to MultiBit – I highly recommend https://blockchain.info/wallet.

[/learn_more][learn_more caption=”Installing & Configuring Your MultiBit Wallet”]

 

1.) You can download and install the MultiBit Wallet @ https://multibit.org/

2.) During the Install you will be prompted to educate yourself about backing up your BitCoin Wallet. Do yourself a favor and read up on how to protect your Bitcoins and Back them up!

BitCoin_MultiBit_Install_BackupYourWallet

3.) Finish the install and Open MultiBit (  C:\Program Files (x86)\MultiBit-0.5.1\MultiBit.exe )

4.) When you first open MultiBit, you should notice that MultiBit automatically creates a wallet for you in the default Location @: C:\%user%\appdata\roaming\multibit\.

I highly recommend that you create a new wallet in a location that makes sense to you. To do this simply browse to: File > New Wallet and select a save location for your new MB wallet files.

5.) Once you have created your first wallet, It is important that you password protect it! You need your password to spend your BitCoins, There is no way to recover your password if you lose it!

You can create a password by selecting your wallet and going to:

  • File > Add Password

BitCoin_MultiBit_AddPasswordThat’s it, You now have a functional BitCoin wallet at your disposal!

 

 

MultiBit Tips & Tricks

  • MultiBit has an awesome help section built into the file menu via: Help > Help Contents
  • Before you begin mining, make sure you are backing up your precious Bitcoins!
  • In the Top R-Hand corner of MultiBit, there is a live BitCoin exchange rate tracker.

 

[/learn_more][learn_more caption=”Backing up Your MultiBit Wallet”]

There are essentially 2 different ways to backup your MB wallet. You can backup BTC wallet by either exporting the private key or simply doing a file level backup of your wallets location! I’ll explain each in more detail…

 

Exporting Your Wallets Private Key
You can export your private keys from a MultiBit wallet by browsing to:
Tools > Export Private Keys

In the event that your MultiBit wallet was comprimised, you can restore it by doing the following:

  1. Create a new empty wallet in MultiBit.
  2. Import your private key file using:
    Tools > Import Private Keys
  3. MultiBit then adds the private keys from the file into the new wallet and replays the blockchain to get the transactions.

 

Backing Up Your Wallet Data Files

As I mentioned earlier, MultiBit automatically creates a wallet file for you and places the data files @ C:\%user%\appdata\roaming\multibit\. Essentially all we are looking to do is take a file level backup of our MultiBit Wallet data files.

For Example:
I created my first MB wallet @ C:\BC_Wallets,with the name of “MyFirstBCW“. So all i need to do is backup this folder location at regular interfals to a safe location (like a NAS/External HD).
BitCoin_MultiBit_BackupWalletFiles

 

[/learn_more][learn_more caption=”Mining For Science! (And Profit?)”]

When you first start looking into BitCoin Mining, it’s easy to become overwhelmed by the wealth of information and options available to you. My aim here is to look at some of the different software available to you for mining and take you through setting up your first “mining pool”.  Once we have walked through setting up a Mining Pool account, I’m finally going to cover how to fire up some mining software and start earning some BitCoins 😀

[/learn_more][learn_more caption=”Signing Up With A Mining Pool”] Currently Pooled Mining for BitCoins is really the only way you are going to get any BitCoins – ever. While it is technically possible for you “Solo Mine”, and the payout is much bigger – You could go years running mining software and sucking down power and never get a single BitCoin. With Pools – Everyone contributes to the cause and receives a portion of the BTC payout based on your computers contribution.

Although there are several different Mining Pools you can join, For the purposes of this guide – I will be detailing how to setup an account with one of the more popular pools – Slush’s Pool.

1.) Browse to:  https://mining.bitcoin.cz/

2.) Click the Sign Up button to start the account creation process, It is a fairly straight forward process to setup an account. You will be prompted check your e-mail address when you are done to complete your account activation.

3.) After activating your account, and browsing to your Profile/My Account Page – You should be greeted by the below screen.

BitCoin_Mining_SlushsPoolThe Important information here, has been highlighted in Red.

 Think of each “Worker” as a PC that you have running mining software. So if you only have one PC mining rig, there is no need to setup additional workers. Make note of your Worker Login / Password on this screen as we will be using it in the next step.

[/learn_more][learn_more caption=”Lets Start Mining!”]

 

As with the mining pools, there are nearly a dozen different choices on what software to use to mine BitCoins. There are a number of different factors that can effect how many BitCoins you are able to mine(or what your MH/s rate is), For example: Cuda Miner typically yields the best results if you are using a Nvidia GPU. With so many variations in hardware & mining software – I encourage you to experiment a bit and try a few different mining programs to see what yields your best MH/s rate!

I’ve Chosen GUIMiner for Windows to demonstrate just how easy getting started can be, however I encourage you to read up on some of the alternatives once you are comfortable with the basics. Trying different mining software or overclocking your hardware can enable you to increase your returns!

Mining With GUI-Miner

 

1.) Download the latest version of GUI Miner @ http://guiminer.org/

2.) Running the GuiMiner .exe will begin the extraction process into a folder called “guiminer”.

3.) In the resulting guiminer folder, Find and run Guiminer.exe.

4.) You will be greeted by the following screen, which will prompt you for 3 key pieces of information:

  1. Your Worker Username
  2. Your Worker Password
  3. Your Pool Name/Server

BitCoin_GUI_Miner

 

5.) Once you have entered your information you simply have to hit the “Start Mining” button to begin! You can keep track of your returns via your Slush’s Pool profile page, and GUI-Miner also displays your current has rate.(boxed in red above).

 

If you have done a few calculations regarding hash rates/returns – You probably know that 3.5 MH/s is a pretty miserable hash  rate.With such a hash rate is certain that I will pay more to keep this running, than I will ever make in BitCoins…. In fact – I had this program running all weekend and didn’t make anything!

Remember that you can refine this process and improve your returns by trying different software. Or if you are a bit of a risk taker, you can invest in some of the alternative Crypto-Currencies. BitCoin Mining is highly competitive, and you may never see a profit unless you are ready to invest some serious cash. So remember to have fun and keep a close eye on the AltCoin market.

[/learn_more][learn_more caption=”Mining AltCoins”]

 

I just wanted to cover AltCoins briefly before wrapping this post up. Below is a running list of some of the best AltCoin mining guides I could find on the web.

If you would like to share/recommend a guide here, please feel free to leave a comment with link in the comments section below.

[/learn_more]

 

Whew’… That was a long post! Hopefully I was able to help you understand BitCoin mining a bit more in its current state. As always if there is something you would like to see covered in more detail here, Let me know in the comments below and I’ll make sure to add it here (or in a new post).

Happy Mining~

 

Update – 12/26/13:
I just ordered a r9 280x mining card to start mining altcoins! Since this is the most significant investment in this Blog (and crypto-currency for that matter) to date, I plan on covering the experience extensively! I know I’m a late comer to the mining game – but I just had to see how the numbers pan out for myself. And If I’m being honest it was a perfect excuse to buy some new hardware for my gaming rig:D If you are interested in my journey, make sure to stay tuned for future posts regarding my profit/loss  mining experience.

 

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