So, you think mining Bitcoin would be a great way to create a stake in the coin? It’s certainly paid off for many others over the years. There are a few different ways to go about mining Bitcoin, but the one you have the most control over is to create your own Bitcoin mining rig. If you have the technical know-how or are willing to learn you can read on to get a basic idea of what it takes to begin mining Bitcoin on your own hardware rig.
How Bitcoin Mining Works
Before you get started in your new career as a Bitcoin miner it will be useful to understand what Bitcoin mining really is. In a nutshell, Bitcoin mining is the use of specialized computer hardware to solve complex cryptographic algorithm problems based on the SHA-256 double round hash verification process. The reason for doing this is to validate Bitcoin transactions and to help secure the public ledger, while also maintaining decentralization. Your incentive for this costly and time-consuming process is Bitcoins.
The Bitcoin network and related tokens were created to be intentionally resource intensive. In return for providing the necessary resources to secure the network and validate transactions each miner is compensated with Bitcoins. This compensation comes in the form of new Bitcoins when a new block is discovered, and also comes in the form of transaction fees for validating Bitcoin transactions on the blockchain. In general, the more computing power (called hashing power) that you bring to the network, the greater the rewards you’ll receive.
Below are the four basic steps required to begin as a Bitcoin Miner.
Step 1 – Get Bitcoin Mining Hardware
Unless you’re planning on cloud mining you’ll need some good computer hardware to mine Bitcoins. In the past it was possible to mine on any desktop or laptop computer, but the increased difficulty and competition of Bitcoin mining these days requires specialized hardware that was developed specifically for mining Bitcoins. These custom Bitcoin ASIC (application specific integrated circuit) chips will give performance that is as much as 100 times better than older systems, and they are considered necessary if you expect to make any money from your Bitcoin mining efforts.
Bitcoin Mining Hardware
There are currently two major Bitcoin ASIC hardware manufacturers that will give you the best price per hashing power and electrical efficiency. Those are Bitmain and Avalon.
Bitmain – The Bitmain AntMiner series is considered to be the most cost-effective hardware for mining Bitcoin. The AntMiner S9 is currently considered to be the world’s best Bitcoin mining hardware. With a price tag of $1,415 is isn’t cheap by any means, but you have to pay to get the best. And if Bitcoin keeps climbing at the rate we’ve seen in 2017 the price tag is actually pretty darn inexpensive as your Bitcoin holdings will continue to grow in value. And when you’re ready to expand into other coins the AntMiner L3+ is the world’s most powerful Litecoin mining rig, and the AntMiner D3 is one of the world’s most powerful Dash miners.
Canaan Creative – Canaan was the first to create the ASIC mining chip for Bitcoin, and while their Avalon 721 offering is still popular, it isn’t nearly as powerful or cost effective when compared with the AntMiner. Plus, you are unable to buy directly from Canaan unless you are able to meet their 60 unit minimum order quantity. This means you’ll be paying a hefty markup on your hardware purchase, making it even less cost-effective. If you’re serious about mining I suggest you stick with the AntMiner, or consider just going the cloud mining route.
Step 2 – Download Free Bitcoin Mining Software
Once you have your mining rig in hand (and that could take some time, with the AntMiner S9 now being quoted for deliveries 8-9 weeks out), you’ll need software to connect your hardware to a mining pool. There are many free solutions for this, with two of the most popular being CGMiner and BFGMiner. However, both of these are command line programs, and if you aren’t technically inclined you may want a different solution.
For those who prefer an easier to use GUI, EasyMiner is a point and click solution that works for Windows, Linux and Android operating systems. EasyMiner will auto configure your Bitcoin miners and provides performance graphs to for easy visualization of your Bitcoin mining activity.
Step 3 – Join a Bitcoin Mining Pool
Now that you have your rig setup and software installed to control and monitor your mining process you have another decision to make. Will you go it alone, or will you combine resources by joining a mining pool?
I recommend joining a mining pool. It is already quite difficult to discover a new block when mining, and the difficulty will only increase. By pooling your resources with others in a mining pool you increase the likelihood of solving a new block and receiving your reward of Bitcoins. Of course this also means sharing the reward with the others in your mining pool, but the tradeoff is a good one when the alternative means you simply may not have enough hashing power on your own to solve a block and get a Bitcoin reward.
There are many different mining pools available to join, and your decision will be based on your needs from the mining pool. Here’s an old, but still valid and useful discussion of the features of many different mining pools. Bitcointalk Forum I recommend you give it a look before making a decision.
If your biggest consideration is decentralization, many people recommend you join p2pool. P2pool has the benefit of helping secure Bitcoin against double-spending and 51% attacks. P2Pool’s initial setup requires a little more effort but provides equivalent payouts with a higher variance and no need for trust in a pool operator.
In any case, you certainly want a pool that is currently fully validating blocks with the latest version of Bitcoin Core. Your best options here are as follows (note that Slush Pool is the oldest mining pool and currently the largest mining pool in the world – which is not necessarily a good thing for decentralization).
Step 4 – Set Up A Bitcoin Wallet
If you don’t already have a Bitcoin wallet then getting one will be your next and final step. You’ll need a Bitcoin wallet to transfer the Bitcoin you mine. There are many options available for Bitcoin wallets, from mobile wallets, to desktop wallets, to web-based wallets, to hardware wallets (recommended for large quantities of Bitcoin).
You will also need to be able to sell your Bitcoins. For this we recommend two options and you can read more detailed reviews about each, including their pros and cons: