For the majority of human history our financial lives have been regulated by a government-controlled currency, either through gold and silver coins or, more recently, paper notes that are backed by the issuing country. But back in 2008, a game-changer by the name of Bitcoin arrived on the scene. Bitcoin was the first so-called cryptocurrency. The European Central Bank described it as “…a type of unregulated, digital money, which is issued and usually controlled by its developers and used and accepted among the members of a specific virtual community.”
Hidden within that low-key characterization was the idea that cryptocurrency was controlled not by any government but by the private sector. Does that mean any old Tom, Dick, or Jane with a computer and access to the internet can go out there and get some? Actually, yes, it does. Here’s how.
As Easy As Riding a Bicycle – Not Exactly
Before you get started laying your grubby hands on a pile of Bitcoin , OneCoin or Ethereum (or any other digital money variant), you need to understand the process of currency-mining or simply mining. If the term brings to mind images of dust-covered men performing backbreaking physical labor in claustrophobic tunnels deep beneath the ground, the analogy is not completely off base. Mining Bitcoin is neither easy nor fast. To make appreciable money requires a significant investment in computer hardware and a willingness to stay abreast of the market.
Actually, a better comparison of mining Bitcoin would be to think of yourself as an online bank teller. Mining is the process of authenticating transactions that take place around the world at all times of the day and night. When someone spends cryptocurrency, the transaction must be added to what we would think of in the real financial world as the final ledger but is called a “blockchain” in the digital money realm.
Before it enters the blockchain, blocks of transactions are sent to miners, who use data keys and specialized hardware to attach unique identifiers, known as “hash,” that serves to authenticate the transactions. After that, the blocks are added to the blockchain. Current rate of pay for a miner to add a hash to the blockchain is about 12.5 Bitcoins.
If all this sounds like it should be an easy matter to just fire up your computer and let it crank out money for you in the background, hold your horses. There’s a little more to it than that.
You’re Probably Going to Need Different Hardware
At the heart of the mining process is a separate computer you’ll need to buy called a mining rig or Bitcoin miner. There are a variety of different models available, but keep in mind that the more you spend on your rig, the more money you’ll probably make. Like gamers go after systems with the best specs, successful mining relies almost entirely on the sheer processing power of your rig.
Expect that you’ll pay at least $500 for a decent Bitcoin miner, which should be able to earn around $100 a month. Remember this is only an estimate! A lot depends upon how many transactions are available for mining at any particular point in time.
Set Up Your Wallet
Think of a Bitcoin wallet as your banking account. This is where you’ll receive and store the Bitcoins you earn and pay them out to others through purchases. When it comes to setting up your wallet, there are two options. The first is to download dedicated software and install it on your home computer. Generally speaking, this allows you to retain more control and provide better security over your growing stash.
The second method is to make use of a third party who will create and host a wallet for you in the cloud. The latter is known as a hosted wallet. It’s easier to set up and use for a newbie. The downside is you have to trust that the company will keep appropriate security in place. Compare features before making your final choice because some impose limits on how much you can store and payout frequency. Two pieces of information you’ll need from your wallet to proceed to the next step are your private key and public Bitcoin address.
Install Mining Software
With your rig and wallet in place, it’s now time to download and install the brain of the operation – mining software. This software instructs your computer in regard to the actual number-crunching that makes up the mining process and allows you to keep an eye on the system’s real-time operating efficiency.
Your choice of mining software goes beyond the constraints of this single article, but those new to the scene could check out GUIMiner if they work in a Windows environment or MacMiner for Apple products. 50Miner is good if you have some experience in techie things.
Pool or Solo Mining?
By the time you’ve advanced this far in getting ready to mine cryptocurrency, you will probably already have become acquainted with the idea of working in a mining pool. The idea is simple. Miners become members of an online community who pool their hardware resources to work on a single block together and share in the resulting profits. In general, pools can find blocks faster and get them done faster than a single miner working alone. The downside is that it’s entirely possible for the people running the pool to perpetrate a scam that involves skimming off the top or something similar. There, obviously, is nothing that remotely approaches regulation of this industry.
Having said that, joining a fair pool can be a great idea. Before throwing in with one, however, ask some questions:
How long has the pool existed?
Are there fees involved and what are they?
How are Bitcoin rewards divided?
How often does the pool generally find a block?
How can one withdraw rewards?
Online resources like reviews and forums are a great place to start your search for a profitable mining pool to join.
Always Be Updating
You can’t stand pat and win at the Bitcoin game. As time goes one, competitors will upgrade to faster equipment will find blocks before you do with increasing frequency. You’ll need to frequently update all parts of your mining operation: software, hardware, and even your wallet. Otherwise, you’ll notice a slow (or maybe fast) decline in the amount of money you make. It also makes sense to stay in the loop on news and developments regarding, not only Bitcoin, but the whole cryptocurrency universe. In case you weren’t paying attention, Bitcoin isn’t the only game in town anymore.
As the first and probably still most popular cryptocurrency, Bitcoin enjoyed a solitary run in the industry until recently. New technology always spawns imitators, and sometimes the imitators go on to do better than the original. In recent years, currency miners have been able to choose among new entrants to the field like OneCoin. Will these newcomers stand the test of time or will Bitcoin retain its supremacy? Only time will tell, but in the meantime, get out there and start digging. Whether you’re looking for a side hustle or to mine cryptocurrency more seriously, the process we have just described should get you into digital coin production with a minimum of fuss.