 Bitcoin Mining is the process of ‘discovering’ more coins.

It is a race against other

miners across the globe.

 Bitcoin miners are also responsible for overseeing the block chain, the record of
transactions that traders complete each and every day.

 Once one of these blocks of transactions has been created, miners will apply a
mathematical formula to it to transform it into something known as a hash. This is a
sequence of letters and numbers that is stored with the block.

 Miners use the last block stored in the block chain to verify the legitimacy of the
chain. If one hash has been modified then it will change the block, and this will show
in the next block along the chain. If hashes have been tampered with then miners will
know.

 It’s impossible to fake a transaction because you need to tamper with a block in the
chain, which would change its hash. So if a miner checked the authenticity of a
block they’d notice that the hash was different, and identify it as a fake.

 The bottom line is don’t try to fake a transaction to boost your Bitcoin account.

 Miners are in competition with each other to seal off blocks in this way, because they
are rewarded with 25 bitcoins every time they create a hash.

 To counteract counterfeit ‘hashing’, Bitcoin Protocol has introduced a ‘proof of work’

ruling.

 Bitcoin mining hardware varies in cost and power – ranging from entry-level products
to the more advanced.
 There are three main types of Bitcoin mining hardware to consider.

 First we have CPU/GPU hardware. You can utilise your own computer for a spot of
Bitcoin mining. This is a much slower process, depending on the power of your
desktop, than the other types of hardware we will run through in a moment.

 You could improve your computer’s Bitcoin hash rate by adding a graphics card.
Quality graphics cards can cost a few hundred pounds or dollars but will greatly
enhance your mining performance, so it is a cost-effective investment.

 GPU is a good route to take on your mining adventures if you wish to work with other
kinds of cryptocurrency alongside Bitcoin.

 Secondly we have FPGA Mining. FPGA stands for ‘Field Programmable Gate Array’,
and comes in second place in our ranking of Bitcoin mining hardware.

 An FPGA is an integrated circuit board that can be optimised and modified to

maximise its mining properties. They can return speeds of up to 750 MH per second at
the very highest end.

 The Olympic gold medal for Bitcoin mining hardware goes to ASIC devices. ASIC
stands for Application Specific Integrated Circuits, and these are designed for one
thing and one thing only: to mine bitcoins at the fastest possible rate.

 ASIC hardware is expensive to purchase in the first instance, but is the best option in
terms of long-term profit potential. Can achieve hash rates ranging from five to
500GH per second.

 Popular merchants for ASIC mining equipment include Butterfly Labs, Coin Terra and
Avalon.

 The hash rate is extremely in mining, it’s the number of calculations your chosen
hardware can perform each second as it tries to produce the mathematical
equation required for Bitcoin mining.

 Hash rates are measured in units from megahashes to gigahashes and through to the
ultimate: terrahashes. Simply put; the higher your hash rate, the more likely – and
quicker - you will be in solving the mathematical equation to complete a transaction
block.

 Each mining operation requires electricity to power it, and in some instances the cost
of this can be quite prohibitive if you are running an operation from home.

 The best advice is to research each piece of hardware in turn and calculate their
hash per watt ratio, which you can do by dividing the hash count by watts of power:
E.G. 750MH per second divided by 600 watts equals 1.25MH per second per watt.
 Once you have calculated the hash per watt ratio you will have a better idea of
which type of hardware will be better for your mining operation and bank balance.

 Another factor to consider is network difficulty, which in broad terms is the rate of how
hard it is to solve transaction blocks.

 The mining profitability calculator available from The Genesis Block will help.

 Depending on your chosen hardware you will need to run the relevant software that
makes it tick. If you are managing a GPU or FPGA operation you will need to be
running the standard bitcoin client alongside the mining program.

 The standard bitcoin client is a piece of software that connects your machine to the
network, which enables you to become part of the community. This software is
available for pretty much all of the mainstream operating software, including
Windows and OS X.

 Whilst you will definitely need the software for GPU and FPGA miners, some ASIC
devices come with it pre-loaded and ready to go.

 One of the biggest decision you can make is whether to mine solo or join a pool.
There are pros and cons to both approaches.

 It really does depend on the level of investment – both financially and in time – you
make as to whether going solo could work for you.

 So mining on your own would potentially offer a greater reward every once in a
while, whilst pool mining is likely to yield smaller but more consistent results, which
would be the splitting of the 25XBTC reward between the group members.

 Any one mining pool can never exceed 50% of the hashing network. Any more than
that and they would in essence ‘own’ the network, which goes against the
community principle of the Bitcoin protocol.

 The general advice for beginners is to join a pool.

 Bitcoin isn’t the only pure digital currency out there, and merged mining enables you
to mine for other cryptocurrencies such as Namecoin and Devcoin that use the same
algorithm.

 Multipool is a really cool site that allows you to switch between cryptocurrencies to
mine the one which is most profitable at any given time. As prices of each currency
fluctuate, your balance will automatically switch to the most valuable.

 The most obvious way to choose which pool you want to join is the amount of money
you will make from them. So find out how each shares its profits to pool partners, and
if they charge any fees along the way.
 Some will share equally across the board, while many will give out ‘shares’ depending
on the level of input of each member – which could be on an Equalised Shared
Maximum Pay Per Share model or a Maximum Pay Per Share scheme.

