So, you want to learn how to mine Bitcoin, right? Well, that’s good because you’ve found the perfect place to start!
In the following guide, you’ll learn everything you need to know about Bitcoin mining. Of course, if you want to do it, I’m going to guess that you already know the very basics about the amazing disruptive technological and financial breakthrough that is Bitcoin!
If you’ve ever wondered where Bitcoins come from, how transactions are kept secure and consistent on the Bitcoin network, or how long does it take to mine a Bitcoin, this guide should be of great help to you.
So, grab your shovel and your head torch, and let’s go mining! Just kidding. I’m sure you know we’re not mining, right?
Table of Contents
- 1 A Short Explanation of Bitcoin Mining
- 2 The Three Ways
- 3 How to Mine Bitcoin in a Pool: Tutorial
- 4 Closing Thoughts
A Short Explanation of Bitcoin Mining
Before I get started teaching you how to mine Bitcoin, I should first offer a brief explanation of what we mean when we talk about Bitcoin mining.
As you most likely already know, Bitcoin is a blockchain-based cryptocurrency. It essentially works similar to a bank’s ledger (record of transactions). However, banks need you to trust them. Bitcoin is different. You only need to trust the code that created the network and its rules. It’s no coincidence that Bitcoin was created just after the global financial crisis of 2008. It’s been designed to be trust-less money!
But wait a minute, if you don’t need to trust a bank, how do you know that people won’t cheat the network? How do you know that every Bitcoin can only be spent once?
The network is secured by specialized computer units called miners that are distributed across a large number of unique entities. When you submit a transaction to the Bitcoin blockchain, these miners need to check that you have the necessary Bitcoin to send it and that various other rules are followed.
Transactions are grouped into blocks and then a string of characters must be guessed by the miners on the network. These characters are known as the “hash” of the block. Each block contains the hash of the previous block, as well as a new hash that needs to be guessed. Once correctly guessed, the miner can add the block to the chain. This guessing process is called “proof-of-work”. It’s the single most important security feature that you need to know to know how to mine Bitcoin.
By including the hash of the previous block, the other miners on the network can verify that those transactions contained in a block did come after those in the blocks that went before it. This collection of blocks in the sequence is the blockchain. Easy, right?
Block Rewards and Miner Fees
Miners unlock new Bitcoin when they add a block to the blockchain. They also get the reward of the fees that users include in their transactions. This makes it worthwhile to spend money on the electricity and computer systems needed to mine. When each Bitcoin is worth thousands of dollars, it’s a very strong incentive indeed!
The Three Ways
Ok, now that you know exactly why you would want to mine Bitcoin, let’s get onto the bit I’m sure you all came here for – learning how to mine Bitcoin! There are three ways to start mining Bitcoin:
|Using cloud mining services|
(not recommended for anyone!)
I’ll look at these in a bit more detail and then I’ll get onto exactly how to mine Bitcoins!
Bitcoin mining as part of a larger pool of miners is the easiest, fastest, and most reliable way to make sure your Bitcoin mining operation is profitable. You join forces with other miners to share the rewards.
By signing up with a pool, you (and everyone else in the pool) are agreeing to split any Bitcoin you are rewarded with the other pool members. This means that you will receive small payments regularly.
However, not all pools are the same. There are plenty of things you need to consider when choosing a pool. They are:
- The size of the pool.
- The minimum payments.
- The fees charged by the pool.
Size of the Pool
The size of the pool is an important thing to think about when you’re mining as part of a pool because as more people mine in the pool, the chances of being rewarded increase. However, since the rewards will be split between more users, they will also be smaller!
Biggest Mining Pools | Source: blockchain
Joining large cryptocurrency mining pools is usually a comfortable option for beginners how to mine Bitcoin. This is because they will be getting many payments and won’t be spending lots on electricity waiting for the next one fraction of a Bitcoin to be rewarded to them.
The Minimum Payment
Another important thing to look at is the minimum payment that the pool will let you withdraw. By minimum payment, I mean the smallest amount of Bitcoin that the pool will let you take out. If you’re very new to cryptocurrency mining, you’ll probably want to join a pool with as low a minimum payment as possible. This will mean that you can be sure that it all works as it should do in a shorter period.
You don’t want to be using lots of expensive electricity amassing a few hundred dollars’ worth of Bitcoin only to find that the pool disappears, or something very bad happens in cryptocurrency news to make Bitcoin’s price suddenly drop!
Every pool charges a fee for organizing it all for you. The fee is usually a percentage of your profits. It will always be taken from the Bitcoin you mine automatically, so you don’t need to worry about paying it yourself!
Of course, we don’t need to tell you that the lower the fee you pay, the better for your profitability. That’s just obvious!
Typical fees are between 1% and around 3%. Pools with 0% mining fees do exist too. However, their reliability is yet to be seen. Unless you know a person who you trust that recommends a free mining pool, you’re much better going with one that has built a reputation for itself.
