Easy to Follow guide on learning how to do Bitcoin Mining and Altcoin Mining.
The reality of bitcoin mining in todays market is very expensive to do and/or maybe beyond the average person to do it.
Understand that most bitcoin users don't mine, and will not ever mine for bitcoins.
To them bitcoins are a currency to be used just like another other form of money.
That being said - continue reading at your own risk and may the luck of Satoshi Nakamoto be with you!
To mine Bitcoin is exciting and dangerous, to mine Altcoins is fun and not as dangerous, but still scary at times!
Bitcoin mining is a business that has become very competitive and expensive to get involved in.
Hard Truth - About bitcoin mining.
Mining for Fun - a Hobby and don't care if you make a profit or just make a little profit.
Mining for Profit - if you can do it very efficiently with a large investment to chase after a profit.
Speculative Mining - using DCM and inexpensive miners - mining beta coins and alt coins in the hope to grab a bunch before everyone else realize that they have value.
Mining - Processing
Mining is a distributed peer to peer network that is used to confirm waiting transactions by including them in the block chain. It enforces a chronological order in the block chain, protects the neutrality of the network, and allows different computers to agree on the state of the system. To be confirmed, transactions must be packed in a block that fits very strict cryptographic rules that will be verified by the network. These rules prevent previous blocks from being modified because doing so would invalidate all following blocks. Mining also creates the equivalent of a competitive lottery that prevents any individual from easily adding new blocks consecutively in the block chain. This way, no individuals can control what is included in the block chain or replace parts of the block chain to roll back their own spends.
As miners process or solve the transactions they get awarded for doing so. The more you process (mining) sucessfully the more you get paid.
Down side of mining today - the more people processing (mining) can cause the equation to become harder to finish for each block. The harder the equation becomes the harder the network difficulty becomes called "Current Difficulty". Which means it takes longer for a round to complete the block. This leads to an increase to the cost of electricty needed and faster equipment to offset the longer and longer times it takes to finish a block. Which slows the process down, increases the need for better and better equipment and a great more electricty to run the faster machines. This results in a great cost of ownership or great investment to return on earning bitcoins. The increase in network difficulty, longer period to earn a bitcoin, combined with the greater cost of ownership creates less ROI (return on investment) thus makes it it not being affordable for most people to do it and make a profit.
Some new coins such as Darkcoin - use X11 - which allows for CPU / GPU rigs to get a speed bonus and lower level of difficult to reduce the costs for hobbiest and small miners so they have a chance to still get coins bits.
New Tech: (DCM) is a digital hardware miner that is programmable, uses less electricity, and puts your ROI back into reasonable terms - will be avaialbe in mid 2014. It will adjust is programming to meet the needs of new coin standards, be reasonably prices, and use less electricity compared to other miners.
Bitcoin Mining Hardware
GPU's: Soon it was discovered that high end graphics cards were much more efficient at bitcoin mining and the landscape changed. CPU bitcoin mining gave way to the GPU (Graphical Processing Unit). The massively parallel nature of some GPUs allowed for a 50x to 100x increase in bitcoin mining power while using far less power per unit of work. While any modern GPU can be used to mine, the AMD line of GPU architecture turned out to be far superior to the nVidia architecture for mining bitcoins and the ATI Radeon HD 5870 turned out to be the most cost effective choice at the time.
FPGA's: As with the CPU to GPU transition, the bitcoin mining world progressed up the technology food chain to the Field Programmable Gate Array. With the successful launch of the Butterfly Labs FPGA 'Single', the bitcoin mining hardware landscape gave way to specially manufactured hardware dedicated to mining bitcoins. While the FPGAs didn't enjoy a 50x - 100x increase in mining speed as was seen with the transition from CPUs to GPUs, they provided a benefit through power efficiency and ease of use. A typical 600 MH/s graphics card consumed upwards of 400w of power, whereas a typical FPGA mining device would provide a hashrate of 826 MH/s at 80w of power. That 5x improvement allowed the first large bitcoin mining farms to be constructed at an operational profit. The bitcoin mining industry was born.
ASIC's: The bitcoin mining world is now solidly in the Application Specific Integrated Circuit (ASIC) era. An ASIC is a chip designed specifically to do one thing and one thing only. Unlike FPGA's, an ASIC cannot be repurposed to perform other tasks. An ASIC designed to mine bitcoins can only mine bitcoins and will only ever mine bitcoins. The inflexibility of an ASIC is offset by the fact that it offers a 100x increase in hashing power while reducing power consumption compared to all the previous technologies.
For example, a good ASIC bitcoin miner provides 600 GH/s (1 Gigahash is 1000 Megahash. 1 GH/s = 1000 MH/s) while consuming 350w of power. Compared to the GPU era, this is an increase in hashrate and power savings of nearly 300x.
Unlike all the previous generations of hardware preceding ASIC, ASIC was considered the "end of the line" when it comes to disruptive technology. CPUs were replaced by GPUs which were in turn replaced by FPGAs which were replaced by ASICs. There is nothing to replace ASICs now or even in the immediate future. There will be stepwise refinement of the ASIC products and increases in efficiency, but nothing will offer the 50x - 100x increase in hashing power or 7x reduction in power usage that moves from previous technologies offered. This makes power consumption on an ASIC device the single most important factor of any ASIC product, as the expected useful lifetime of an ASIC mining device is longer than the entire history of bitcoin mining. It is conceivable that an ASIC device purchased today would still be mining in two years if the device is power efficient enough and the cost of electricity does not exceed it's output. Mining profitability is also dictated by the exchange rate, but under all circumstances the more power effecient the mining device, the more profitable it is.
DCM: Digital Cloud Miner - near silent digital miner that is programable, cost effective, and hosted in large data centers.
We were promised from GAW the first large scale offerings in DCM mining: The Hashlet: Never Obsolete, Instant Activation, 0% Pool fees, and the more you own the cheaper your cost in hosting fees become. What most of us got from being initial investors was very broke. You can read more on this article: Where is my Hashlet?
- Proportional - When a block is found, the reward is distributed among all workers proportionally to how many shares each of them has found.
- PPLNS - Pay Per Last N Shares. Similar to proportional, but instead of looking at the number of shares in the round, instead looks at the last N shares, regardless of round boundaries.
- PPS - Pay Per Share. Each submitted share is worth a certain amount of Anoncoins. It is risky for pool operators, hence the fee is highest.
- RBPPS - Round-Based Pay Per Share. Like PPS, but payouts are delayed till a block is found and confirmed by the network. If a found block gets orphaned, earnings relative to it are not paid.
- SMPPS - Shared Maximum Pay Per Share. Like PPS, but never pays more than the pool earns.
- RSMPPS - Recent Shared Maximum Pay Per Share. Like SMPPS, but aims to prioritize the most recent miners.
Hash rate denominations
- 1 kH/s is 1,000 (one thousand) hashes per second
- 1 MH/s is 1,000,000 (one million) hashes per second.
- 1 GH/s is 1,000,000,000 (one billion) hashes per second.
- 1 TH/s is 1,000,000,000,000 (one trillion) hashes per second.
- 1 PH/s is 1,000,000,000,000,000 (one quadrillion) hashes per second.
- 1 MH/s = 1,000 kH/s
- 1 GH/s = 1,000 MH/s = 1,000,000 kH/s
- 1 TH/s = 1,000 GH/s = 1,000,000 MH/s = 1,000,000,000 kH/s