There are numerous guides online about bitcoin mining, equipment, mining pools etc but a lot of the information is one way. The first question should be what do you want out of bitcoin?
We’re not all geeks, the same as we’re not all investors, so I’ve broken this guide down to cater for 3 types of potential interest in bitcoin:
1. Dabbler You are interested in mining (or accumulating) bitcoins but you don’t have the time or inclination to buy equipment, compile software or really do anything too techie!
2. Techie You are comfortable with computers and want to get your hands dirty by investing in hardware, reading tech blogs and github articles on getting maximum performance from your gear. You want to be a real bitcoin miner!
3. Investor You’re a small or large investor and you just want to trade in bitcoins like any other stocks and shares.
Hopefully you’ll fit into one of those categories. If you don’t please let me know and i’ll revise this document accordingly.
So you don’t have time or can’t be bothered with the techie stuff? No problem. Cloud mining is increasing in popularity. Cloud mining websites allow you to ‘rent’ equipment or buy hashing (mining) power.
The benefits are numerous. No expensive hardware to buy or set up, no electricity costs to worry about, the potential to mine 24/7 without the stress of keeping your gear in check and also less of a worry about interruptions to your internet connection.
Sites are available that will allow you to mine SHA-256 currencies (like Bitcoin) or Scrypt based currencies (like Litecoin). It is not within the remit of this article to advise on which currencies are the most profitable to mine, but based on the mining power you buy you can use online mining calculators like the one at Coinwarz before you start out.
Keep in mind that profitability can vary depending on the current level of difficulty and the number of coins already mined (as well as market sentiment ofcourse).
cex.io is a bitcoin commodity exchange that allows you to mine bitcoins by buying (or trading) their hashing power with other users. It can be fun and rewarding if you trade at the right times. Your dashboard will show you how many coins you have accumulated in real-time. The site automatically mines Namecoins, Devcoins and IXcoins at the same time as bitcoins and you can also use your own mining hardware at their ghash.io mining pool. Litecoin, Dogecoin and Auroracoin mining are also either already running or in development. You can also buy Future Hashing Power at reduced rates to use at time triggered intervals.
Another site Hash Profit concentrates on scrypt, scrypt-N and x11/13 based currencies. Unlike cex.io the mining pools at Hash Profit are private so you can’t use your own hardware. They claim to mine the most profitable coins to maximise your return. They allow you to trade for KHS (hashing power) or simply deposit bitcoins to fund your account.
It’s worth noting that you’ll need some Bitcoins and a digital wallet to start mining on these platforms so if you don’t want to risk sites like ebay for this you can purchase bitcoins at Coinbase (US) or Bitstamp (EU).
You’ll need to provide detailed ID information to open an account at Coinbase or Bitstamp so be prepared. If you’re still keen to get involved then everything is explained in detail on the respective sites. cex.io’s guide is particularly user friendly.
Let’s face it, Geeks are the new hipsters and having your own mining farm is more impressive than owning a vintage corvette. If you want to mine SHA-256 currencies like Bitcoin and Peercoin you are going to need some powerful gear.
At the low end, ASIC USB BLOCK ERUPTER miners running at 330-336 mh/s used to be the choice for hobbyists and bedroom miners but the increasing difficulty and newer technology has lessened their appeal. Get in at the start of a new currency and these miners could still make you money. Many farms were established on these miners and multi-slot hubs supporting 7 or more miners could generate 2.5 gh/s or more.
In January (2014) Bitmain’s Antminer U1’s arrived on the market. They were similar in operation to the ASIC block eruptors but crucially each could mine at up to 2.2 gh/s (the equivalent of 6 or 7 Asics). The price of the Antminer U1 (as of going to press) was around $45 (£30) – a price comparable to the ASICS in December 13. (This shows how fast technology moves and how you need to be careful with your hardware investments).
If you want to get started, we’d recommend the Antminer U1. They can be picked up cheaply and you only need a suitable USB hub to attach to your computer to get started.
Next you’ll need suitable software to control the actual mining. CG Miner or BFG Miner are open source projects with versions for Mac (OSX) and Windows and Linux. It should be pointed out here that you’ll need to be comfortable in the command line or Terminal (mac) to get these compiled and/or running.
If you are on a Mac you can download and get started with CG Miner here. The same page also has a GUI version of the software called Asteroid which is super simple to setup and use.
Windows users can head over to the github repository.
Another great piece of software to enable mining of SHA-256 and Scrypt based currencies and is available in all flavours (OSX, LInux and Windows) is MultiMiner. The website and installation guide is super easy to use.
You can possibly use your existing graphics card but your mining power will probably be small unless you have a high end gaming computer. Top spec GPU’s to consider are the AMD Radeon R9 290X or the 7990.
Once you’ve set up your gear you’ll need to download a wallet or use an online wallet before you can start mining. These links above have downloadable wallets for Litecoin, Dogecoin, and Feathercoin. For Bitcoin you can download the wallet from the official site here or use an online wallet at a site like Blockchain.
Once you have downloaded your wallet you’ll need to wait for it to sync with the network. This can sometimes take a few days so be patient. Make sure you encrypt your wallet and use strong passwords (see our security guide here).
We’re nearly ready to start mining! Solo mining is unlikely to be profitable unless you have a mining farm full of mega equipment, so the best policy is to join a mining pool. Here you’ll be mining with masses of other users and you’ll find blocks easier. You point your mining equipment to your chosen pool using information supplied by the pool.
You can input this information in the terminal/command line or create a batch file to do it for you. Each mining pool has full instructions for implementation.
If you simply want to trade Bitcoins on the financial markets you can do so by creating a free account at Plus500 who have a great website and mobile app so you can trade on the move.*
Bitcoin prices are very volatile so short term gains (and losses) are very possible. Before Christmas the Bitcoin price peaked at over $1000 but it is now down to around $620. Ripe for the canny investor.
We hope you’ve found this guide useful. For a full list of Cryptocurrencies visit the Bitcoin Wiki.
Please remember that the value of investments and the income derived from them can go down as well as up. Exchange rate movements can also have a positive or negative impact on the value of Non-UK investments. Past performance is not a reliable indicator of future returns and you may not get back your original investment. Generally, investments should be considered for the medium/long term.
You should weigh up factors such as the impact of any potential penalties and charges and the loss of possible benefits in circumstances where you may be considering cashing in or transferring an investment. If in doubt seek professional Financial Advice. Your capital may be at risk.