Running a pool is expensive. There are lots of computer systems and data center space that need to be paid for. It’s a full-time job for a few members of staff. Fees of around 1% are fair. However, you should probably avoid pools with fees of above 3%.
When talking about how to mine Bitcoin, mining alone is possible. It probably seems like the best idea. Surely you shouldn’t have to share your mining rewards with thousands of other people? Also, paying 1% on everything you make could end up expensive if you plan to mine for a long time.
Well, you’re right. Sort of.
Solo Bitcoin mining does mean that you don’t have to share your profits with a huge group of other people. However, it also means that you don’t get to share the profits of the thousands of other miners either. You only get paid out if you’re the miner who solves the hash. This means you’re not only competing with every other solo miner on the planet, but you’re also competing with every pool too. Even if you have more computing power than every single miner in every pool, do you have more than the entire pool combined? Probably (definitely) not!
That said, if you are a multi-millionaire, you could set up a profitable solo mining operation. You’d need to buy hundreds (if not thousands) of ASIC (application-specific circuit chips). For the very best mining chips, you will be looking at spending around $1,000 to $1,500.
Problems for Solo Bitcoin Miners
To run hundreds of computer chips will take a whole lot of electricity. The best possible way how to mine Bitcoin now is with the help of the DragonMint T1 miner. This runs at 1,600W. Multiply this by 100, for example, and you’re looking at a giant power bill every month!
To make matters worse, running hundreds of computer chips gets hot. Think about using a laptop for a few hours on your knee. They can get pretty warm, right? The average laptop runs at around 60W. That’s about 26 times less power than a single DragonMint unit. Now, imagine 100 of these bad boys running at once in a small room. You’re going to need some serious ventilation! That means more power consumption!
One of the concerns that will occur on your way how to mine Bitcoin is the noise. With the constant buzzing of hundreds of computer components, plus industrial-scale cooling facilities running 24 hours a day, a professional scale solo mining operation is going to be hellishly loud!
When you look at where most solo miners have decided to set up their operations, you’ll see a pattern emerging. They like cool climates (less ventilation required), cheap electricity (the cost of power eats into the profits less), and remote, rural locations (there’s space for sizeable operations away from people who might complain about the noise). The top Bitcoin mining locations today are Iceland, rural Canada, and Russia.
You might ask why someone would bother spending the huge sums of money on expensive mining equipment to rent it out to someone else. The reason is simple. They want to guarantee profits on their investment and not have these affected by swings in the price of Bitcoin.
The concept seems strange, but some people choose how to mine Bitcoin in this way. Let’s look at some of the advantages and disadvantages of cloud mining.
Advantages of Cloud Mining
✓ You’re not responsible for the equipment. If something breaks, you often don’t need to replace it or repair it. (However, always be careful to read the small print in a cloud mining contract. The company might require you to pay for damage done to their equipment!)
✓ Besides, you can make money by Bitcoin mining without spending thousands, or millions on mining equipment. This also means you don’t need to deal with the heat or the noise in your own home or other potential locations.
✓ The final advantage is that you don’t need to know anything about cryptocurrency mining. If you want to cloud mine, you probably don’t need this guide on how to mine Bitcoin at all!
Disadvantages of Cloud Mining
✗ You pay money upfront. If the price of Bitcoin drops considerably, you might be stuck in a contract and mining at a loss until the price increases again (if it ever does). You take all the risk as the cloud mining operator is guaranteed a profit.
✗ You can’t upgrade or change either the mining software or hardware used by the cloud mining provider.
✗ Cloud mining companies are targets for hackers. In July of 2017, Genesis Mining was hacked. Bitcoin was transferred from the company’s hot wallet to an external wallet.
Personal opinion: If you want to get hold of some cryptocurrency but don’t want to invest in expensive mining hardware, just buy some Bitcoin with the money you would have spent on a cloud mining contract. That way, if the market takes a dramatic downturn, you can sell your position. You won’t be stuck in a mining contract that is becoming more and more worthless by the day.
How to Mine Bitcoin in a Pool: Tutorial
So, you probably want to start mining Bitcoin already? There are a few things that you must have before you begin:
- At least one ASIC Bitcoin mining rig.
- A mining application.
- A digital wallet to store the Bitcoin you make.
- Ventilation equipment – fans, ducting (only for larger operations).
- Membership at a pool.
- Power Splitters.
- Power supply units (the wattage of your ASIC will determine how many and of what power you need).
- Ethernet cable.
- Internet connection.
- Computer or mobile device capable of browsing the internet.
Setting up the Gear
The specific setup options will vary depending on the model of ASIC miner you are using. The manufacturer should detail exactly how to do this in their user manual or on their website. The following guide is specific on how to mine Bitcoin with the Antminer S9 unit on the Antpool. However, much of it will be useful no matter what ASIC miner you decide to use.
