How to Mine Bitcoins? MyBitcoin User, Investor & Trader Knowledge Base

What Do You Need to Mine Bitcoins?

If you want to mine bitcoins, then you only need four basic tools:

• Bitcoin mining hardware (like a high-end gaming PC or ASIC)
• Bitcoin mining software (like BTCMiner or BFGMiner)
• A bitcoin pool
• A bitcoin wallet

Next, we’ll take a closer look at each of these requirements.

Bitcoin Mining Hardware

Bitcoin mining hardware has changed drastically over time. In the early days, bitcoin mining could be completed at home using an ordinary gaming PC. Today, you can still mine bitcoin with an ordinary gaming PC – although you’ll have much more success using specialized bitcoin mining hardware.

Another important distinction with the early days of bitcoin mining was CPU mining: you initially mined bitcoin using your CPU. Over time, we’ve moved to GPU-based mining. GPUs are much more powerful, but they also consume more power.

To improve power efficiency, miners started using Field Programmable Gate Arrays, or FPGA. Although these were highly efficient machines, they didn’t result in a huge increase in mining power over a conventional GPU-powered rig.

That’s when the bitcoin community created Application Specific Integrated Circuits, or ASICs. These are chips dedicated specifically to mining bitcoin. They’re not used for gaming. They’re not used for photo editing or video processing. They’re built to mine cryptocurrencies and generate the highest number of cryptographic hashes (the highest hashrate) possible. ASICs have led to a massive improvement in mining speeds and energy efficiency in bitcoin mining.

We’ll talk more about bitcoin mining hardware in our hardware section.

Bitcoin Mining Software

You’ll also need bitcoin mining software in order to start mining bitcoin.

Today, you can download a wide range of free bitcoin mining software for PC, Mac OS, and Linux. You can even download mining apps for your smartphones.

We’ll talk extensively about bitcoin mining software in our chapter on bitcoin mining software.

Bitcoin Mining Pools

In the early days of bitcoin mining, anyone with a decent gaming PC or high-powered rig could mine bitcoin on their own.

Today, that’s not the case. It would take you hundreds of years to mine 1 BTC on an ordinary PC. That’s why most hobbyist miners join a mining pool.

With a mining pool, you’re “pooling” the resources of multiple bitcoin miners together. By joining all of your computer resources together, you’re giving the entire pool a better chance of mining a single bitcoin block and receiving the block reward.

When the pool successfully mines a block and that block gets added to the chain, the block reward will be split among all members of the pool. Instead of one person receiving 12.5 BTC, for example, that 12.5 BTC might be split among 1,000 different people.

Different pools have different rules. Some pools allocate the block reward equally to all members. Most pools, however, distribute block rewards proportionally based on the hashpower you contributed to the pool. The more processing power you provided to the pool, the bigger proportion of the block reward you’ll receive.

To claim your bitcoins as part of the pool, you’ll need to provide the pool with your public address – your wallet address. You’ll be asked for this address when you sign up for the pool.

Bitcoin Mining Wallets

You don’t need a special wallet to mine bitcoin. Your wallet just stores the bitcoin you earn through mining activities.

We’ve already talked about bitcoin wallets extensively in this course. As long as you have access to a bitcoin wallet with a public address, you can start mining and earning bitcoins.

How to Start Mining

So you’ve got mining hardware, mining software, a mining wallet, and a mining pool. What now? Here’s the basic process you’ll use to start mining:

• Plug your mining rig – like your computer or specialized ASIC-powered rig – into a power source and turn it on
• Start the mining software
• Enter your pool, your username, and your password into the mining software
• Leave your rig running as long as you like; you’ll generate mining profits based on the power of your rig

This is a super simplified version of how bitcoin mining works. You can read entire books about bitcoin mining, how to optimize mining performance, and how to lower electricity costs. However, since this is guide is a basic overview of how cryptocurrency works, advanced mining tutorials lie outside the scope of this chapter.