Mining bitcoins – a process that helps manage bitcoin transactions as
well as create new “wealth” – is the new Beanie Babies. Luckily for us,
however, bitcoins seem to be going up in value and should maintain
their value over time, unlike your mint condition Tiny the stuffed
But how do you get bitcoins? You can begin by buying them outright,
but the market is currently wild. At $188 per coin, the direction of the
bitcoin is anyone’s guess right now and, unlike equities, these things
don’t split. In short, you should probably mine. But what is bitcoin
Think of it as work done by groups of people to find large prime numbers or trying keys to decrypt a file. You can read a lot more about it here
but just understand that for every block mined you get 25 coins or, at
current rates, $4,722.25. Currently a single bitcoin is valued at $188,
an alarming result that is probably caused by money movements related to
Cyprus and a general bubble-like excitement over the platform in
general. In fact, many wager that the DDOS attacks on many
bitcoin-related services are direct action by hackers to inject
instability in order to reduce the price.
As it stands, mining solo is very nearly deprecated. The process of
finding blocks is now so popular and the difficulty of finding a block
so high that it could take over three years to generate any coins. While
you could simply set a machine aside and have it run the algorithms
endlessly, the energy cost and equipment deprecation will eventually
cost more than the actual bitcoins are worth.
Pooled mining, however, is far more lucrative. Using a service like
“Slush’s pool” (more on that later) you can split the work among a
ground of people. Using this equation:
While this is simplified, it is basically how the system works. You
work for shares in a block and when complete you get a percentage of the
block based on the number of workers alongside you, less fees. Using
this method, I have been able to raise about $1.50 over the weekend by
running a dormant PC. The astute among you will note that I probably
used twice that amount of electricity.
Being a neophile, I’m surprised it took me so long to start mining. My buddy Tom explained how to set up a pooled mining account so I thought it would be interesting to share the instructions.
1. Get a wallet. You can either store your wallet locally or store it online. Coinbase.com
is an online wallet that is surprisingly simple to set up. Wallets
require you to use or download a fairly large blockchain file – about
6GB – so downloading and updating a local wallet may be a non-starter.
Like all wealth storage mediums, keeping your bitcoins “local” is
probably a better idea than trusting a web service, but that’s a matter
of private preference. There is no preferred wallet type and there are
obvious trade-offs to both. Privacy advocates would probably say a local
wallet is best.
You can download a local wallet here but make sure you keep a copy of your data backed up.
Once you’ve created a wallet, you get an address like this:
1BEkUGADFbrEShQb9Xr4pKPtM8jAyiNQsJ. This, without the period, is a
direct way to send bitcoins to your wallet. Make a note of your address.
In Coinbase, the wallet address found under linked accounts.
2. Join a pool. To mine in a pool you have to work with a group of other miners on available blocks. The most popular is Slush’s Pool found here. You can also try guilds like BTC Guild
as well as a number of other options. Each of the pools is
characterized mostly by the fees they charge per block – 2% for Slush’s
pool, for example – and the number of users. Pools with fewer users
could also have a slower discovery time but pools with many users
usually result in smaller payments.
How can you be sure the pool owner doesn’t steal all your bitcoins? You can’t. However, as one pool owner, Slush, notes:
For simplicity’s sake, I’m using Slush’s Pool and have created three
workers. First, create a pool login. Then add workers. The workers are
sub-accounts with their own passwords and are usually identified by
[yourlogin].[workername]. I have three workers running, currently – one
on my iMac and two on my old PC.
You must create workers to mine. The instructions are very
straightforward for most services so don’t become overwhelmed. Like any
online club, you can dig deeply into the subculture surround bitcoin as
you gain experience. I like to think of it as a financial MMORPG.
Also be sure to enter your wallet address into the pool information. This will ensure you get your bitcoins.
3. Get a miner. There are a number of mining options
for multiple platforms although OSX users may find themselves in a bit
of a pickle. Miners use spare GPU cycles to power the mining operation,
much like services like SETI@Home uses spare cycles for finding
intelligent life. Miners, on the other hand, use these cycles to help
handle peer-to-peer processes associated with bitcoins. Thus by doing
“work” you are maintaining the network as well.
GUIMiner is the
simplest solution for Windows users as it allows you to create miners
using almost all standard graphics cards. You can download it here. 50Miner is also a popular solution. Both require you to enter your worker info and pool and they’ll start mining.
OS X users can use DiabloMiner,
a two-year old command-line program that will mine using OpenCL. Sadly,
it uses deprecated calls to Bitcoin and is quite a bit slower. As a
result, you need to run your own proxy, Stratum,
that allows Diablo to connect with services like Slush’s pool. Both of
these programs usually run without issue on OS X although you may need
to install OpenCL for OSX.
To mine I’ve created a script that I run in Terminal that simply runs
the proxy in the background and then connects Diablo. Note the last two
arguments are necessary for Mountain Lion.
is far easier to run – you simply click an icon and enter some data –
and both have very rudimentary, text-based interfaces. Running Diablo on
my iMac has not had much effect on application performance under OS X
although it does slow down my Windows 8 machine considerably.
4. Keep your mind on your money. Bitcoins are
baffling in that they are wildly simple to use and mine. Speculators,
then, would probably be able to throw hundreds of machines at the
problem and gather bitcoins like raindrops, right? Wrong. As more
bitcoins are found, they become more difficult to find. This profitability calculator
will help you understand what you’re up against but understand that
this isn’t a sure thing. I’ve run my systems for a weekend and seen a
mere $1.50 – enough for a coke – but other users may have improved
hardware and methods to succeed. In short, if it costs more to run your
hardware than you gain in bitcoins, you’re probably doing something
Good luck in your journey and enjoy your first foray into this wild and wooly world.