- Find the power draw of your ASIC. This should be clearly stated in the manual under specifications. The S9 uses 1,275 Watts.
- Match your power supply units to the power draw. Two 110v PSUs of 1,000W and 650W will be sufficient for most single miner operations.
- Connect the power supply units to the Antminer unit using the relevant connections.
- Once connected to the power supply, insert ethernet cable and plug it into your internet’s router.
- Make sure all the necessary connections are made then power up the power supply. Your Antminer S9 should now come on.
- On your computer or mobile device, use an IP scanning tool to show the devices connected to your internet connection. You should see your Antminer listed. You can then type the IP address of the Antminer into your browser window on your chosen device.
- The next screen you see should be the login window of the miner. In the case of the Antminer S9, the default login details are username – root, password – root. You can change these by clicking on the “Admin” tab. I recommend doing this.
- You will now need to enter various details from the mining pool you will be using. You should be able to find these out easily from the website of your mining pool.
- Once entered, your Antminer should begin mining in the pool.
Choosing a Mining Pool
On your path how to mine Bitcoin you can choose any Bitcoin mining pool you want. However, we recommend you choose from one of these recommended pools to begin with:
|Pool Name||Pool Fee||Minimum Payout||Pool Address||Pool Size|
|Slush Pool||2%||1mBTC (with fee) 10mBTC (free)||stratum+tcp://eu.stratum.slushpool.com:3333|
|ViaBTC||2%-4% (depends on how shares are paid)||0.1mBTC||stratum+tcp://btc.viabtc.com:3333||Large|
Note: Pool addresses are for users from Europe where indicated. Other addresses will apply from other parts of the world.
Note: 1mBTC is 1/1,000th of a Bitcoin.
How to Check How Much You’ve Mined
Every mining pool will have its user interface. However, the idea is always the same. You need to visit your pool’s website and type in your wallet’s public address when prompted.
Type your wallet’s public address in the search bar. This will let you see all the information about your Bitcoin mining efforts so far. Some pools will let users set how much they want to mine before their Bitcoin is automatically sent to the external wallet address they specified.
How to Calculate Expected Profits
If you want to check how much you should be earning, you can use a mining calculator. CryptoCompare provides an easy to use one.
- Open your mining software and check how many Megahashes per second it is doing (Mh/s).
- Load up the mining profitability calculator.
- Enter your current mining hashing power.
- Enter the power consumption of your unit or units.
- Enter the cost of your electricity in kWh. You should be able to get this from your energy supplier.
- Enter the pool fee for the pool you are using.
In the example from the picture below, we’re using a single DragonMint T1 miner mining on the Slush mining pool. Our electricity is about the average rate in the UK. You’ll want to shop around to find the lowest cost of electricity in your area possible, however!
As you can see, mining in the UK isn’t particularly profitable! The high price of electricity means that you will be losing $2.45 every day, even with the most efficient miner on the market. When you factor in the price of the unit itself, this example operation is going to be incredibly expensive!
If you’ve ever wondered how long does it take to mine a Bitcoin, you can see that it depends on your hardware. With this highly advanced bit of kit, it would take just over three and a half years. That’s at the current difficulty rating too. As more miners work on the network, the difficulty increases and the number of Bitcoin a miner can expect decreases.
So, that’s it! That’s my guide on how to mine Bitcoin. I’ll close the guide with a few thoughts on Bitcoin mining.
Bitcoin mining is very important. It’s worth doing even if you’re not making huge (or any) profits. The more miners working on the network, the more secure it is. Some hobbyist miners mine the network at a loss. They see it as their duty to run a miner to increase the network’s decentralization and reduce the likelihood of a potential attack being successful.
Unfortunately, Bitcoin mining is highly competitive these days. Without a huge investment and the freedom to set up somewhere with low electricity rates and a cool climate, your chances of making a lot of money Bitcoin mining are very slim.
Even if you’re not planning on mining Bitcoin, it’s still good to learn how to di it so you can understand the technology better, as well as the wider industry.
If you’ve not got a lot to spend and are more interested in profits than you are securing the network, you can always mine a different cryptocurrency. Several digital currencies can still successfully be mined with a GPU or CPU chip. Ethereum and Monero are amongst the most popular choices. However, a quick search of the web will find many more obscure projects that can be mined with less expensive hardware.
So, that was it. That’s the end of this how-to mine Bitcoin guide. I hope you learned a lot!
You should now know pretty much everything you need to know about mining Bitcoin; from the reasons, you should consider mining Bitcoin, to the setup procedure, and the answer to the question: “how long does it take to mine a Bitcoin.” If you wish to know more about Bitcoin mining software, click here. If you’re interested in top Bitcoin mining hardware, press here.
Now that we’re all done, what do you think? Do you have any questions? We’d love to hear your thoughts!