 Mining is a process of solving algorithmic problems, and each currency has its own
difficulty level.

 Each mining pool will set a difficulty rating between one and that of the particular
currency. Should a miner achieve a difficulty level between the two he or she will
receive a share, as this is a proof of work that shows they are trying to solve blocks.

 Some mining pools will also deduct anything from 1% to 10% from your share to cover
their costs, whilst some pools won’t deduct a thing.

 Signing up to your chosen pool is generally quite easy. You simply create an account
like you would for any website, and then create a ‘worker’, which is basically your
identity in the pool.

 Now we want to introduce you to a third option, known as Cloud Mining.

 This is perfect for people who want to get involved with mining - without the hassle or
expense of investing in hardware. You simply harness the processing power of the
cloud, which is usually a remote data centre, to earn your bitcoins.

 The key advantage to participating in cloud mining is that it minimises your risk. Cloud
miners don’t have to make an expensive investment in hardware and hope that it
yields returns. Your electricity bill will be significantly less than for active miners too.

 Participants in cloud mining schemes will enjoy lower profits as the operator will
generally take a big cut. You will lose a degree of control over your mining operation
too.

 Cloud mining ventures can be categorised in three different ways.

 Firstly, hosted Mining which is leasing a mining machine owned by a provider. Cloud
Hashing is a site worth exploring if hosted mining appeals to you.

 Secondly, Virtual Hosted Mining which takes advantage of a virtual private server
network on which to install your own mining software.

 There are a few examples of Virtual Hosted Mining providers out there, with perhaps
the most widely known being Amazon’s EC2 platform. You can pay for a year’s
space in advance or via a pay-as-you-go model.

 Digital Ocean is another specialist virtual mining option based on monthly pay-as-
you-go tariff.
 And thirdly Leased Hashing Power which is the most popular form of cloud mining, as
it requires no investment in a computer or virtual power.

 With Cloud Hashing and Bit of Glory miners specify the amount of hashing power they
need on a one-year contract.

 Providers like Hash Rack and E-Pickaxe offer indefinite contracts for a one-off
payment.

 Bit-Miner offers collective mining with various types of set-up on offer.

 You can even get 24-hour mining contracts from sellers on eBay nowadays!

 It is still possible to calculate the profitability of cloud mining using tools such as The
Genesis Block.

 To work out your profitability, you’ll need to: Write down your monthly running cost,
and Divide it by 0.744 (the conversion factor).

 This gives you your cost per kilowatt hour that you can then type into the mining
calculator, in much the same way a hardware-based miner would. Then complete
the rest of the form as usual.

 The trick is to pick the mining strategy that’s right for you....and stick with it!

 As with any business venture, it’s important that you understand how to make it
profitable. When it comes to mining digital currencies, doing the maths is a crucial
part of this.

 And like with most business ventures; the bigger your initial investment, the greater
your potential for making profit.

 As you know by now the process of mining currencies like Bitcoin requires you to solve
quite complex cryptographic equations.

 There are two main hashing algorithms, and you will need to solve one of these in
order to show ‘proof of work’.

 Firstly we have the SHA-256 algorithm. This complex algorithm is becoming more and
more difficult to solve with CPU and GPU machines. The difficulty level inherent in
solving it for Bitcoin reward has seen miners operating ASIC hardware streak ahead in
the great digital currency race.

 Secondly we have the Scrypt algorithm. The Scrypt formula, meanwhile, still favours
GPU machines, due mainly to their increased RAM and parallel processing powers.

 There are two main types of rig for mining digital currencies.
 Your CPU or GPU mining machine can be built from your existing PC, by installing as
many or as powerful graphics cards as you can afford to.

 ASICs on the other hand are purpose-built machines ready to mine even the most
difficult of currencies.

 As you can probably imagine, mining requires a significant amount of electricity to

keep your machine working. A CPU/GPU will come with its own power supply unit
(PSU), which should be as economical as possible.

 ASICs are tailor-made for mining, so they can do more for less – more calculations for
less power usage. And as they are purpose-built the PSU supplied will have the most
efficient wattage consumption possible.

 So take the time to invest in a good PSU at the earliest opportunity.

 Remember, the key to all of your calculations is: HASHING SPEED divided by POWER
CONSUMPTION equals YOUR MINING EFFICIENCY.

 Keep an eye on your energy bills. If you can get these monthly then that will give you
a better understanding of your output.

 It’s much harder to mine Bitcoin today than it was, say, two years ago for example.
It’s like any form of currency; its price will rise and fall due to ‘market’ factors.

 It’s better to work with the best hardware you can afford – simply because this will
give your mining operation more longevity.

 Heat can minimise the efficiency of your mining – as it tends to slow your hardware
down.

 Do consider adding a decent fan or air conditioning unit to your list of equipment
required.

 Look into the possibilities of Uninterrupted Power Supplies. These will ensure you carry
on mining at all times.

 Import costs of hardware need to be factored in if you plan to bring an ASIC miner
into your country.

 There are a few different profitability calculators on the web that will help you to
understand roughly how much money mining each cryptocurrency will bring. Head
to Coin Warz, What Mine or Dust Coin.