BitCoin Mining for Beginners

Let me begin by saying that I am not advocating nor recommending the use of BitCoin or getting involved in the service. I think there are pros and cons to the service, much like many other things you can be doing in your spare time. That said, I had some involvement with the project early on, and have kept up enough that the emails I've received since the CNN article broke a couple days ago have encouraged me to give a purely technical explanation of what you would need to do if YOU want to get started.

First off, if you're not familiar with BitCoin at all, you might want to first read the Wikipedia entry about BitCoin, then the article on CNN that mentions BitCoin (as well as LETS and other items), and finally a decent beginning video about BitCoin.

If you've decided you want to get involved, you will need a machine you can do your mining on. Here's a link to a site to build a machine specifically for doing BitCoin mining, but for most beginners you will want to use a machine you already own. While BitCoin mining was originally done with programs harnessing the power of your CPU, most miners now use programs designed to take advantage of your GPU - i.e. the Graphics processor at the heart of your video card. This usually means a machine that has it's own nVidia or ATI video card, not an integrated graphics chip on the motherboard. You can still mine with lesser machines, but your odds of breaking even in that setup are very much against you.

On your machine, the first thing you will want to do is go to the main BitCoin site and download the current BitCoin client software for your Mac or Windows PC. You can do this on Linux as well, but that's beyond the scope of this article. While you are there I would also recommend signing up for the BitCoin forum.

Install the client, and click the "Generate" option. This does some "free" CPU mining, and gives you a feel for how things are setup. It is also a quick way to make sure your machine is able to connect to the other machines out there that administer the BitCoin currency.

Next you have to decide if you want to be a "Solo" miner or mine as part of a group (sometimes called "minting"). As a Solo miner, the costs and the rewards are all yours. However as the number of folks mining increases, the odds of a Solo miner breaking even gets much smaller. That is because only so many "coins" are available at a time to be mined, and you are effectively in competition with everyone else who is trying (by themselves or as part of a group) to mine those coins. On an average day there are between 250 - 500 coins available to be mined. So, for a very basic example, if you have a Core i7-950 with a high end graphics card, the odds are that if you mine 24/7 that by the end of the month you will have mined between 5 and 25 coins. As more folks mine, your odds of being at the low end are greater. Given that as of May 1, 2011 a BitCoin is equal to $4 US, you can see where that puts you. Consider that you are also paying for electricity, and increasing the wear and tear on your machine. Not to mention that those cycles are coming out of cycles you could be using for other things.

As part of a group, on the other hand, you are contributing your cycles to a group server that coordinates cycles between all the members. When the group mines a BitCoin, that is then split between all the group members based on how many cycles they have contributed to the group since the last coin. As you can see, this means you will get "something" more often, but it will be worth less since you have to share it. Because the larger groups are certain (because of the number of cycles they control) to get coins on at least a daily basis, they are starting to refer to what they do as "minting" given that there is less variation month to month.

Another quick way of looking at this is that solo miners are very much like prospectors in the old days, and you are generally hoping that by keeping at it and having some luck that you will "strike it rich". Group miners are more like owners of a Gold mine where everyone makes something, but no one makes a killing.

Having decided which way to go, you will now want to DL your mining software. Since this is a guide for beginners, I highly recommend going with a GUI based miner such as the the one available here.

If you are going Solo, then install this, start up the GUIminer.exe program, use it to setup a "password" so that it can talk to your BitCoin client, and set it to relaunch the client as a Server so that it can receive the coins you mine.

If you are going as part of a group, then install, start up the program, and give it the information for the group you have joined. If you haven't joined a group yet, look at the ones it lets you select from as those are "pre-configured" in the client so that you can pick one of these and know that everything will work.

In either case, you now sit back, and let the software do the hard work. After a week, take a look at your wallet, and decide if continuing on makes sense for you.

Next steps would be to either increase your mining (by adding Video cards to your current machine, getting additional machines, or improving your productivity by getting a client tuned to your particular video card), or to begin speculating on BitCoin much as a Forex investor does.